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Carbon reduction scheme to cost businesses $7b by 2010

A White Paper released by the Australian Government discussing a carbon emissions reduction scheme is a “positive compromise” but “a stretch” for industry, potentially costing us $7 billion by 2010, according to the Australian Industry Group (Ai Group).

According to Ai Group, the White Paper incorporates a number of major improvements that were championed by the Ai Group for the benefit of our industry. Still, the planned carbon reduction scheme, called Carbon Pollution Reduction Scheme (CPRS), will cause manufacturing, process and control companies in Australia to stretch beyond their capabilities, said the Group.

Ai Group chief executive, Heather Ridout, estimates that the Scheme will add approximately $7 billion to business costs in 2010 after compensation rising to $10.5 billion by 2020.

Also, Ridout foresees that Australia’s commitment to reduce emissions to 5 per cent below 2000 levels by 2020 means, relative to current projections, stripping more than one in six emissions from our economy by 2020. This amounts to a 27 per cent reduction in per capita emissions over the period, said Ridout.

“These challenges for business will be exacerbated by the fact they will have to be met at a time when businesses are being called on to manage their way through an unparalleled global economic crisis and unprecedented domestic economic uncertainty,” said Ridout.

Ridout believes that the industry should not be tied to a particular ‘start date’ for carbon reduction, but should be able to do it of its own fruition, due to training and resources concerns.

“Ai Group remains of the view that we should not be wedded to a particular start date and that putting a robust system in place in line with international developments is more important,” she said.

“For businesses, training personnel and putting in place the internal systems required for a 2010 start will be challenging. This is especially so in view of the lack of certainty about the international response and huge uncertainty about the prospects for the world economy in both the near and medium term.”

Ridout suggests six steps that the Government could make to ensure the Scheme is within our grasp:

1) The Government’s recognition that the extent of emissions reduction required under the CPRS should be linked very closely to progress towards a concerted international effort;

2) The allocation of the bulk of the $2.15 billion Climate Change Action Fund (CCAF) to assist businesses invest in reducing their carbon footprints. These funds will particularly benefit trade exposed businesses that do not qualify for permits;

3) The increase in the initial proportion of permits allocated to emissions intensive trade exposed (EITE) businesses;

4) The proposal to allocate 60 per cent of permits to activities with emissions intensities between 1,000 and 1,500 tonnes per $ million of revenue;

5) The increase over time in the proportion of total permits allocated to EITE industries; and

6) In addition, measures such as the option to have emissions intensity assessed on the basis of value-added; the changes to the base period for assessing emissions intensity and the inclusion of indirect emissions from non-electricity inputs.

“The 2020 emissions target of a reduction of between 5 per cent and 15 per cent below 2000 levels depending on the degree of international agreement will not be easy. A target of 10 per cent would imply a reduction in 2020 emissions of 25 per cent relative to current projections and a reduction in per capita emissions of about 30 per cent relative to 2000 levels will not be easy to achieve,” said Ridout.

“Ai Group will be working closely with our members to examine the impact of the White Paper measures and the adequacy of compensation.

“We acknowledge the efforts of the Minister and her Department for the consultative process in the preparation of the CPRS White Paper.

Ai Group will continue to engage constructively with the Government as well as the Opposition and the minor parties and independents as the legislation is prepared and taken to the Parliament,” Mrs Ridout said today.”

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