Emissions Trading

Report of the Senate Environment, Communications, Information Technology and the Arts References Committee
The Heat Is On: Australia's Greenhouse Future
Table of Contents

Chapter 9

Emissions Trading

To deliver lower emissions, the cost of CO2 needs to be internalised into investment and energy purchasing decisions. In other words, the emitters of greenhouse gas need to see the cost consequences of their actions. [1]

Introduction

9.1 In a context where Australia's total emissions trends are already putting the ability of the country to meet its 2008-12 Kyoto target into doubt, and in which there are alarmingly rapid increases in the largest emissions sector - energy - many witnesses argued that Australia would need to progress from voluntary to mandatory measures. In particular, many argued that only an approach which placed a price on carbon emissions, either through taxation or a system of tradeable permits, would achieve the long term reductions necessary to meet Australia's international obligations.

9.2 A number of factors have led the Committee to conclude that voluntary measures are insufficient to achieve the required emission reductions. These include the impact of energy market reform on emissions from that sector, and the lack of progress in reducing transport emissions and the progress to date of voluntary measures, such as the Greenhouse Challenge. The key issue then becomes how measures can be designed to achieve effective levels of long term abatement at least cost to the economy, to ensure flexibility and provide investors with certainty, and to ease the burden on vulnerable regions or sections of the community.

9.3 The Committee has concluded that a system of tradeable emissions permits (`emissions trading') is likely to form part of any least cost approach to emissions abatement at both a national and international level. However, it heard a diversity of views as to whether there was a need for such a system, the best timing for its introduction and its coverage and design.

9.4 The Kyoto Protocol provides for the establishment of an international emissions trading system, a feature which received the strong support of the Australian Government at Kyoto. While the Commonwealth Government has begun consultation and design work on a possible domestic emissions trading scheme, it has deferred its introduction until 2008 and possibly later. In August 2000, Senator the Hon Nick Minchin, Minister for Industry, Science and Resources, announced that:

9.5 This statement by the Government is of serious concern to the Committee. Not only has the Government ruled out introducing a mechanism that could ease the transition to lower emissions for Australian consumers and industry, but it appears to be hedging its commitment to meet its undertakings given at Kyoto in 1997. Senator Minchin also said that `We have given very firm commitments to industry that, while we intend to fulfil our Kyoto commitments, we are not prepared to sacrifice the competitiveness of Australian industry'. He says that the Government `will avoid greenhouse gas abatement policies and measures that will distort investment decisions between particular projects and locations', and that it will `avoid greenhouse gas abatement policies that unduly limit access to the most cost-effective greenhouse gas mitigation options'. [3]

9.6 In the Committee's view these statements are tantamount to an abdication of responsibility on the part of the Commonwealth Government. To avoid `measures that will distort investment decisions between particular projects and locations' is to dismiss policy options that may be required if the greenhouse trends of current market structures in energy and transport are to be reversed. It is these structures, which reward environmentally irresponsible investments and technology choices, which are distorted. It is entirely rational to utilise flexible market-based instruments like emissions trading to promote and reward investment shifts that will be greenhouse beneficial.

9.7 Such policies are not likely to cause damage to business, if they are well designed and sensitively applied over an appropriate time frame. This chapter argues for an emissions trading system that is introduced gradually and takes account of a range of circumstances in which the concessional treatment of emitters would be justified, especially in the lead-up to the first commitment period and while developing countries are not subject to binding emissions reductions. With these features, emissions trading offers Australia the most flexible and efficient way of meeting its Kyoto commitments at least cost to the national economy. Deferring action only runs the risk of incurring much higher costs in later years.

9.8 Under Articles 3 and 17 of the Kyoto Protocol, Parties are allowed to trade unused emissions credits. That is, Parties whose net emissions are likely to fall below their assigned amounts can sell them to Parties who require additional credits. The detailed design and structure of the system - including rules for verification, reporting and accountability - was deferred for negotiation at later meetings of the Conference of the Parties (CoP). [4]

9.9 Agreement on the design and rules of an international emissions trading system may be achieved at the 6th CoP meeting at the Hague in late 2000 (CoP 6). Australia is part of the `Umbrella Group' of countries (whose other members are Canada, Iceland, Japan, New Zealand, Norway, Russia, Ukraine and the US) which is seeking to progress discussion of such a system. [5]

9.10 The Commonwealth has already begun to explore options for the introduction of a domestic emissions trading system. The Australian Greenhouse Office (AGO) has released 4 discussion papers as part of an ongoing consultative process with industry and other stakeholders. The papers, listed below, respectively discuss:

9.11 The AGO stated that it would use the consultation process to help it formulate advice to the Government, which was provided in the first half of 2000. It explained that:

9.12 The Committee commends the efforts of the AGO in acting early to consult on and develop detailed design and implementation options for a domestic system of emissions trading. The Committee does not intend to make detailed recommendations about the design of the system, much of which may depend on further consultation, trials and economic modelling. However, a number of key issues do face this inquiry:

Why Introduce Emissions Trading?

9.13 In the Committee's view, there are a number of reasons why the introduction of a domestic emissions trading system is attractive:

Integrating with an international emissions trading system

9.14 Given the existence of an international emissions trading system, ratifying the Protocol would raise the question of how best to integrate the Australian economy with that system. An international emissions trading system would create scope for Australia to buy emissions permits on the international market in order to make up any shortfall in its total; however, the way in which those liabilities would be distributed within Australia is not clear. Dr Clive Hamilton argued that this could expose taxpayers, rather than polluters themselves, to such liabilities:

9.15 The AGO has stated that, if a domestic emissions trading system is introduced, providing for its easy integration into the international system is a `key requirement' and an important design criterion. For this reason, they prefer a `cap and trade' to a `baseline and credit' approach. [9]

9.16 The international system incorporated in the Kyoto Protocol is effectively a `cap and trade' system, which caps the volume of emissions allowed and limits the available number of permits to that cap. Thus, whoever possesses permits, or however they are traded, no volume of permits greater than the targets agreed will exist. `Cap and trade' thus creates a foolproof way of capping emissions, because no legal rights to exceed a given volume of emissions (either nationally or internationally) will exist.

9.17 In a domestic system the number of potential permits in circulation will be capped at the national target allowed under the Kyoto Protocol, which in Australia's case is 108 per cent of 1990 emissions. Within the `cap and trade' system flexibility exists for permits to be traded among market participants, and allocated using either auctions or administrative or concessional methods.

