THE world's biggest mining company, BHP Billiton, is urging the Gillard government to impose a tax on carbon before any international agreement. This is in order to protect Australia's long-term economic interests.
BHP Billiton chief executive Marius Kloppers has also warned the government not to try to change the terms of the pre-election mining tax deal negotiated with the big three miners.
In a major address yesterday, Mr Kloppers made it clear the mining industry did not intend to be passive in the face of the political uncertainty created by minority government.
His very public intervention pressures the government on two fronts: not to cede ground to the Greens and independents who wish to revisit the fundamentals of the mining tax; and to take more decisive action on climate change in the wake of Labor dropping its emissions trading scheme and the fiasco of the proposed citizens' assembly
Mr Kloppers's call for a carbon tax undermines the passionate objections of Tony Abbott to setting a price on carbon before there is a global consensus.
"We do believe that such a global initiative will eventually come and, when it does, Australia will need to have acted ahead of it to maintain its competitiveness," Mr Kloppers told a packed Australian British Chamber of Commerce lunch in Sydney.
"Carbon emissions need to have a cost impact in order to cause the consumer and companies to change behaviour and favour low-carbon alternatives.
"We all recognise this is a politically charged subject. No government relishes telling people that things need to cost more."
Mr Kloppers argued for a revenue-neutral carbon tax, insisting that the government must not treat any income as windfall revenue but return it to companies and individuals and "let the market work".
"Importantly, the government must avoid using those funds for general spending or to back 'winning technologies' - the outcome of which will likely be disappointing emissions reduction and slower growth," he said.
Instead, he called for corporate and individual tax cuts and, possibly, lump-sum payments to lower-income households to return the cost of a predictable and gradual transition that was as broadly based as possible.
The Labor government will have to negotiate the views of the Greens in the Senate, and the Greens and the independents in the House of Representatives, on both highly sensitive issues.
The Greens were able to block the ETS because it was too generous to big companies after the Liberals replaced a supportive Malcolm Turnbull as opposition leader with the antagonistic Mr Abbott.
The government is also facing great pressure from the independents and the Greens to broaden and increase the scope of the mining tax in order to get it passed, while the Liberals reject the concept of the mining tax altogether.
In a dig at the original ETS, Mr Kloppers praised the simplicity and effectiveness of a carbon tax as opposed to a "single, encompassing trading system and academically elegant economics surrounding it".
But he said there was no silver bullet and a range of approaches was needed, including land-use initiatives, which are similar to the "direct action" proposed by the opposition, and "perhaps a limited trading system" for power generation infrastructure.
Mr Kloppers's other main argument was for trade-exposed industries to have their emissions costs rebated until a global emissions reduction system was in place because they would otherwise shift their facilities offshore.
"Under these circumstances, the globe will not be better off, as the emissions will only be relocated to a different country and the Australian economy negatively impacted," Mr Kloppers said.
But this element of his proposal, at least, is sure to be resisted by the Greens and perhaps some of the independents.
Mr Kloppers said Australia would need to look beyond coal-powered electricity and towards other energy solutions. "Failure to do so will place us at a competitive disadvantage in a future where carbon is priced globally," he said.
His comments came as the nation's biggest energy retailer, AGL Energy, warned that uncertainty about climate change policy would cost $2.1 billion a year by 2020, leaving consumers facing soaring power bills.
The company also signalled a radical shift in its position on carbon policy by urging the government first to target the $120bn energy sector and parts of manufacturing in an emissions trading scheme.
AGL chief executive Michael Fraser said an ETS was the cheapest way to slash carbon emissions.
But he argued that the reform was so ambitious Australia should take a staggered approach that initially spared the transport, agriculture and waste sectors.
Mr Kloppers, in his first public comments on the mining tax since the agreement with the big three miners was announced just before last month's federal election, effectively dismissed any suggestions from the independents for the issue to be discussed at next year's tax summit.
"Our basic value proposition to our customers is that if you bought it from us at a given price, we are going to deliver it to you at that price.
" I think the discussions we had with the government before the election fall into exactly that category," Mr Kloppers said.
"We agreed to something.
"Companies don't like voluntarily paying more tax.
"We agreed to something and our intention would be to stick to it."
Mr Kloppers didn't spell out any threats about what would happen if the tax were substantially altered but the major miners dropped a very effective television advertising campaign to allow good faith negotiations with Julia Gillard on the tax just after she replaced Kevin Rudd.
The subsequent deal cut the rate of the tax and limited its application to only iron ore and coal.
The details are still being worked out by a committee led by former BHP Billiton chairman Don Argus, but the main principles are clear.
The Business Council of Australia yesterday insisted the minerals tax should be revisited during the tax summit, even if this put a $10bn hole in the government's budget forward estimates.
BCA president Graham Bradley told the National Press Club that the deal "cobbled together" by the Prime Minister and three of his biggest members, BHP Billiton, Rio Tinto and Xstrata, was an "unsatisfactory tax process".
Climate Change Minister Greg Combet said he welcomed Mr Kloppers's contribution to the climate change debate. "As I have indicated, my three priority areas are support for renewable energy, greater energy efficiency in industry and households, and working towards the introduction of a carbon price," Mr Combet said.
"I will be working with other parliamentarians, the business community and the environmental movement to build consensus and to discuss the best way we can achieve a price on carbon."
Greens climate change spokeswoman Christine Milne said: "I welcome Marius Kloppers' acknowledgement that a carbon price is inevitable, and that Australia should get moving on it, but it will be the parliament in charge of designing a scheme this time - not lobbyists in ministerial offices.
Additional reporting: Nicola Berkovic
theaustralian.com.au 16 Sep 2010
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