June 9, 2011 / 5:01 AM / 9 years ago

UPDATE 2-Australia productivity report backs carbon pricing

* Report backs Australian plans to price carbon

* Report unable to recommend starting price for carbon tax

* Treasurer says report shows Australia not alone to price carbon (Adds coal industry, independent MP quotes)

By Rob Taylor

CANBERRA, June 9 (Reuters) - Australia’s bruising battle to price carbon pollution received a boost on Thursday with a major report into steps by leading trade partners concluding a price-based scheme would be the cheapest, most effective way to cut emissions.

The report pointed to a multitude of steps by the United States and other competitors, undercutting criticism by the Australia’s conservative opposition that the country risked acting alone in using carbon pricing to fight climate change.

Prime Minister Julia Gillard’s minority Labor government, seeking to shore-up its plan to price carbon from 2012, asked the country’s Productivity Commission to assess climate steps by eight major economies — the United States, China, Germany, India, Japan, New Zealand, South Korea and Britain.

“The consistent finding from this study is that much lower cost abatement could be achieved through broad, explicitly carbon-pricing approaches, irrespective of the policy settings in competitor economies,” the independent Productivity Commission report said.

Gillard’s Labor wants to set a carbon tax on 1,000 of the biggest polluting companies from July next year to fight global warming, with a move to an emissions trading scheme three to five years later. The aim is to put a price on every tonne of carbon emissions to drive investment in energy efficiency and greener energy.

Several independent lawmakers who support Gillard’s one-seat majority government in parliament have called the commission report the “final pieces of the jigsaw puzzle” that will decide whether they back the carbon tax legislation, providing a benchmark for action elsewhere.

Key independent Tony Windsor, who has yet to support the carbon price scheme, said the report found the world was taking action and that a price on carbon was the best option, but details of the government’s plans were now the key to his vote.

“It’s coming down to the end result in all of this as to what the price actually does in terms of converting people’s polluting behaviour to cleaner behaviour,” he told Australian radio.

Australians are the top per-capita emitters of carbon dioxide among developed nations, ahead of the United States, with more than 80 percent of the country’s pollution coming from reliance on ageing coal-fired power stations.

Details of the tax, including a starting price and levels of compensation to business and households, is being worked out by a multi-party committee. The government wants details announced by early July, and laws passed later this year.

Australia’s resurgent conservative opposition, ahead in opinion polls, is opposed to a carbon price and has accused Gillard of trying to lead the world with a scheme that will destroy jobs in an economy into its 20th year of expansion.

But Treasurer Wayne Swan this week said modelling by Treasury officials, based on a A$20 a tonne carbon price, found aggregate employment levels would remain much the same with or without a price on emissions.


The commission, the government’s main advisory body on competition issues, found there were more than 1,000 climate policies already in place around the world, despite wrangling over a global climate framework beyond 2012.

More than 300 policies were in place in the United States. This is despite the government shelving federal emissions cap-and-trade legislation in the face of political opposition and international uncertainty.

California is pressing ahead with its own emissions trading scheme that it aims to link with a regional North American programme, while 10 northeast U.S. states already participate in a mandatory cap-and-trade scheme for the power sector.

“What this shows very clearly is that global action is taking place,” Treasurer Wayne Swan told reporters. “The report shows that Australia is in no danger of acting alone. Far from it. We are in danger of falling behind.”

A separate study in October last year found that Britain led major economies in encouraging investment in cleaner energy, due to price incentives double that of its nearest rival China.

The survey by London-based Vivid Economics for the Climate Institute in Australia assessed incentives for power generators in six countries to move to cleaner energy and away from polluting coal and oil.

Britain ranked first with an implied carbon price per tonne of $29.30. China was second at $14.20 per tonne, followed by the United States at $5.10, Japan $3.10, Australia $1.70 and South Korea $0.70. [ID:nSGE69H0BF]

The commission said it was unable to recommend a starting price for the carbon tax, which could make or break Gillard’s hopes of re-election in 2013.

But it said Australia ranked mostly in the mid-range of action being taken to cut emissions from electricity generation, behind Germany and Britain, but around the same as efforts in China and the United States.

The Greens said the report should end political claims that Australia was moving ahead of the rest of the world by putting a price on carbon, but more needed to be done to promote renewable energy.

Australia’s coal industry said the review missed the point, because it compared Australia to countries that were not direct export competitors.

“I don’t think this is a resounding support or justification for the drastic measures the government has before us,” said Coal Association executive director Ralph Hillman. (A$ = $1.06) (Additional reporting by James Grubel; Editing by Ed Davies and David Fogarty)

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