Carbon woes

A LOT of good stuff comes out of Canberra, such as pathos, slapstick and good drama, but thanks to overly generous compensation for the coal industry, the carbon tax is not one of them.
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James McGrath

That is the view of Young Law’s Doug Young, who told the Australian Petroleum Production & Exploration Association's 2012 conference that while the LNG and gas industries escaped relatively unscathed from the carbon tax, a move toward more gas-fired power generation could be stymied by overly generous compensation for the coal industry.

“There are the additional costs of inputs in terms of fuels, the costs of emissions generated in conducting your activities, the price of the things you sell will go up because of the embodied emissions component on gas and petroleum and that only applies to domestic consumption,” he said.

“You get a substantial benefit, relatively speaking, compared with coal because APPEA says gas fired power stations emit 70% fewer emissions than coal does.”

Therefore, he said, powering power stations with gas should be a lot more attractive.

“It should therefore be more attractive as a fuel but the massive assistance being given to the coal-fired generators I suspect will defer those rewards for you for some time,” he said.

The federal government will hand out about $1 billion in compensation to the nation’s dirtiest coal fired plants, with Victorian brown-coal generators to receive the bulk of the payments.

They include Hazelwood, which will grab $266 million, Yallourn will receive $57 million, and Loy Yang A and B will get a combined $357 million in compensation.

Young also warned the powers given to the government under the legislation would mean increased scrutiny.

“You would already be aware of the increased scrutiny from the greenhouse gas reporting regime, as there are a lot more teeth associated with those inspections,” he said.

“The carbon regulator has a lot of power to come and inspect your books and take them away.

“The conclusion is that because of the coverage the government will be able to look into your operation in ways you couldn’t have imagined before.

“While this scheme is about lowering emissions, it is also about revenue.

“We’ve already seen that the government will receive less in GST revenue, so I think this may have come along at just the right time.”

He said it was important to note LNG for export would not be liable for carbon produced from the product overseas, only the production, and had a sobering thought for those hoping for a coalition victory in the next national election.

“It is just as hard to unmake a law as it is to make it,” Young added. “That is, you need to have both houses of parliament onside.”

“The Greens currently hold the balance of power in the Senate, and most of those senators got there on July 1 last year and are there for six years.

“So it will be a while before the Senate can be relied upon to join in a repeal of the legislation.”

This article first appeared in ILN's sister publication EnergyNewsBulletin.net.

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