9.18 In a `baseline and credit' system each participant is assigned an emissions `baseline' which represents a schedule of allowable emissions over time (often set to decline). When emissions fall below that baseline the unused credits can be traded; if they exceed the baseline, credits must be purchased on the open market. A feature of this system is that emitters are inherently allocated a free tranche of permits based on their expected emissions levels, which may explain the popularity of this approach in industry submissions to the AGO discussion papers. [10]

9.19 The AGO is unenthusiastic about `baseline and credit' because: setting and graphing paths for individual firms would be administratively prohibitive; it would also limit the supply of available permits and cramp the market, because permits would only be created when emissions had fallen below the baseline; it could reduce policy flexibility in ameliorating the impacts on some sectors, because no permit revenues would be available to government; and it would not be compatible with an international emissions trading scheme. [11]

Ensuring Australia meets its Kyoto target

9.20 The AGO argues that emissions trading is a very dependable emissions control strategy and can minimise the potential costs of achieving a given level of emissions reduction. `Implementation of an emissions trading system, or other market-based measures at the national level', it argues, `would be likely to give Australia its best chance to fulfil its commitments under the Kyoto Protocol at least cost':

9.21 The AGO told the Committee that they favoured a `cap and trade' system, and if that were implemented, it would be the `most certain means' of achieving Australia's Kyoto target:

9.22 It also argued that, given that emissions trading is a market-based mechanism, it would create an added incentive for market participants to reduce emissions to levels below the cap:

9.23 The AGO also says that emissions trading is ideal because it:

9.24 A number of witnesses suggested that emissions trading would be essential if the rapid growth in energy emissions was to be slowed or reversed. The former adviser to the US Administration, Ms Cathy Zoi, argued that `emissions trading in concert with the 2 per cent renewables target' would move Australia `into a more environmentally friendly energy arena more quickly'. [16] The Australia Institute argued that:

9.25 Pacific Power also argued emissions trading was essential to any effort to reign in energy sector emissions:

9.26 Witnesses argued that crucial to promoting less emissions-intensive forms of energy was a price on carbon, which would enable the market to recognise the greenhouse advantages of lower emissions sources. The Australian EcoGeneration Association argued that:

9.27 Among submissions to this inquiry, emissions trading received the in-principle support of Pacific Power, Great Southern Energy, Boral Limited (now Origin Energy), the Australian Gas Association (AGA), the Australia Institute, the Australian Conservation Foundation (ACF), the Climate Action Network Australia (CANA), the Sustainable Energy Industry Association (SEIA), Cathy Zoi, the Stanwell Corporation, the Western Australian Greenhouse Council and BP Amoco. However, these individuals and organisations had diverse views on the timing and design of a system, and on the kinds of measures which may need to be combined with it. For example, BP Amoco supported an early voluntary pilot of emissions trading, but cautioned against implementing a mandatory scheme in isolation from in international system. [20]

9.28 Emissions trading is also supported by the New South Wales and South Australian Governments. This support, however, is conditional on the satisfactory design and implementation of the system. [21] The Liquefied Natural Gas (LNG) exporter Woodside Energy holds a position midway, recognising the theoretical benefits of emissions trading but concerned that it not impose on exporters carbon costs that are not also borne by international competitors. [22]

9.29 Other industry groups remain sceptical of the benefits of emissions trading. The Australian Industry Greenhouse Network (AIGN), which represents 12 major industry bodies, [23] has stated that it supports the current consultation process being conducted by the AGO on emissions trading, but cautions against the early establishment of a national system. They argue that `extensive further analysis of options and impacts is needed' before any definite move is made, and that `the current uncertain state of global greenhouse policy does not… justify additional mandatory measures that could jeopardise Australia's economic growth and competitiveness'. They would prefer a continued focus on voluntary cooperative measures such as the Greenhouse Challenge. [24]

9.30 The AIGN's views were echoed by the Pulp and Paper Manufacturers Federation of Australia (PPMFA), the Business Council of Australia, the Australian Aluminium Council, and the Cement Industry Federation. [25]

Emissions Trading - Timing its Introduction

9.31 If and when a national emissions trading system will be introduced is unclear. The Minister for Environment and Heritage, Senator Hill, stated in July 1999 that Australia would introduce an emissions trading system when the Kyoto Protocol is ratified, which would be 2008 at the very latest and possibly sooner. However, the Minister for Industry, Science and Resources, Senator Minchin, has sought to downplay the need to go beyond `no regrets' action, and in August 2000 announced that Cabinet had decided against the introduction of emissions trading `until the Kyoto Protocol is ratified by Australia, has entered into force and there is an established international emissions trading regime'. [26]

9.32 The Committee heard a range of views on the best timing for the introduction of a domestic emissions trading system. Many submitters argued for its early introduction; others advocated waiting until closer to 2008, when an international system would be in place, but supported earlier voluntary trials; and others advocated a policy of allowing more time for voluntary abatement measures to work before a domestic scheme is considered.

9.33 The Australia Institute argued that a domestic emissions trading could, and should, be introduced in the near future:

9.34 A discussion paper prepared by the Institute argues for the introduction of a scheme in 2001, which would cover around 120 of the largest emitters (72 per cent of total net emissions) and involve the full auction of permits, with revenues being recycled back into the economy through cuts to businesses taxes (especially taxes on labour such as payroll tax), or through capital investment incentives (such as a targeted form of accelerated depreciation). [28]

9.35 Given the current sharply upward trend in Australian emissions, the Institute argued that: `As the Federal Government has ruled out a carbon tax, a decision not to proceed with emissions trading (or to delay a decision by a few years) in effect signals an intention not to comply with the Kyoto Protocol'. [29]

9.36 The early introduction of a scheme also received the support of the Australian EcoGeneration Association (AEA), SEIA, Pacific Power, the Australian Consumers Association, Stanwell Corp, Origin Energy, Greenpeace Australia, the Australian Conservation Foundation (ACF) and the Climate Action Network Australia (CANA). [30]

9.37 At hearings, the New South Wales Government was non-committal on the exact timing of emissions trading, but did say that `it would be… useful if we were to signal that, at some time in the not too distant future, there will be a cap on Australian emissions and people had better start factoring the cost of that into their projections of project costs…'. However, their submission stated that:

9.38 The New South Wales Government's position statement on emissions trading, dated November 1998, suggests that a national emissions trading could be phased in from 2002 sector by sector, starting with energy and other industry sectors, and later extending to transport. [32] Such an approach, beginning with energy, was also advocated by the AEA. [33]

9.39 Pacific Power also supported the early introduction of emissions trading arguing that:

9.40 They also stressed that an early announcement of the key rules and design features would be of value to investors:

9.41 A notable recent development has been the Position Statement on Climate Change released by industrial giant BHP on 2 August 2000. BHP argued that the current policy environment was failing to provide certainty for investors. Committing now to a future emissions trading scheme would go some way to reducing that uncertainty:

