CARBON POLLUTION REDUCTION SCHEME

The Hon. M. PARNELL (15:10): I seek leave to make a brief explanation before asking the Minister for Mineral Resources Development, representing the Premier in his capacity as the Minister for Sustainability and Climate Change, a question about the impact of the CPRS on state government budgets.

Leave granted.

The Hon. M. PARNELL: Recently, the Australia Institute released an economic analysis of the Rudd government's proposed carbon pollution reduction scheme, entitled 'State of denial'. The paper argues that the demarcation of responsibility for responding to climate change is inappropriate and will result in a substantial reduction in the ability of state governments to provide services, such as health and education, to their citizens. The paper concludes that, while the commonwealth will receive a windfall of more than $10 billion per year in revenue from auctioning pollution permits, state and local governments will transfer more than $2 billion a year to the commonwealth government, primarily through increased energy costs.

According to a May 2009 report by Access Economics—which, incidentally, was commissioned by state Labor governments through the Council for Australian Federation—South Australia's share of this loss is $92 million by 2013 and $211 million by 2020. In addition, South Australia, along with other states and territories, will be liable for tens of billions of dollars worth of expenditure associated with adapting to climate change, for example, increased health costs and storm and fire damage. This is because the federal government, which is giving away more than $10 billion in compensation to households and polluters each year, will not be providing state governments with any financial assistance to meet either the direct costs of the CPRS or the need for urgent investment in adaptation infrastructure. In short, the report states that, although it is the responsibility of the federal government to solve climate change, the bill for addressing the problem is being sheeted home to state governments.

There are three ways for the Rann government to respond to the increase in costs: first, it could seek to emulate the approach taken by trade-exposed industries and seek direct compensation from the commonwealth; secondly, it could increase state taxes; or, thirdly, it could cut services. The report states:

It is difficult to comprehend why state governments would not object to the introduction of a system in which the commonwealth does little to prevent climate change and demands, meanwhile, that all the costs of adapting to climate change become the responsibility of the states. The fact that the CPRS actually transfers money from state governments to the commonwealth makes their silence even harder to explain.

My questions are:

1. Has the Premier raised concerns with the federal government about the transfer of up to $211 million over the next 10 years from South Australia to the commonwealth under the CPRS. If so, with whom and what was the response?

2. Has the South Australian government followed the lead of big polluters and specifically sought a share of the revenue from auctioning CPRS pollution permits to compensate for rising costs under the scheme. If not, why not?

3. If the government is not prepared to seek compensation, does it intend to cover the shortfall by raising state taxes, cutting services or both?

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Small Business) (15:13): I am aware that the Premier has raised issues in relation to the CPRS with the commonwealth government, but I will refer the question to him to get the exact details of that matter, given the honourable member's quite detailed question.