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Public Sector Informant : PSI - September
THE PUBLIC SECTOR INFORMANT 19 [SEPTEMBER 2010] BRADLEY ALLEN LAWYERS P: 02 6274 0999 | F: 02 6274 0888 9 th Floor Canberra House, 40 Marcus Clarke Street, Canberra ACT 2601 | GPO Box 240 Canberra ACT 2601 DX 5633 Canberra | www.bradleyallen.com.au Estate Planning Keith Bradley and Rebecca Tetlow are experts in Estate Planning and are available to advise and assist with: Estate planning including Wills against estates Keith Bradley AM Partner Rebecca Tetlow Voters back a changed political climate Pricing carbon A hung Parliament may deliver to voters what they want: principled leadership on climate change [CLIMATE CHANGE:DAN G AFFNEY] Despite strident opposition to an emissions-trading system by some exposed industries, many businesses and investors want decisive and progressive policies on carbon trading and renewable energy Federal Labor's failure to honour its commitments on climate change and emis- sions trading was a wrecking ball that demolished Kevin Rudd's prime ministership and slashed the party's support at the recent election. In the business sector, long delays and inadequate action on economic and structural reforms is stalling investment in renewable energies and putting a brake on sustainability and energy-efficiency programs in manu- facturing, mining, energy, transport and corporate property companies. The refusal of both main parties to provide certainty and commit to market mechanisms to cut greenhou- se gas emissions means it is in- creasingly unlikely that Australia will meet its modest commitment to a 5 per cent reduction in carbon emis- sions from 2000 levels by 2020. Regrettably, the failure of prime minister Julia Gillard and opposition leader Tony Abbott to articulate progressive, long-term social, econ- omic and environmental policies was a distinguishing feature of the elec- tion campaign. Indeed, the economist and author of the Climate Change Review, Professor Ross Garnaut, recently characterised this state of affairs as the ''nadir of the early 21st- century political culture, in which short-term politics and accession to sectional pressures has held sway over leadership and analysis of the national interest''. Carbon is deeply embedded in the Australian economy. Eighty-seven per cent of the nation's energy is sourced from fossil fuels and the export of coal and liquefied natural gas contribute substantially to its export income. Australia is also climate sensitive. It is the driest inhabited continent on Earth and no nation will be more vulnerable to global warming and predicted climate extremes, in the form of hotter temperatures, drought, water scarcity, storm surges, flooding and bushfires. The nation's economy is also threatened by the consequences of global warming. Agriculture and farm exports contributed $32 billion to the economy in 2005 but the drought of 2002-03 wiped almost $6 billion from gross domestic prod- uct and saw 100,000 people lose their jobs. The nation's food bowl, the Murray Darling Basin, supplies 40 per cent of the nation's food and contributes significantly to export income from beef, livestock, wool, barley, wheat, and canola. But com- puter modelling by the Australian Bureau of Agricultural and Resource Economics reveals that Australian wheat, beef, dairy and sugar pro- duction could decline by up to 20 per cent by the middle of this century and agricultural output could fall by as much as 80 per cent. Climate change will also threaten the nation's vast and fragile infra- structure network -- roads, railways, bridges, schools, hospitals, ports, electricity lines, and water and sewage pipes -- which is ill-equipped for rapid climate change and its consequences. Nobody, therefore, would have disagreed with Garnaut's assessment two years ago that climate change was a ''diabolical'' policy problem for governments. Garnaut acknow- ledged that an emissions trading scheme would result in emissions- intensive, trade-exposed sectors such as coal, gas and aluminium facing disadvantages in a world slow to move to a global carbon-trading regime. However, he also warned that, in the longer term, a world market that prices carbon will irrevo- cably damage Australia's terms of trade given our heavy reliance on the export of carbon-based commodities. Nobody could have guessed that the policy responses to the Garnaut report would destroy the leaders of both main political parties. Former Liberal leader Malcolm Turnbull's determination to support Labor's carbon-trading legislation in Novem- ber last year saw him replaced by Abbott. Rudd's decision this year to shelve action on the ''great moral, environmental and economic chal- lenge of our age'' saw him squander his mandate and lose the prime ministership. An irony of this fiasco is that Australians want timely action on climate change and support an emis- sions trading scheme. Repeated surveys have shown the community understands that a carbon price would raise energy prices. But they support this when told that receipts from the sale of carbon permits will be used to offset rising power costs for people on lower incomes. Similarly, despite strident oppo- sition to an emissions-trading system by some exposed industries, many in the business