9.42 While BHP argues that `a legislated emissions trading regime should not be introduced until there is agreement on international actions to address greenhouse gas emissions', they advocate the immediate introduction of a system of incentives for early action, of a kind that will substantially affect the way a later emissions trading system would impact upon participants. [37]

9.43 Any mandatory scheme, BHP argues, should not be based on the grandfathering (concessional allocation) of permits, but on their full auction with revenues being recycled into business tax cuts. Early action should be encouraged by providing concessional tranches of permits for those who take early action to reduce emissions from January 2000 to 2005. A one tonne fall in CO2-e emissions achieved in 2001 would qualify for four tonnes of permits during the first Kyoto commitment period; a similar cut achieved in 2002 would attract three tonnes of permits, winding down to one tonne in 2004. Those companies who failed to achieve emissions falls would be forced to buy their full quota of permits once a mandatory scheme commenced. [38]

9.44 The Committee notes that the proposal would have a similar impact to the early introduction of a mandatory scheme, with the difference being its structure of incentives and its deferral of permit costs until later years. However, a number of witnesses have raised problems with an early reliance on auctions, which may impact harshly on trade-exposed industries or those, such as Liquified Natural Gas (LNG), which has high emissions during production and processing but an overall greenhouse benefit, when displacing more emissions-intensive fossil fuels. Nevertheless, the Committee is encouraged to see a bold and proactive proposal from industry which aims to stimulate significant early abatement.

9.45 Other witnesses, while supportive of emissions trading in principle, were more cautious about introducing it too early. While holding this view, BP Amoco has already trialed an internal emissions trading scheme, and advocated `the establishment of a pilot voluntary domestic emissions trading scheme as soon as possible' which was also `supported by a credit scheme for early action':

9.46 The Australian Aluminium Council argued that a domestic emissions trading scheme should be delayed until an international scheme was also in place:

9.47 The Minerals Council of Australia argued for the outright deferral of mandatory measures, saying that they should be `a clear second preference' and that Government should `fully assess their costs and competitiveness implications, including their cumulative impact on Australian industry, before implementing them'. [41]

9.48 The AGO, while having progressed discussion and consultation on the possible scope and design of a domestic emissions trading system, was cautious about introducing it ahead of Australia's trade competitors. On the other hand, they did recognise `early mover' advantages:

9.49 The AGA, while supportive of emissions trading as `a very useful way of bringing about fuel switching in Australia', did not wish to see it introduced before an international system was in place:

9.50 The AGO acknowledges that introducing emissions trading ahead of an international system may be necessary if a least-cost adjustment to emissions reductions is to be achieved leading up to the first commitment period 2008-12. They suggest that a path that avoids both large short term adjustments, or strict annual targets, will provide least cost outcomes. While they say that a `wait and see' approach while international mechanisms are decided is a `viable option', they also comment that `there is a risk that delaying domestic action now may result in lost opportunities and higher costs in the future'. [44]

9.51 The AGO argues that a serious commitment to emissions reduction will force structural change in the economy and that `managing these pressures for the long term advantage of the community is an ongoing challenge for policymakers'. They suggest one possible approach might be to post interim targets for the domestic economy in the lead up to 2008:

9.52 One option the AGO does suggest is a transitional program of voluntary emissions trading. [46]

9.53 The Committee notes with some concern that the Commonwealth Government appears to have ruled out the early introduction of a domestic emissions trading system. In August 2000, Minister for Industry, Science and Resources, Senator Minchin, announced that:

9.54 The Committee believes this announcement is a retrograde step that will only cause industry to defer action to reduce emissions and will lead to higher abatement costs in the future.

Recommendation 96

The Committee recommends the early introduction of a domestic emissions trading system, with the aim to build capacity and experience, encourage uptake of fuel switching and energy efficiency, and position Australia to lead the international debate in the development of a global trading scheme.

Recommendation 97

The Committee recommends a phased introduction of an emissions trading scheme, with the possible introduction of a voluntary scheme in advance of a mandatory scheme, designed to direct the economy on a path to meeting Australia's Kyoto target in the first commitment period, and to meet potentially lower targets in the subsequent and later commitment periods.

Australian Democrats Recommendation 12

The Australian Democrats recommend that the Commonwealth Government, in advance of a domestic emissions trading system, phase in a small carbon levy from 2003 to provide a signal to Australian industry. Where industry can demonstrate that this levy adversely affects its international competitiveness some or all of those payments could be rebated or returned as a contribution to fund investment in emissions abatement actions within that industry.

Australian Democrats Recommendation 13

The Australian Democrats recommend that the Commonwealth Government use the revenue from the carbon levy to fund a `Reverse Carbon Tax' incentive program. The program should provide financial incentives linked to the size of lifecycle emissions savings (at a rate of $x/tonne of CO2 avoided) for the manufacturers of low greenhouse impact appliances and equipment and builders of energy-efficient buildings and other approved projects.

Designing an Emissions Trading System - Debate and Principles

9.55 The Committee heard a diversity of views about the ideal design of a system, with a particular concerns being:

9.56 How these issues are decided will affect: the adjustment pressures faced by some industries, along with employment and profitability; how fairly the abatement burden is distributed; and the effectiveness of emissions trading in bringing about emissions reductions.

Boundaries and coverage

9.57 The breadth and scope of a domestic emissions trading system was a strong concern for witnesses. While it does present some difficulties, the Committee believes it important as a factor which could have an important influence on the effectiveness of emissions trading as a policy tool for greenhouse gas abatement. It will also influence the costs of compliance and administration. These issues have also been described as the `upstream or downstream' problem.

9.58 The AGO has proposed, as a general principle, that emissions trading be as comprehensive as possible, covering all greenhouse gases from all sources and incorporating all carbon sinks. [48]

9.59 A comprehensive system presents a number of advantages, including:

9.60 However, absolute comprehensiveness presents some problems, such as:

9.61 Given that the bulk of Australia's emissions are in the energy sector the AGO has proposed locating the requirement to hold and acquit emissions permits further `upstream' in the emissions chain. This would target a series of `focus points' in the emissions chain (smaller groups of emitters whose production has a strong link with the more numerous and dispersed emitters further downstream). The AGO suggests that targeting the 260 sites of oil, coal and gas production, rather than the emissions from the several million users of such products, would offer such advantages. This approach is also advocated by the Australia Institute. [51]

9.62 In such a case, coverage would be theoretically comprehensive (CO2-equivalent emissions from fuel by weight or volume can be accurately calculated, without having to monitor actual emissions) and cover all possible emissions points at which the fuel is consumed. Emissions would simply be estimated according to the carbon content of fuels, most probably at the point of sale. This would also help minimise compliance and monitoring costs and streamline administration.

