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Transcript - Greg Evans on ABC Radio's Fran Kelly Breakfast - ACCI 's Position On A Carbon Price

30 May 2011

FRAN KELLY: The Gillard Government has stepped up its efforts to strike a deal on a carbon price holding talks across the weekend, all weekend, with the Green’s and key Independents. The parties say progress is being made, but agree there is still a very long way to go.

As the negotiations continue, the business community is also refining its position. The Business Council of Australia has called for a low starting price of just $10 a tonne on carbon. The AI Group representing manufacturers has also put out a paper calling for a $10 price on carbon.

The country’s other major employer organisation though, the Australian Chamber of Commerce and Industry, doesn’t even want that. ACCI has hardened its position to a carbon price, insisting there be no hit on Australian industry prior to a global agreement on climate change.

Greg Evans is the Director of Economics and Industry Policy of ACCI and he joins us from Canberra this morning. Greg Evans, good morning.

GREG EVANS: Good morning, Fran.

FRAN KELLY: The BCA (Business Council of Australia) and the AI Group (Australian Industry Group) are now proposing a low $10 starting price per tonne of carbon, what’s wrong with that?

GREG EVANS: Well, we think it is the wrong approach because under the influence of the Greens, and this is what we’re concerned about, that the $10 figure will escalate and it actually provides a convenient pathway for the price to be much higher within a two or three year period.

FRAN KELLY: So if there was some kind of guarantee that it would stay at $10 and stay there for several years, would ACCI feel different about it?

GREG EVANS: No, even at $10 it represents a tax increase, an incremental impost on Australian business. We represent overwhelming middle ranking and small size business and their view is that this tax impost at this point of time when there is the major restructuring in the economy, a rebalancing of the economy going on, that it is too much to afford.

FRAN KELLY: Say it was $10 a tonne, most of your members wouldn’t be paying it would they? Most of the industries paying the tax on carbon are the 1,000 big companies, not your members. So your members would face the flow on, in a sense of price of electricity and energy. How much damage would a low $10 price per tonne do to your members?

GREG EVANS: Well it is a cost over and above what they are currently paying and as I said, it provides the pathway and very convenient mechanism for the Government to ramp it up over time.

FRAN KELLY: Have you done a cost benefit analysis of the impact on the sort of businesses you represent?

GREG EVANS: Certainly, and that was based on the original Treasury analysis at $25 a tonne and that had a negative impact on the earnings and profitability on many of these small and middle ranking businesses in the manufacturing sector.

FRAN KELLY: The AI Group which represents and crosses over with some of your members I suspect has refined its position. It’s now demanding a third tier of assistance for less intensive trade exposed industries like food processors, iron forgers, plastics and chemicals; if that was in there would that ameliorate some of ACCI’s concerns?

GREG EVANS: Well we certainly don’t disagree with that. That is what was absent from the CPRS debate, that these small to medium sized businesses were left out in the cold with no compensation at all.

FRAN KELLY: So is that a yes? Yes that it would make you more predisposed to support it or not?

GREG EVANS: Our overwhelming view is that we currently can’t afford a carbon tax or emissions trading scheme it is a net impost on us, it makes us less competitive and it will cost jobs. We don’t think that this is the time, when there is currently a rebalancing of the economy going on and this carbon tax actually targets those businesses in the manufacturing sector that are currently exposed to a high dollar and high interest rates , that it’s just not the right time to do it.

FRAN KELLY: So is ACCI’s argument against a carbon price, either a carbon tax or an ETS, now based on what you call the timing and the rebalancing of our economy, our higher dollar, or you don’t support a market based mechanism at all?

GREG EVANS: No, it is a major factor in our overwhelming view which is why should we move ahead of other countries, especially those countries who we actually trade with? If you look at the Asia Pacific region, none of the major economies are actually implementing an explicit price on carbon; it just puts us on the competitive back foot straight away.

FRAN KELLY: So we have a split in the business community don’t we? We have BCA and the AI Group supporting a market based mechanism with a fair few caveats around it and ACCI not. So business is split on the way to reduce emissions?

GREG EVANS: Well they need to account their members and so do we, but we represent 350,000 businesses, a lot more than those two other groups and our members are in a very vulnerable section of the economy and they are telling us that they would rather deal with this issue through efficiency and technology rather than an explicit tax on them.

FRAN KELLY: What sort of businesses do you represent?

GREG EVANS: Across the full range of Australian business, from large companies to small companies, but for this particular issue, the sentiment which has been expressed is by those middle ranking and smaller businesses.

FRAN KELLY: So do you members see the need to reduce emissions?

GREG EVANS: Absolutely, but they want to do that through technology and efficiency measures. The other point you have mentioned a couple of times is that this is a market based mechanism. Well a deliberate tax or a regulation that puts a target in place is a tax or a regulation not necessarily a market based system.

FRAN KELLY: But an ETS is a market based system, isn’t it? The market works out where the price on carbon is based on the regulation?

GREG EVANS: Yes but it relies on the Government placing an arbitrary limit on the amount of emissions in the economy. So it it’s a regulation and there is potentially a lot of loose debate around this issue. Our point on this is it’s not whether it’s a market based mechanism or not, it’s whether you are moving ahead of your competitors. That is the primary issue for the Australian economy.

FRAN KELLY: There has been a number of reports, and I will go back to the Shergold Report as the primary one, that the John Howard Government was asked to look at the best and most effective way for Australia to reduce its emissions and it found that in terms of cost effectiveness for the economy and for business broadly was that clearly the most efficient way was through an emissions trading scheme rather than to invest heavily in just the technology and efficiency measures side of things.

GREG EVANS: That may well be the case, but it is in a sense an academic argument because the point is that it’s an incremental cost of the economy, especially because other countries aren’t actually acting in the same manner.

So this is all about an extra cost, and the debate should be about that rather than whether it is a market based mechanism or not.

FRAN KELLY: Greg Evans thank you very much for joining us.

GREG EVANS: Thanks very much Fran.

FRAN KELLY: Greg Evans is the Director of Economics and Industry Policy at the Australian Chamber of Commerce and Industry.