This commentary by Keith Orchison appears at Business Spectator.com.au and like a shiny Easter egg, the ETS is wrapped in pretty paper but its sugar coating dissolves to reveal a big blank space. The ETS will not solve global warming, it will hurt Australian businesses as they compete against those in countries without an ETS and it will add to the cost of goods.

 COMMENTARY

Putting the squeeze on ETS

What alternatives in carbon policy does the Rudd government have if the Senate declines to pass its emissions trading legislation?

The possibilities have been canvassed in Department of Climate Change evidence to the Senate Economics Committee, which is due to report on the bills next week, unreported anywhere in the media so far as I can find – except for a passing reference in a Mike Steketee commentary in The Australian.

Blair Comley, acting secretary of DCC, told senators that, if an ETS or a carbon tax is not accepted, then the government has a range of “successively more restrictive” regulatory options. They could include imposing restrictions on large or significant projects and limiting or banning some activities.

Comley said the five per cent target the Rudd government has set for the ETS aims at delivering greenhouse gas abatement of 135 million tonnes a year by 2020. If the target was shifted up to 15 per cent, as the government has proposed if there is an agreement on a new carbon treaty at Copenhagen in December, it would deliver cuts of 195 million tonnes in 2020, in round terms what fossil-fuelled power generation emits today.

This, he added, should be seen against an expected increase of one per cent a year in emissions without carbon policies.

He also provided an insight in to government thinking on the ETS impact on employment in answer to questions. “Broadly speaking,” claimed Comley, “you should not expect a large change in employment over all.” The rationale for this is the Treasury analysis that “there is just a switch away from some areas of employment to others” – for example, engineering skills needed by coal-fired power plants “would be readily adaptable to either gas plants or the renewables sector.”

His colleague Barry Sterland, acting deputy secretary, told senators that the government expects revenue from issuing permits to be $12 billion in 2011-12, with $8 billion worth being available for auction. Cross-examined by Barnaby Joyce, Comley conceded that the ETS legislation did not require the government to pay the money back out to consumers, although it had made this commitment.

“So, they could just keep it,” riposted Joyce. “Especially if they have got a huge deficit and they are trying to cover their books.”

The two bureaucrats responded that there would be legislation – for example the fuel tax adjustment – that would account for “very significant amounts.” The fuel tax alteration, said Comley, would cut excise by $2 billion and, all up, the government planned to return $6 billion to low and middle income earners plus the concessions to heavily affected industries.

“They are not permanent measures, though, are they?” Joyce came back.

There’s likely to be a lot more on this as senators move on to the second review – through a select committee on climate change – and then the decisive debate.

Nick Xenephon pursued another angle – what would householders do with the money they get sent, which will be in a lump sum it seems? 

In South Australia, he said, retail power prices rose up to 35 per cent after privatisation and even that “massive whack” did not change user behaviour. Nothing he got in response from the DCC officers indicated confidence that the money would go on energy efficiency measures.

David Bushby, a Tasmanian Liberal who joined the Senate in 2007, wanted to know if the government had built in to its ETS thinking the deliberate abandonment of some industries to achieve carbon cuts? 

Moving certain industries offshore, responded Comley, was “not a deliberate policy objective.”