9.63 Other witnesses, however, argued for the scheme to be as comprehensive as possible, and thus incorporate more elements of a downstream approach. The New South Wales Government stated that: `For an emissions trading scheme to be as efficient and equitable as possible, it should include as many sectors and sources as can be adequately verified, subject to acceptable transaction costs'. [52]

9.64 While some industry groups did not advocate the introduction of domestic emissions trading system, they did emphasise that emissions reductions needed to be borne by all sectors. For example, Electricity Supply Association of Australia (ESAA) argued that: `the burden sharing of emission tasks is very important. It needs to be equitable, and it cannot be loaded on the most prominent emission sectors… there is a trend to try to do that at the moment'. [53]

9.65 The Committee accepts the administrative convenience of using an `upstream' approach, but notes that the policy objective of reducing emissions would then rely on more indirect incentives such as price, which could not always be assumed to provide clear or effective signals.

9.66 For example, the principal incentive for electricity producers to reduce emissions would be an increased price for coal (as they themselves would not be required to hold permits). While this may reduce the competitiveness of brown coal or increase the competitiveness of gas and some renewables as alternative fuel sources, the effect on emissions would be delayed because substantial reductions would have to wait for new capital investment in gas-fired and renewable power. The price increases caused by the need for coal producers to hold permits may be delayed also by the extent to which they are grandfathered (issued at little or no cost), and they will be only one element of a complex market environment.

9.67 Price increases could theoretically encourage small energy users and householders to use less electricity, but that too is an indirect signal. The reduced or more efficient use of electricity would depend on the cost, awareness and availability of technological alternatives such as solar power, energy-efficient appliances, and improved house design. The ability of householders to make substantial capital investments (as is required for solar energy or house renovations) is further dependent on variables such as income, property prices and rents, interest rates and other market complexities. [54]

9.68 In the case of oil, incentives for vehicle owners to reduce emissions would again rest on increased fuel prices. However, this too would be only one element of a market mix which includes world prices, regional distortions and excise. In the road transport industry it may increase the cost of freight without necessarily resulting in reduced travel or emissions. Whether freight is transferred to rail, or fuel alternatives such as Compressed Natural Gas (CNG) become more viable, will depend on further technological innovation and would need to be carefully modelled. This is a dilemma recognised by BP Amoco, which told the Committee that:

9.69 In the Committee's view, this is a telling point. While `upstream' emissions trading would be likely to stimulate a stronger move to smaller engined and more fuel-efficient vehicles, in the absence of viable public transport alternatives, a dramatic reduction in emissions may not occur. Additional policy measures, such as to promote the manufacture of CNG fuelled vehicles, investment in public transport infrastructure, or limits to new road-building, may be needed in such circumstances. [56]

9.70 Sustainable Energy Industry Association (SEIA) also believes that an upstream approach could blunt the behavioural signals that will be needed for effective abatement:

9.71 The AGO recognises the uncertainties in this area, saying that: `If the point of acquittal is divorced from the source of emissions, this can dilute the incentive for actual emitters to pursue the full range of emissions abatement opportunities'. They argue that decisions about the location of permits should be made by balancing administrative costs, ease of measurement and `the degree of abatement incentive and opportunity'. The changing nature of this balance across the economy would `suggest an indirect approach for some types of emissions and a direct approach for others... for some emissions sources implementation of either approach could be problematic, and more work will be needed to assess the feasibility of these and alternative approaches'. [58]

9.72 The AGO suggests that where the costs of including emitting activities in an emissions trading system outweigh the potential benefits (due to prohibitive monitoring and administration costs or measurement difficulties) it may be necessary to encourage abatement through other policy measures. `In such cases,' they say, `it may be necessary to establish a permit reserve to act as a buffer against the output of these emission sources' - that is, to ensure that there are not more permits in circulation than the capped emissions amount allowed under the Kyoto Protocol and subsequent international agreements. [59]

9.73 The Committee acknowledges the administrative problems in setting up an emissions trading scheme which takes in a large number of dispersed `downstream' sources. It agrees that an `upstream' approach could be effective, and that administrative costs and complexity are factors. However, the key policy objective ought to be to use emissions trading to stimulate greenhouse abatement by encouraging markets to internalise the costs of greenhouse pollution.

9.74 The Committee recommends that a future emissions trading scheme be as comprehensive as administratively feasible, taking in a wide range of sources and emitters. In this sense, whether an upstream or downstream approach is taken, it should be able to produce clear abatement responses, not only in energy and industrial processes but also in land use, transport and agriculture. The broader the scheme the more acceptable it would be to the community and to affected industries; it will also be more equitable and increase the potential for abatement to occur with greatest efficiency and least cost across the economy. If it is not possible to include some sources or emitters, policy must ensure that they do not attract unfair advantages in relation to other emitters and that they are also subject to policies which promote abatement.

Recommendation 98

The Committee recommends that a future emissions trading scheme be as comprehensive as administratively feasible, taking in a wide range of sources and emitters.

The Committee acknowledges that an emissions trading scheme will not achieve all desirable emission reductions, and recommends that consideration be given to complementary policy measures.

Australian Democrats Recommendation 14

The Committee recommends that a future domestic emissions trading system be designed so that the environmental costs of transport are internalised into market decisions and consumer behaviour. The Committee recommends that, if necessary, emissions trading be supplemented by a range of policies which reward more responsible technologies, investments and behaviour, and which can ensure the availability of high quality transport alternatives that are less emissions-intensive.

Permit allocation - Grandfathering or auctions?

Grandfathering

9.75 Under an administrative (grandfathered) allocation method permits are distributed free or at a price below their market value. While this tends to increase the administrative complexity involved in the allocation of permits, it is attractive as a method of easing the adjustment burden of emitters by reducing the cost of emissions. The AGO argues that grandfathering is attractive to ensure that `past investment and production decisions, taken in good faith, are not excessively penalised by emerging greenhouse commitments'. [60]

9.76 A number of industry witnesses favoured grandfathering as a way limiting the costs of abatement action.

9.77 Pacific Power supported grandfathering over auctioning, with permits allocated on a once only basis:

9.78 BP Amoco argued for the grandfathering of permits as way of ensuring that export-competing industries were not burdened with costs that competitors did not face:

9.79 Other stakeholders point out drawbacks to grandfathering. BHP's Position Statement on Climate Change states that:

9.80 The AGA was concerned that an excessive reliance on grandfathering would have perverse effects in greenhouse policy terms. They worried that the concessional allocation of permits could actually work against the introduction of less emissions-intensive energy sources by creating new barriers to entry:

9.81 The AGA argued against both the predominant grandfathering or auction of permits. Instead they suggested a policy-focused hybrid:

9.82 The AGA recommended `the differential treatment of energy sources in the initial allocation of permits':

Auctions

9.83 In a system where permits were auctioned, the number of permits released would still be capped at (or below) Australia's allocation of emissions under the Kyoto Protocol, but market forces (supply and demand) rather than administrative decision would determine their allocation and cost. This would occur within a context where government is still likely to regulate the emitters who would be required to acquire and acquit permits, and set in place other rules for trading, monitoring and acquittal.