and investment sectors want decisive and progressive poli- cies on emissions trading, carbon abatement and renewable energy. Origin Energy boss Grant King affirmed last month his support for a carbon market, saying, ''We've believed and articulated for quite some time that we think the most effective way to manage carbon and reduce carbon emissions in the econ- omy is through putting a price on carbon and in so doing through an ETS, not a tax.'' AGL Energy chief Michael Fraser has warned repeat- edly that delays over the emissions- trading scheme and renewable energy targets threaten Australia's reputation as a stable investment destination. Australian National University economist and Reserve Bank board member Professor Warwick McKib- bin also cautioned that delaying the introduction of the emissions-trading scheme could cause job losses in banks and big companies that were preparing to trade carbon permits before the promised mid-2011 com- mencement. ''Industry must be very frustrated,'' he said in response to Rudd's back-down. ''This is the worst possible outcome for them.'' Meanwhile, the prospect of a price on carbon has seen hundreds of companies sink capital into low- carbon and green-energy programs, while venture capital has backed hundreds of start-ups hoping to profit from a transition to a low-carbon economy. In the United States, com- panies such as Google, Wal-Mart, Target, Cisco, Hilton, Ford, Chrysler and General Mills have reported saving tens of millions of dollars through renewable energy, energy efficiency and recycling schemes. In Britain, 20,000 public and private sector organisations need to register and report their energy use by the end of this month under the Government's CRC Energy Effic- iency Scheme. Those whose elec- tricity use exceeded 6000 megawatt- hours in 2008, expected to be about 5000 companies, must join a cap-and- trade scheme that will begin in April next year. The scheme requires organisations to record and monitor their CO2 emissions before buying allowances equivalent to their emis- sions each year. In the US, regula- tions such as the Environmental Protection Agency's Mandatory Re- porting of Greenhouse Gases Rule and laws to create greener buildings in New York City are setting founda- tions for a significant new compliance-based reporting market. Carbon and energy accounting software companies are among hund- reds of businesses that mushroomed in response to promised emissions- trading schemes and the new green- ing of business. Analyst company Verdantix has predicted that the carbon and energy management industry will double in value to $US250 million ($A280 million) by 2012 as companies realise that measuring and tracking energy, water, fuel and carbon with spread- sheets and utility bills is inadequate for new environmental reporting and auditing regimes. In Australia, the business drivers for pursuing better environmental performance and reporting have been regulation, under the National Greenhouse Energy Reporting Sys- tem, and broader strategic goals in areas such as risk management, business continuity and business transformation for a future low- carbon economy. Some companies have also been spurred into action by shareholder agitation, the greening of large investment and pension funds, and the rising influence of initiatives such as the Global Reporting Initiat- ive and the Carbon Disclosure Proj- ect. As an example, two years ago, the Australian company Metcash Trading set a goal of becoming more environmentally sustainable. The distributor of food and fast-moving consumer goods is piloting energy and water-saving programs that could save it millions of dollars in business costs. Like many of its peers around the world, Metcash has adopted sophisticated software to manage its environmental data and assess the return on investment of energy and carbon-abatement programs. Putting a sufficient price on greenhouse gas emissions through an emissions-trading scheme or carbon tax and applying a significant part of the revenue from emissions permits or tax receipts to support research, development, commercialisation and adoption of new low-emissions tech- nologies were the central aspects of the climate change policy recommen- ded by the Garnaut review. However, during the election cam- paign, both Gillard and Abbott rejec- ted the introduction of either an emissions-trading scheme or carbon tax. Their stances may change as the two negotiate with the Independents and Greens in the hope of forming a minority government. The Greens certainly support a market mechanism for pricing car- bon. They have taken new Senate spots from both the Liberal and Labor parties and will hold the balance of power in the upper house from July next year; which they are likely to hold for at least the next six years. Businesses and investors want greater certainty before committing further funds to sustainable low- carbon technology and business prac- tices. Meanwhile, the politics of change is taking root in Canberra: Australians have repudiated political leaders who abdicated action on climate change and have endorsed a new green body politic. Now is the time to listen and lead. Dan Gaffney is marketing and communications manager at CarbonSystems, which produces accounting software.
PSI - October