The QRC commissioned a report into the ETS and delivered it last week to Prime Minister Kevin Rudd, Climate Change Minister Penny Wong and other senior Cabinet ministers.
The report was put together by consultants ACIL-Tasman using current financial data supplied by QRC member companies with substantial Queensland interests.
“This is the best picture we have so far of how emissions trading might affect Queensland’s exporters,” QRC chief executive Michael Roche said.
The report concluded that currently proposed assistance measures for EITE industries was highly arbitrary and distortionary; less efficient than modified versions of transition arrangements proposed by Professor Ross Garnaut and the Business Council of Australia; and unlikely to sustain the levels of profitability necessary to allow further investment and/or sustain adequate earnings to remain commercially viable.
“The assistance measures currently proposed in the federal government’s Green Paper don’t properly take account of the fact that EITE industries are price takers and cannot pass on costs,” Roche said.
“That is why industry is seeking transition assistance. Australia will have a carbon price before any of our major competitors, so operating margins in Australia will come under pressure. If margins get too thin, operations become unsustainable.
“We must get this transition assistance right if we are to avoid a drift of energy-intensive industries to countries anticipated to have lower obligations under a global emissions trading scheme.”
The ACIL-Tasman report has recommended a variant of the approach endorsed by the Business Council of Australia (BCA).
“If, as the result of higher carbon costs in Australia, an EITE industry’s earnings per unit falls by say 10 per cent, the report contends the federal government should provide compensation in the form of free emission permits covering seven of those percentage points,” Roche said.
“With the facility in question picking up the additional three percentage point cost increase, there remains a strong incentive to reduce greenhouse gas emissions without immediately threatening economic viability.”
At a carbon permit price of $20 per tonne, the cost of the revised assistance scheme endorsed by the QRC would require an allocation of about 19% of the total permit pool to affected industries – a cost comparable to the government’s current estimates of around 20% under its Green Paper model, QRC said.
The Australian government is scheduled to release the details of its domestic emissions trading scheme on December 15.