9.84 Auctioning permits is appealing because it utilises market forces both to allocate permits among emitters efficiently, and to provide incentives for abatement action. Permit prices respond to the available opportunities for abatement and the demand to emit greenhouse gases, thus theoretically maintaining a price incentive for abatement action in all circumstances. Where permits are plentiful (in a context where Kyoto targets are being met or overachieved) prices will be lower and abatement action rewarded by lower emissions costs. Where emissions are close to, or exceed, target levels and permits relatively scarce, prices will increase and thus enhance the cost-effectiveness of abatement actions over emissions.

9.85 In this way the auction of permits provides a flexible market mechanism that rewards effective abatement actions, while increasing the pressure (and rewards) for abatement as emissions reach unsustainable levels across the economy. It is administratively simpler than other forms of allocation, and provides an innately efficient way of achieving policy goals that utilises autonomous market dynamics. For these reasons, auctioning is a theoretically superior method of allocation to grandfathering or other administrative methods.

9.86 Auctions received the support of the Australia Institute, the Australian Conservation Foundation, the Climate Action Network Australia, the Australian EcoGeneration Association, the South Australian Government and Greenpeace.

9.87 The Australia Institute argued that auctioning was a fairer way of allocating the wealth associated with the creation of tradeable emissions permits, and was consistent with the `polluter pays principle':

9.88 However, Dr Hamilton did concede that the circumstances of some industries, including their exposure to non-Annex B competition, may justify some special consideration, which he argued could come in the form of `border-tax adjustments' or a tax rebate on permits:

9.89 Ms Carrie Sonneborn, a renewable energy expert, argued that auctions would provide a greater boost to renewables:

9.90 Ms Sonneborn felt that supporting renewables was a crucial complement to emissions trading:

9.91 Pacific Power, who had concerns with auctioning, argued strongly for auction revenues to be recycled back into the development and promotion of renewable energy:

9.92 The South Australian Government also argued for `a policy linkage between renewable energy and emissions trading, by establishing expansion of the renewable energy sector as Australia's primary long term greenhouse policy goal and structurally locking in its expansion by allocating a component of the proceeds of emissions trading auctioning to research and industry development in the sector'. They also advocate a system of `tiered eligibility for trading credits' wherein fully renewable sources such as solar wind and biomass would have `long term eligibility' and energy from `non-renewable waste sources with a greenhouse benefit' (such as cogeneration or coal seam methane) have a limited eligibility (50 per cent or renewable sources or between 2008-12 only). [72]

9.93 BHP advocated the auction of permits, with concessional allocations only for early action prior to 2005:

9.94 BHP's approach, which stresses auctions but also advocates the concessional allocation of permits to those emitters who achieve reductions between 2000 and 2004, could be seen as a form of combined allocation. Ms Carrie Sonneborn, while acknowledging the benefits of auctions, felt that a full auction may be less desirable than some combination of auctioning and grandfathering:

9.95 The AGO raised the problem that a full auction of permits could rob Government of the flexibility needed to manage the unequal distribution of costs throughout the economy:

9.96 Thus, while theoretically ideal, during the period when economic and social adjustment is occurring, auctioning presents a number of equity and economic concerns. For this reason the AGO suggests phasing in auctioning through a combined auction and administrative allocation of permits in the short-to medium-term, with a greater proportion of permits auctioned over time. The AGO has suggested a phasing schedule which reduces the allocation of concessional permits during the second commitment period (2103 to 2018) by half, by 3/4 in the second (2019 to 2023), and thence to zero after 2023. An alternative method of phasing out grandfathering could be to increase the price charged for concessional permits towards the market price, using a predetermined scale. [76]

9.97 The AGO acknowledges that auctioning all permits from the outset will create greater incentives for abatement action and force a more rapid greenhouse response. They warn, however, that the cost and urgency of these changes are likely to be spread unevenly across the community. Of particular concern are trade-exposed businesses and some regional areas. On the other hand, auctioning would also provide revenues which could be used to compensate those affected or assist with abatement efforts.

9.98 The Committee acknowledges the many benefits of auctioning emissions permits: the fidelity to the polluter pays principle, the avoidance of potentially unfair allocations of wealth to incumbents and the consequent erection of barriers to entry; the administrative efficiencies gained by allowing the market to allocate permits; and the clarity of price signals as a spur to abatement. Auctions are by far the most effective way of ensuring that the market internalises the costs of greenhouse pollution and rewards investment in emissions reductions. For these reasons, the Committee finds auctions an attractive principle for the allocation of permits under a domestic emissions trading system.

9.99 The Committee also acknowledges that auctions have drawbacks. Until developing countries have agreed to binding emissions reductions and are imposing on their emitters the same kind of costs faced by Australia, export competing industries could face costs which are not borne by the competitors. While the Committee does not suggest that every exporting industry should receive a large concessional allocation of permits, in some cases there may be grounds for doing so. In the case of the industries such as LNG, which could potentially demonstrate their greenhouse benefits on a life-cycle basis, the arguments would be stronger.

9.100 Emissions trading based on auctions would also be regressive in its impact. While these costs could be borne by many consumers without too much difficulty, they could also increase the disadvantage faced by those on low or fixed incomes, or those who lack access to public transport or live in regional areas. In other cases cost increases could be indiscriminate - for example, increases in petrol prices could force increases in public transport fares. It may also be possible that changing market conditions could cause job losses in industries in transition, which may impact upon particular communities or regions more than others.

9.101 It is incumbent upon government to ensure that they are sensitive to such potential impacts and be willing to ameliorate them. This could be achieved in a range of ways. Auction revenues could be used to fund compensation or increase welfare payments, or to invest in new public transport alternatives and to subsidise the costs of operating such systems. In other cases, grandfathered allocations could be used to soften a transition.

9.102 The Committee believes that auctions are in principle the best way of allocating permits and should be the underlying basis of a domestic emissions trading system. However, it acknowledges that there may be cases where the administrative allocation of permits may be warranted. The Committee stresses that such concessional allocations should be discrete, be made on principle, and not be used as a blanket form of allocation. In the lead up to 2008, and while information is still being gathered about the likely social and economic effects of adjustment, some concessional allocation of permits may be justifiable. However, in the Committee's view, the fundamental policy objective ought to be to move to an environment where the costs of greenhouse emissions are fully and transparently recognised by the market.

