The federal government’s proposed Emissions Trading Scheme (ETS) and the recently announced Carbon Pollution Reduction Scheme white paper prompted much fear, confusion and plenty of fierce discussion as miners attempted to understand the potential impact such a development would have on their emissions intensive sector.

 

Target time

 

Following on from government adviser Ross Garnaut’s climate change review and the Rudd government’s earlier emission trading green paper, last week saw the prime minister announce a greenhouse gas emission reduction target of 5-15% by 2020.

 

Under the scheme, detailed in an 800-plus page document, the 5% target remains unconditional while the higher target is to be applied if a global climate pact is signed.

 

The first carbon permits are to be auctioned in the first half of 2010 with the initial carbon price to be around $23 per tonne if the 5% long-term target is adopted, or around $32/t if the 15% target is adopted.

 

The government will also provide free permits over five years to the some emissions-intensive groups.

 

Critics cry foul

 

Like earlier carbon emission reports, the response from both industry and green groups was fast and at times furious.

 

Many business groups feared it would king hit Australia’s energy-intensive industries – including the mining sector – restrict economic growth and lead to a so-called “carbon leakage” with Australian companies heading offshore rather than operate under the scheme’s requirements.

 

Having long aired its concerns over the proposed scheme’s potential cost burdens, impact on global competition and speed of the implementation, the Minerals Council of Australia was critical of the impact of the government’s plan.

 

“The white paper would impose the most aggressive emissions trading scheme and interim targets in the world,” MCA chief executive Mitchell Hooke said in a statement last week.

 

“This will impose the highest carbon costs in the world on industries severely constrained in their ability to adjust due to current economic circumstances and the rate of development of new low emissions technologies.”

 

Even before the government detailed its targeted reductions, Hooke had said the introduction of an ETS would kickstart “the most significant economic upheaval since Federation”

 

The industry group called for a phased transition to a low emissions economy and a global agreement over carbon emission reductions.

 

The Australian Chamber of Commerce and Industry said the government’s announcement represented a “high risk” scheme.

 

"While the government has attempted to soften the blow on the economy, the fact remains that even with the announced targets, both businesses and the community will be hit with very high costs of industry restructuring," ACCI chief executive Peter Anderson said.

 

But environmental groups were just as critical, attacking the government’s targets as too low.

 

Meanwhile in light of the challenges of the global market turmoil, some business groups called for the scheme to be delayed until some stability returns to the financial markets.

 

Dazed and confused

 

Beyond all the talk, one thing was clear – a huge level of uncertainty surrounded nearly every aspect of the proposed scheme.

 

How much would it cost? Would it threaten the viability of mining operations? Would it serve as a disincentive to Australian industry? Would the system actually succeed in reducing carbon emissions?

 

The coal, aluminium and zinc sectors are expected to fare the worst under the government’s proposed scheme.

 

Zinc refiner Nyrstar last month warned its smelters would be unviable under the government’s proposed scheme, and coal miner Centennial Coal said captive coal mines should receive compensation or face risk of closure.

 

Even the gold sector is fearful of the scheme’s impact with precious metals miner AngloGold Ashanti expressing its worry an ETS could threaten development of its majority-owned Tropicana gold project, and slap an extra $A40-50 an ounce onto costs.

 

Still others fear the consequence of inaction with Ross Garnaut himself declaring earlier in the year that doing nothing could “haunt humanity until the end of time”