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Australia's climate-change winners & losers

SYDNEY (Reuters) - The only clear, outright winners from Australia’s climate-change policy unveiled on Monday are the accountants and lawyers who will have to make sense of it.

Losers, on the other hand, are everywhere.

They include coal-fired power stations, mainly in government hands or unlisted, and some of the local stock market’s biggest firms, such as smelters BlueScope Steel and OneSteel, and refiner Alumina Ltd, analysts say.

Around 1,000 of the largest polluters, ranging from transport operators and aluminum makers to gas producers and petroleum refineries, will have to pay to pollute from 2010, under a government plan to cut national greenhouse gas emissions by 5-15 percent by 2020.

Gas firms Woodside Petroleum and Santos, and refiner Caltex Australia will have to pay for permits to pollute. Qantas Airways will also face carbon costs via higher fuel prices or the need to buy permits, or both.

But market analysts said many firms were in reality breathing a sigh of relief on Monday because the government’s white paper on cutting carbon emissions could have been a lot tougher, with green groups demanding emission cuts of up to 40 percent.

“The whole tone of the white paper is that they have aimed to provide greater assistance to business,” said Andrew Gray, head of environmental research for Goldman Sachs JBWere.

That tone was reflected in the stock market where firms supposedly in the firing line in the war on global warming were all hanging on to strong gains they had already made earlier in the day due to higher metal and crude oil prices.

BlueScope and OneSteel gained 5-7 percent, Santos 3.7 percent, Woodside 7.4 percent and Caltex 6 percent -- avoiding the bloodbath some industry lobbyists had warned of in the event that the government opted for a tougher emissions target.

Instead, Prime Minister Kevin Rudd said in unveiling his climate-change policy that the government would hand out billions of dollars in free permits to a much wider class of polluter than envisaged in the government’s initial consultation paper in July.

That cheered LNG producers such as Chevron and Woodside Petroleum, who were offered exemptions.

For graphic showing Australia’s emissions targets:

here

In the first year alone, to end-June 2011, almost A$4 billion ($2.65 billion) in free permits are to be given to big polluting exporters, assuming a market price for carbon of around A$25 a tonne. That is almost A$1 billion more than the compensation that would have been forthcoming under the proposals mooted in July.

By 2020, using market expectations for a carbon price of about A$35 a tonne and assuming Australia cuts emissions by its minimum 5 percent, assistance for these exporting firms could amount to around A$8 billion a year.

And that would be in addition to billions of dollars earmarked as compensation for the coal-fired power industry, which accounts for about 80 percent of Australia’s electricity generation and about a third of national emissions.

“It’s an attempt to really balance the winners and losers,” said analyst Richard Gibbs of Macquarie Bank, agreeing that more firms stood to receive more assistance than originally feared.

Gibbs said chemical firms such as fertilizer-maker Incitec Pivot could also now take advantage of the more generous free-permit scheme, and big miners such as BHP Billiton and Rio Tinto also had scope to shield themselves from the full impact of paying for carbon emissions.

“I would not be crying too much for them,” Gibbs said.

Without assistance the losers would bear a lot of financial pain, according to the Carbon Disclosure Project, which reveals paying for carbon emissions at A$20 a tonne would slice 8 percent off Rio Tinto’s 2007 earnings before all financing costs and tax.

Rio Tinto is a major aluminum producer, one of the world’s most energy-intensive industries, but it still would suffer less than Alumina, BlueScope and OneSteel, which would lose around a fifth of their 2007 earnings, based on the same assumptions.

For green politicians, who have a pivotal role in the upper house of parliament and could yet stand in the way of the government’s plans, the real loser is the environment.

“Kevin Rudd’s white paper has raised the white flag of surrender on climate change,” said Greens Party leader Bob Brown.

($1=A$1.507)

Editing by Ian Geoghegan

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