9.103 The Committee suggests that the Government consider the following principles for the concessional allocation of permits:

Recommendation 99

While recognising that a hybrid approach to permit allocation may be desirable in the short term, the Committee recommends that allocation of permits by auction be considered as the basis for a domestic emissions trading system.

Where interim concessional allocations are made, the Committee recommends that they be made on the basis of clear and widely accepted principles (such as life-cycle greenhouse benefits, a severe loss of international competitiveness, or credit for early action) and require recipients to agree to emissions reduction targets.

Recommendation 100

Where carbon leakage is likely because an activity competes with activities in countries not bound by emissions reduction targets, the Committee recommends that measures be implemented to minimise the disadvantage. This may include the allocation of concessional permits on the basis of clear and transparent criteria.

Credit For Early Action

9.104 In discussions about the potential for mandatory policy measures, like emissions trading, a common theme among industry witnesses was a need to ensure either that emitters are rewarded (or not punished) for having taken early action to reduce emissions.

9.105 The Australian Industry Greenhouse Network (AIGN) argued that this issue was important, both for progressing the Greenhouse Challenge, and for ensuring that companies who took no action to reduce emissions would not seek unfair advantage later:

9.106 For Great Southern Energy, credit for early action is a matter of certainty:

9.107 However, the Committee also heard concerns about the uncertain verification of emissions reductions. The uncertainty around the baselines being used in the Greenhouse Challenge has already been discussed in chapter 8, and this uncertainty would translate into assessing the scope of early reductions for the purposes of an emissions trading system. The Australia Institute, which was very critical of the assumptions used in assessing emissions reductions under the Greenhouse Challenge, was thus sceptical of claims for reward for early action:

9.108 If rewards for early action were to be considered, such as concessional or cut-price allocation of emissions permits as BHP suggests, they would have to be completely and transparently verifiable, and available from a point in the near future rather than in the past. Verification would have to be in place for all potential emitters, otherwise distortions and inequities would be created. The viability of such an approach would also depend on the coverage of a future emissions trading system and thus be only available to those who were later liable. This may limit the applicability of such a scheme.

9.109 Ensuring that early action is not penalised is however a far more simple matter. This could easily be incorporated into the design of an emissions trading scheme. Emissions trading could also work to reward early action. It could also be argued that announcing the introduction of an emissions trading scheme now, with some key design principles, will create incentive for early action. Early action would be rewarded by future market conditions because it would reduce the emissions costs firms faced once emissions trading came into force. This would be clearer where the majority of permits were auctioned; however if grandfathering were to be widely used as an allocation method this would create the danger that early actions could be penalised vis-à-vis emitters who had not taken early action.

9.110 The AGO argues that it would be easy to guard against such problems with grandfathering by adopting rules early that preclude them - such as choosing an allocation date that has already passed, rewarding early abatement efforts by allocating more permits to those who make faster progress, or by calculating allocations on the basis of an emission `standard' relative to activity levels. This last option would reward facilities with a lower emissions relative to carbon inputs or production output with a larger allocation of permits. This, says the AGO, `has the advantage of being outcomes focused, and practicable in terms of data requirements'. [80]

Recommendation 101

The Committee recommends that Government seek to ensure that a future emissions trading system does not penalise early action to reduce greenhouse emissions.

Recommendation 102

The Committee recommends that any use of permit allocation to reward early action to reduce greenhouse emissions be treated with caution, and ensure that reductions are verifiable and calculated from a date following the announcement of a reward for early actions scheme.

Recommendation 103

The Committee recommends that businesses that comply with specified accounting practices and protocols should be guaranteed that the emissions reduction actions will be considered in future policy development.

Is Emissions Trading Enough?

9.111 A number of witnesses, while supportive of emissions trading, argued that it would need to be supplemented by a range of other measures. For example, Pacific Power argued it may not, of itself, be enough to stimulate the renewable energy sector:

9.112 Carrie Sonneborn suggested that the development of renewable energy will in turn, reduce the price of permits:

9.113 Ms Sonneborn argues that the Kyoto flexibility mechanisms, including emissions trading, may not stimulate renewables alone, a problem which could be exacerbated by the design of a domestic system:

9.114 SEIA also recognised that emissions trading may not be able, through price signals alone, to stimulate emissions reductions. The main problem would come if an upstream approach was taken, which could blunt price signals to the end users of energy or market intermediaries like the building industry or car manufacturers. To counter this problem, they propose including market intermediaries through a `reverse carbon tax':

9.115 SEIA argues that this approach `compensates for the adverse impacts of introduction of a GST on the sustainable energy industry, while providing immediate market signals consistent with a carbon tax or emissions trading to purchasers of energy-related systems'. Their detailed proposal is for:

9.116 They then propose that the rebate be applied at two rates:

9.117 They argue for paying the rebates to the manufacturer or importer rather than the consumer, and could be applied to energy saving domestic and commercial appliances, local renewable energy systems, energy-efficient building systems and even motor vehicles. [87]

9.118 Such a scheme could generate considerable complexities, and may be easier to apply in a more discrete rather than a very broad way. However, the Committee believes it is a valuable suggestion and urges government to explore its possibilities seriously. It may be of particular value in promoting renewable energy, energy efficiency and low emissions vehicles in the years before policy-induced market changes began to make such developments cost effective. It may also be a way of providing assistance to groups such as farmers to pursue abatement when costs such as fuel are rising under the impact of greenhouse reduction policy.

9.119 In terms of the broader problem of promoting downstream efficiencies and behavioural changes, a range of policies would need to be considered. The Government's 2 per cent renewable target in electricity is one such policy, as are others such as the rebates for household solar and other renewable programs. Tax incentives for R&D in renewable energy should also be considered, as should a removal of tax incentives for greenhouse unfriendly fuels and vehicles.

9.120 Major investments in public transport and a sustainable approach to investment in road infrastructure also need to be a priority, to provide travellers with less emissions-intensive alternatives and reduce the number of trips. In short, there needs to be a creative effort by government to ensure that emissions trading is complemented by a wide range of policies to reduce emissions in all sectors of the economy. In the Committee's view, emissions trading is one highly desirable element in an overall policy mix.

Recommendation 104

The Committee recommends that a national emissions trading system be supplemented by a range of policies which will stimulate emissions reductions in sectors for which it is difficult to provide coverage or which do not respond to price signals.

