Cabinet debates carbon tax

Cabinet debates carbon tax


Australian Broadcasting Corporation

Broadcast: 04/04/2011

Reporter: Chris Uhlmann

Federal Cabinet is considering detailed briefs on how to implement a carbon tax, and identify who will face losses and who will be compensated.


LEIGH SALES, PRESENTER: The carbon tax was on the table when federal Cabinet met this afternoon. It considered detailed briefs on how to impose the charge. One big problem is whether to compensate electricity generators who'll face a loss in asset value. Another issue is that some parts of the business community believe their negotiations with the Government are a charade.

The power generators were in Canberra today and other business leaders will be there on Friday. Our political editor Chris Uhlmann's been following the negotiations and he joins me now from Canberra.

Chris, it's no surprise that the negotiations with the power generators were always going to be tough.

CHRIS UHLMANN REPORTER: That's right, Leigh, because there was never any doubt the consumers would be compensated for a carbon tax, and it's likely that the Government and the Greens will find common ground on assisting exporters to stay competitive.

But the real sticking point is what to do with electricity generators, and as you said, they were here in Canberra today talking with the Climate Change Minister Greg Combet and the Energy Minister Martin Ferguson. Now the Greens believe that generators shouldn't get transitional assistance. The argument goes that generators knew a carbon price was coming and should've made their investment decisions accordingly. If they go broke, someone will buy the power stations and keep running them. And frankly, the idea in the long run is that things like Victoria's brown coal generators will be closed.

But the power suppliers say that in the real world what will happen is that the minute this carbon tax bill passes, the legal demands of their accounting standards will kick in and their audit committees will book a significant drop in their asset value and some might be declared insolvent and their banks would take a similar view.

Now, even if generators keep producing power, the Government doesn't want headlines screaming that generators are going to go bust. And as important, it doesn't want to be seen as a sovereign risk, and by that I mean that a government decision destroyed the equity of investors. So both the industry and the Government want to ensure reliability of electricity supply and a continued stream of new investment.

So the Government's understandably sympathetic to the generators and the generators are saying for their part they believe that they're getting a decent hearing from the ministers. The problem's still a long way from solved, but the Government says it will solve it and adds that there's plenty of scope for innovation in the final solution. And finally, Leigh, it keeps making the point that the money raised by the tax will pay for compensation for consumers and for assistance for exporters, and at this stage, for generators.

LEIGH SALES: So, Chris, there clearly is though a political imperative to get this sorted out sooner rather than later.

CHRIS UHLMANN: Yeah, and that's precisely the complaint: that this timetable is entirely driven by politics. The carbon tax bill has to be passed by the end of the year so that it can come into effect from July next year, and that would mean that the system would be in place for a year before the next election. Now, if the Government can achieve that timetable, it believes people will realise that the carbon price isn't the cost-of-living Armageddon that the Opposition says it will be, but of course the timetable means industry has to settle accounts with the Government by the end of May - that's not very far away, obviously - so the Government can make an announcement mid-year.

And speaking to some businesses today, I have to say that I think it's fair to say that it's been a mood shift in the last month. Some of the participants are becoming restive because they don't believe that their concerns are being reflected in the Government's public statements. The business roundtable convenes again in Canberra on Friday and if there isn't an acknowledgement of their concerns then things could start to get a little bit untidy. More than one of them said to me today that the business community had paid close attention to the mining tax brawl last year and some of them see it as a blueprint for what might happen over the carbon tax. Others obviously are cautioning against being so combative. But I think it's fair to say, Leigh, that landing a carbon price will test all the negotiating skills of the Prime Minister and her senior colleagues, but she does want a deal and that means that there is no backing away from this.

LEIGH SALES: Chris, speaking of negotiations and meetings, members of the Christian lobby met with Julia Gillard in Canberra today. What was that about?

CHRIS UHLMANN: Well they did come to see her. Of course they've seen the Prime Minister in the past. They saw Kevin Rudd in the past and you might recall that they had a lot to say to Kevin Rudd and to Tony Abbott and of course to Prime Minister John Howard in the past. So they've met with Julia Gillard. They were talking about the things that obviously are of concern to them. Among those things of course: euthanasia and gay marriage. It's - obviously they haven't met with the Prime Minister since she mentioned that she thought that Bible stories were important for the Australian community to know. I have no word on whether or not they put her to the test on that, but I'll try and find out.

LEIGH SALES: Ah, she says she was up to it; maybe next time if not this time. Chris Uhlmann, thankyou very much.

CHRIS UHLMANN: Thanks, Leigh.