Monday, August 5, 2013

Smoke and mirrors with carbon figures - The Australian Financial Review

Smoke and mirrors with carbon figures

Opposition Leader Tony Abbott, centre, highlighted carbon tax concerns while visiting JBS's abattoir. Photo: Andrew Ellinghausen


Marcus Priest

On the first day of the election campaign Opposition Leader Tony Abbott backed up his oft-repeated claims that it will be a referendum on the carbon tax by highlighting the increased costs of a business which has been a major beneficiary of the scheme.

Both involve questionable calls.

First, he argues if he wins the election he will have a mandate to repeal the carbon scheme.

"I do assume that whoever gets elected will respect the mandate that any new government has," he said. In this respect, the Coalition points to its decision not to oppose the repeal of WorkChoices after the 2007 election.

But it conveniently glosses over its decision to block the Carbon Pollution Reduction Scheme, which was a key plank of Labor and Coalition's election bids in 2007.

"As an opposition our job is to hold the government rigorously to account. Oppositions are not there to get legislation through," Mr Abbott said immediately after becoming leader in 2009.

"And unless we are confident that a piece of legislation is beyond reasonable doubt in the national interest, it is our duty as the opposition to vote it down."

Mr Abbott's second claim on Monday related to the increased costs due to the carbon tax of Brisbane abattoir JBS, which he visited Monday.

"This particular plant alone is paying $5 million a year one way or another already in carbon tax and as the carbon tax goes up, and as the carbon tax goes up and up to $38 a tonne, and then to $350 a tonne," he said.

The $38 and $350 figures are from Treasury modelling of the price of carbon in 2020 and 2050 respectively. Even if it ever reaches this level – which is debatable– companies are expected to reduce their carbon intensity offsetting the rising price.

JBS is an interesting company for the Coalition to highlight. In February, it received one of the largest grants from the Clean Technology Program - $4.4 million - to reduce its carbon liability by capturing methane waste and using it in a boiler. The technology will enable the company, when completed in two years time, to cut its energy costs by $1.1 million and carbon liability by $790,000. JBS director John Berry said at the time of the announcement the project was expected to have pay-back period of two years.

"The industry and the communities it supports have a very bright future under carbon pricing," he said.

Mr Abbott rightly pointed out this is a classic example of Direct Action. But unlike the Coalition's policy, the carbon scheme provides the incentive to cut emissions by putting a price on greenhouse gases.

"By the time the plant has paid its direct carbon tax costs, by the time this plant has paid higher electricity and gas prices it's up for $5 million a year," Mr Abbott said vaguely when challenged.

It seems likely Mr Abbott's $5 million figure includes increased energy costs not only from carbon but other factors such as network upgrades – which are 50 per cent of price hikes.

Even so, the Coalition case was strengthened by the announcement by Virgin Australia on Monday that it has been unable to recover $45 to $50 million in carbon costs due to "weak economic conditions and the competitive environment", nearly half of its yearly losses after tax.

The Australian Financial Review
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