In particular, policies to provide public transport alternatives to the use of private motor vehicles, and to promote the development and takeup of renewable energy, need to be a priority.

 

Footnotes

[1] Ric Brazzale, Proof Committee Hansard, Melbourne, 21 March 2000, pp 215-16.

[2] Senator the Hon Nick Minchin, Media Release, Government Provides Greater Greenhouse Certainty For Industry, 23 August 2000.

[3] Senator the Hon Nick Minchin, Media Release, Federal Government Guarantees No Premature Introduction of Greenhouse Gas Emissions Trading, 4 September 2000; and Senator the Hon Nick Minchin, Federal Government Greenhouse Commitments to Australian Industry, 6 September 2000.

[4] Michael Grubb, The Kyoto Protocol: A Guide and Assessment, The Royal Institute of International Affairs, London, 1999, pp 128-29.

[5] Australian Greenhouse Office, National Emissions Trading Discussion Paper 1: Establishing the Boundaries, March 1999, p 7.

[6] Australian Greenhouse Office, Submission 169, p 1688.

[7] Australian Greenhouse Office, National Greenhouse Gas Inventory 1998, p A-3; and McLennan Maganasik Associates, Greenhouse Gas Emission Projections: Australian Electricity Generation and Natural Gas Combustion, Report to Australian Greenhouse Office, 5 June 2000, p vi.

[8] Proof Committee Hansard, Canberra, 10 March 2000, p 58.

[9] Australian Greenhouse Office, National Emissions Trading Discussion Paper 4: Designing the Market, December 1999, p 6.

[10] Australian Greenhouse Office, National Emissions Trading Discussion Paper 4: Designing the Market, December 1999, p 16.

[11] Australian Greenhouse Office, National Emissions Trading Discussion Paper 4: Designing the Market, December 1999, pp 26-27.

[12] Australian Greenhouse Office, National Emissions Trading Discussion Paper 1: Establishing the Boundaries, March 1999, p 8.

[13] Ms Gwen Andrews, Proof Committee Hansard, Canberra, 22 June 2000, p 730.

[14] Ms Gwen Andrews, Proof Committee Hansard, Canberra, 22 June 2000, p 731.

[15] Australian Greenhouse Office, National Emissions Trading Discussion Paper 1: Establishing the Boundaries, March 1999, p 8.

[16] Proof Committee Hansard, Sydney, 22 March 2000, p 304.

[17] Dr Clive Hamilton, Proof Committee Hansard, Canberra, 10 March 2000, pp 58-59.

[18] Dr Robert Lang, Proof Committee Hansard, Sydney, 22 March 2000, p 351.

[19] Ric Brazzale, Proof Committee Hansard, Melbourne, 21 March 2000, pp 215-16.

[20] Mr Merton Smith, Proof Committee Hansard, Sydney, 22 March 2000, p 312.

[21] Pacific Power, Submission 98, p 801; AGL, Submission 128, p 1284; Great Southern Energy, Submission 150, p 1562; Boral Limited, Submission 184, p 1955; New South Wales Government, Submission 198, p 2095; and South Australian Government, Submission 199, p 2123.

[22] Woodside Energy Ltd, Submission 129, p 1298.

[23] Australian Aluminium Council, Australian Automobile Association, Australian Coal Association, Australian Institute of Petroleum, Australian Petroleum Production and Exploration Association, Business Council of Australia, Cement Industry Federation, Electricity Supply Association of Australia, Federal Chamber of Automotive Industries, Minerals Council of Australia, Plastics and Chemical Industries Association, and Pulp and Paper Manufacturers Federation of Australia.

[24] Australian Industry Greenhouse Network (AIGN), Submission 113, p 959.

[25] Bridson Cribb, Pulp and Paper Manufacturers Association, Proof Committee Hansard, Canberra, 23 June 2000, p 778; Dr John Tilley, Proof Committee Hansard, Canberra, 23 June 2000, p 794; Mr David Coutts, Proof Committee Hansard, Canberra, 10 March 2000, p 49; and David Buckingham, Proof Committee Hansard, Melbourne, 21 March 2000, p 183.

[26] Nick Hordern, `Libs at odds over greenhouse', The Australian Financial Review, 24 September 1999, p 7; and Nick Hordern, `Carbon trade nod after Kyoto', The Australian Financial Review, 23 July 1999, p 24. `No regrets' action is a phrase used by participants to denote voluntary (rather than compulsory) abatement actions by emitters, which allow them to choose the timing and scope of change, which will usually be dictated by an acceptable level of cost.

[27] Dr Clive Hamilton, Proof Committee Hansard, Canberra, 10 March 2000, p 59.

[28] Clive Hamilton and Hal Turton, Business Tax and the Environment: Emissions trading as a tax reform option, Discussion paper No. 22, The Australia Institute, 1999, pp ix-xv.

[29] Clive Hamilton and Hal Turton, Business Tax and the Environment: Emissions trading as a tax reform option, Discussion paper No. 22, The Australia Institute, 1999, p x.

[30] Mr Ric Brazzale, Proof Committee Hansard, Melbourne, 21 March 2000, p 215; Dr Alan Pears, Proof Committee Hansard, Melbourne, 21 March 2000, p 228; Dr Robert Lang, Proof Committee Hansard, Sydney, 22 March 2000, p 360; Lynette Thorsensten, Proof Committee Hansard, Sydney, 22 March 2000, p 370; Dr Kuan Chia, Proof Committee Hansard, Brisbane, 26 May 2000, p 525; Mr Andrew Stock, Proof Committee Hansard, Brisbane, 26 May 2000, p 541; Mr Don Henry, Proof Committee Hansard, Melbourne, 21 March 2000, p 189; and Climate Action Network Australia, Submission to the Australian Greenhouse Office regarding `Issuing the permits', August 1999.

[31] Mr Peter Stevens, Proof Committee Hansard, Sydney, 22 March 2000, p 282; and New South Wales Government, Submission 198, p 2095.

[32] New South Wales Government, Submission 198, p 2103.

[33] Australian EcoGeneration Association, Submission 196, p 2061.

[34] Dr Robert Lang, Proof Committee Hansard, Sydney, 22 March 2000, p 360.

[35] Mr Anthony Sproule, Proof Committee Hansard, Sydney, 22 March 2000, p 362.

[36] Position Statement, BHP and Climate Change, p 1.

[37] BHP Media Release, BHP release position statement on climate change, 2 August 2000.

[38] Position Statement, BHP and Climate Change, p 2.

[39] Mr Merton Smith, Proof Committee Hansard, Sydney, 22 March 2000, p 312.

[40] Mr David Coutts, Proof Committee Hansard, Canberra, 10 March 2000, p 49.

