EMISSIONS TRADING SCHEME

Ms BEDFORD (Florey) (14:17): My question is to the Premier. Will the Premier inform the house about the potential impact on South Australia of the green paper released by the federal Minister for Climate Change and Water, the Hon. Penny Wong?

The Hon. M.D. RANN (Ramsay—Premier, Minister for Economic Development, Minister for Social Inclusion, Minister for the Arts, Minister for Sustainability and Climate Change) (14:17): The federal Minister for Climate Change and Water, the Hon. Penny Wong, released the government's green paper on the Carbon Pollution Reduction Scheme last Wednesday at the National Press Club. The minister described the scheme as a 'necessary market reform for a low carbon future', one that is on par with past economic reforms such as the reduction in tariffs or deregulation of the financial system (which, of course, occurred under the Keating/Hawke government). There is no doubt that this will be one of the most significant economic changes experienced by Australians. For the first time in this nation's history a limit and a price on carbon will be implemented.

At the heart of this reform will be the establishment of an emissions trading scheme. Much of the design of this emissions trading scheme is based on the National Emissions Trading Scheme, which was first released as a discussion paper by the states and territories in August 2006 through the Council of the Federation at a press conference on Bondi Beach. Of course, the work undertaken by Professor Ross Garnaut was also commissioned by the states collectively in April 2007 and contributed to the green paper.

The government intends to respond to specific issues addressed in the report after detailed analysis, but overall the paper reflects a common sense and practical approach in dealing with the challenge of climate change. I believe the paper is a common sense and practical approach in dealing with this vital issue. The emissions trading scheme will be a cap and trade scheme using annual permits. I understand that every cent raised from the selling of permits will be used to help business and households as they make the move to a clean energy future. This is the view I have held all along. Put simply, the federal government will set a limit on how much carbon can be produced by industry and then sell permits up to that limit which will, in turn, create an incentive to adopt cleaner options.

An estimated 1,000 firms nationally will be covered by the emissions trading scheme. Businesses which exceed the threshold of 25,000 tonnes of greenhouse gas emissions annually will be affected. I am advised that, probably, around 30 to 40 South Australian firms will come within the ambit of such an emissions trading scheme. There will obviously be some of the big players such as OneSteel, Santos and Adelaide Brighton Cement.

To help reduce the costs, the federal government has made the scheme as broad as possible to allow those sectors which can abate their emissions most cheaply to do that. This will minimise the total cost of achieving the federal government's abatement levels. The direct liabilities under the scheme will fall on the largest industrial players in the state, including those in the electricity, mining, steel, cement, and oil and gas industries.

Agriculture is a sector that has not been included in the scheme in its initial stages. Agriculture has been excluded in the short term in part because of difficulties in measuring and monitoring emissions from such a large number of small sources. I understand that from 2015 a decision will be made about whether the agricultural sector may fall within the scheme. Certainly, a decision will be made later on.

Forestry businesses can choose to opt into the scheme. This means that any landholder who reforests in a way that is consistent with the conditions of the Kyoto Protocol will be eligible to earn permits for the carbon stored in these forests. There will not be a liability imposed for emissions from deforestation for those who choose not to opt into the scheme. Compensation for emissions-intensive and trade-exposed industries will be provided in the form of free permits. There will also be some form of compensation for electricity generators, but it is unclear at this stage whether this will be in the form of free permits or a cash subsidy.

The scheme will also have indirect flow-on effects in the price of goods and services. I am told that, if the price of carbon per tonne is $20, the price of electricity for households across Australia would increase by around 16 per cent. That is why it is so important that the revenue raised through the scheme will help South Australian and Australian households adjust. Not one cent of this scheme must be used for general revenue. It must be ploughed back into the community for working families. It must also be used to help get better energy efficiencies and to help companies that are affected. The desal plant will not be delayed one minute.

Households will receive compensation in the form of tax and welfare adjustments and direct assistance for energy efficiency. There will also be offsets provided for the impact on fuel prices through the fuel excise on a cent-for-cent basis for the first three years of the scheme. Fortunately, South Australia's electricity generation sector has one of the smallest carbon footprints of mainland Australia.

I am advised that in 2007-08 electricity generated from gas made up 55 per cent of our profile, 34 per cent came from coal and 11 per cent from renewable energy sources. This will grow to 20 per cent by around the end of 2010, which will put us in a world leadership position. We will need to continue our leadership in renewable energy technologies so that we can reduce our reliance on coal. I am expecting some more announcements about investment in renewable energy in coming months. That is why I have made a submission to the federal government's $20 billion infrastructure fund for investment in our transmission infrastructure so that geothermal energy, as well as our wind resources, can be connected to the national grid as well as providing clean energy to our major mining infrastructure.

I have spoken to Professor Garnaut and Sir Rod Eddington about our submission, and they both seem to be very supportive. The Department of the Premier and Cabinet, with the Department of Transport, Energy and Infrastructure, has provided some initial advice on the green paper, but we will be doing further work to provide a whole of government submission for consideration as part of the white paper, which will be released later this year. The state government will be meeting with industry and local government as part of the process in developing the state submission to the green paper. I have already started meeting with businesses affected by the scheme in South Australia, and their feedback will be used as part of our submission to the federal government.

Unfortunately, Australia is lagging behind much of the world due to the inaction of the Liberal Howard government, which means that we are at least a decade behind implementing policy responses to tackle climate change.

Members interjecting:

The Hon. M.D. RANN: It is amazing that they could disagree with that. Which countries in the world had not signed Kyoto before the last election? The United States and, of course, Australia under John Howard. If you did not know that, I find it extraordinary. There are significant consequences for our economy and for the environment. For the sake of future generations of Australians, both sides of politics will need to work together as we adapt to a carbon-constrained world.