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On 8 April I circulated a note headed “Carbon Tax – Gillard’s Major Error” in deciding to start with a carbon tax in July next year when no other major emitter has one and both the EU and France abandoned their proposed taxes. Media reports today suggest Combet intends to announce full compensation (or more than full) to low-middle income households for the cost of living effects of the tax. But what is to happen to the many businesses facing adverse international competition effects in circumstances where most countries have no carbon tax as such and the EU ETS scheme has a raft of exemptions?

Des Moore

Possible carbon exemptions
letter published in The Australian Financial Review, 13 April 2011 [Square bracketed omitted by Ed]

Lorna Tingle reports that, at a meeting with ministers Wayne Swan and Greg Combet, senior executives of mining and steel companies expressed concerns about how international competiveness would be treated under a carbon tax. (“Heavy hitters oppose carbon tax”, 9/10 Apr).

A report in the Illawara Mercury also indicated that concerns about job effects were raised at a meeting of steel workers with Combet. Both Tingle and the Illawara Mercury report that Combet’s response focussed mainly on the adverse competitive effects from the strong dollar.

But that is dodging the issue of competitiveness effects from domestic policy decisions.

Businesses facing international competition are justifiably concerned that full allowance is made for adverse competiveness effects resulting from the proposed carbon tax and that Combet’s use of competiveness safeguards under the “old” (Rudd) emissions trading scheme (ETS) as a model shows he is out of touch with competitiveness realities. Indeed, Minerals Council calculations reportedly show that those competiveness safeguards are “vastly inferior” to those developed under the ETS operated by the European Union, [which (for example) exempts the iron and steel industry from having to reduce emissions.]

What the Gillard government appears to have overlooked is that the Rudd ETS was framed on the basis that it would be part of a global scheme. By contrast, there is no global carbon tax and none of the major emitters have one. Indeed, [partly in recognition of the adverse competitiveness effects,] both the EU and France have dropped proposals to introduce such a tax.

If the Gillard government goes ahead with legislation to introduce a carbon tax in July next year, it must at a minimum surely adopt the same exemptions as under the EU ETS.

Des Moore
South Yarra Vic

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