[41] Dr Richard Wells, Proof Committee Hansard, Canberra, 10 March 2000, p 70.

[42] Ms Gwen Andrews, Proof Committee Hansard, Canberra, 9 March 2000, p 4.

[43] Mr William Nagle, Proof Committee Hansard, Sydney, 22 March 2000, p 393.

[44] Australian Greenhouse Office, National Emissions Trading Discussion Paper 2: Issuing the Permits, June 1999, p 19.

[45] Australian Greenhouse Office, National Emissions Trading Discussion Paper 2: Issuing the Permits, June 1999, pp 20-21.

[46] Australian Greenhouse Office, National Emissions Trading Discussion Paper 2: Issuing the Permits, June 1999, pp 22-23.

[47] Senator the Hon Nick Minchin, Media Release, Government Provides Greater Greenhouse Certainty For Industry, 23 August 2000.

[48] Australian Greenhouse Office, National Emissions Trading Discussion Paper 1: Establishing the Boundaries, March 1999, p 12.

[49] Australian Greenhouse Office, National Emissions Trading Discussion Paper 1: Establishing the Boundaries, March 1999, p 16.

[50] Australian Greenhouse Office, National Emissions Trading Discussion Paper 1: Establishing the Boundaries, March 1999, pp 17-21.

[51] Australian Greenhouse Office, National Emissions Trading Discussion Paper 1: Establishing the Boundaries, March 1999, pp 17-20; and Clive Hamilton and Hal Turton, Business Tax and the Environment: Emissions trading as a tax reform option, Discussion Paper No. 22, The Australia Institute, 1999, p xi.

[52] New South Wales Government, Submission 198, p 2095.

[53] Mr Keith Orchison, Proof Committee Hansard, Sydney, 22 March 2000, p 333.

[54] In December 1999, the Government announced a new rebate for householders who installed rooftop photovoltaic systems for solar energy, up to a maximum of $8250 per installation. Press release, Senator, the Hon Robert Hill, Major boost for clean, green energy, 15 December 1999.

[55] Mr Merton Smith, Proof Committee Hansard, Sydney, 22 March 2000, p 320.

[56] Compressed natural gas currently runs in 1.4 billion vehicles worldwide and emits 50 per cent fewer greenhouse gases than petrol and diesel alternatives. An environmental life-cycle study of CNG-fuelled buses found a 9 per cent reduction in CO2 emissions. CNG also has associated environmental benefits through the elimination of sulphur and lead emissions and the reduction of noxious carbon monoxide and particulate emissions. Car, truck and bus engines which run on CNG are currently available, but have achieved low penetration in the Australian market. The AGO is currently running the Greater Western Sydney Natural Gas vehicles trial and the Commonwealth has committed $7.6 million over four years to assist with the establishment of CNG refuelling stations. The $75 million Alternative Fuels Conversion Program will provide grants of up to 50 per cent of the cost of upgrading to, or replacing conventionally fuelled vehicles over 3.5 tonnes with CNG. Australian Greenhouse Office, Fact Sheet: Compressed Natural Gas Infrastructure Program, http://www.greenhouse.gov.au/transport/cng.html.

[57] Mr Alan Pears, Proof Committee Hansard, Melbourne, 21 March 2000, p 229.

[58] Australian Greenhouse Office, National Emissions Trading Discussion Paper 1: Establishing the Boundaries, March 1999, p 22.

[59] Australian Greenhouse Office, National Emissions Trading Discussion Paper 1: Establishing the Boundaries, March 1999, p 26.

[60] Australian Greenhouse Office, National Emissions Trading Discussion Paper 2: Issuing the Permits, June 1999, pp 26-27.

[61] Mr Anthony Sproule, Proof Committee Hansard, Sydney, 22 March 2000, p 361.

[62] Mr Merton Smith, Proof Committee Hansard, Sydney, 22 March 2000, p 312.

[63] Position Statement, `BHP and Climate Change', p 1.

[64] Mr William Nagle, Proof Committee Hansard, Sydney, 22 March 2000, p 400.

[65] Australian Gas Association, Submission 205, p 2451.

[66] Australian Gas Association, Submission 205, p 2451.

[67] Dr Clive Hamilton, Proof Committee Hansard, Canberra, 10 March 2000, p 59.

[68] Dr Clive Hamilton, Proof Committee Hansard, Canberra, 10 March 2000, p 59.

[69] Ms Carrie Sonneborn, Proof Committee Hansard, Perth, 17 April 2000, p 537.

[70] Proof Committee Hansard, Perth, 17 April 2000, p 538.

[71] Mr Paul Flanagan, Proof Committee Hansard, Sydney, 22 March 2000, p 362.

[72] South Australian Government, Submission 199, p 2125.

[73] Position Statement, BHP and Climate Change, p 2.

[74] Ms Carrie Sonneborn, Proof Committee Hansard, Perth, 17 April 2000, p 538.

[75] Australian Greenhouse Office, National Emissions Trading Discussion Paper 2: Issuing the Permits, June 1999, p 38.

[76] Australian Greenhouse Office, National Emissions Trading Discussion Paper 2: Issuing the Permits, June 1999, pp 45-6.

[77] Mr John Eyles, Proof Committee Hansard, Melbourne, 20 March 2000, p 137.

[78] Mr John Smith, Proof Committee Hansard, Canberra, 23 June 2000, p 688.

[79] Dr Clive Hamilton, Proof Committee Hansard, Canberra, 10 March 2000, p 57.

[80] Australian Greenhouse Office, National Emissions Trading Discussion Paper 2: Issuing the Permits, June 1999, pp 34-35.

[81] Dr Robert Lang, Proof Committee Hansard, Sydney, 22 March 2000, p 351.

[82] Proof Committee Hansard, Perth, 17 April 2000, p 535.

[83] Proof Committee Hansard, Perth, 17 April 2000, p 537.

[84] Alan Pears, Proof Committee Hansard, Melbourne, 21 March 2000, p 229; and Alan Pears, Proposal: Rebate scheme for sustainable energy systems/services that reduce greenhouse gas emissions, Sustainable Energy Industry Association, Revised January 2000.

[85] Alan Pears, Proposal: Rebate scheme for sustainable energy systems/services that reduce greenhouse gas emissions, Sustainable Energy Industry Association, Revised January 2000.

[86] Alan Pears, Proposal: Rebate scheme for sustainable energy systems/services that reduce greenhouse gas emissions, Sustainable Energy Industry Association, Revised January 2000.

[87] Alan Pears, Proposal: Rebate scheme for sustainable energy systems/services that reduce greenhouse gas emissions, Sustainable Energy Industry Association, Revised January 2000.