Solar protection

LOWER-INCOME households, pensioners, business and industry will receive more than $11 billion a year to compensate for increased costs caused by the emissions trading scheme.

Families and singles on high incomes, however, will be worse off under the scheme, which was locked in yesterday to begin on July 1, 2010 – only months before the next election is due.

Billed as the biggest economic upheaval since the 1980s deregulation of the economy, the scheme was tweaked to accommodate the demands of industry in lean economic times.

This angered the Greens and environmental groups, which say it will not cut emissions enough to save such icons as the Great Barrier Reef.

The Government aims to cut greenhouse gas emissions by 2020 by between 5 and 15 per cent. The final target, most likely to be 10 per cent, will be set in early 2010, by which time the intentions of other nations will be better known.

An anticipated reserve target of 25 per cent, to be put on the table in the unlikely event all the world’s big emitters agree to act together, was missing yesterday. However, Mr Rudd said he would seek a mandate at the next election to increase Australia’s 2050 reduction target from 60 per cent to 80 per cent as a show of goodwill.

The Prime Minister said yesterday’s targets were "appropriate and responsible" in this economic climate. "We are not going to make promises that cannot be delivered," he said. [These measures] "deliver the necessary reform to tackle the long-term challenge of climate change while supporting our economy and securing jobs in this global recession."

Mr Rudd was heckled by three environmental supporters as he unveiled the scheme at the National Press Club.

About 1000 of the nation’s biggest industries, responsible for 75 per cent of Australia’s non-farm emissions, will pay about $25 for each tonne of carbon they emit. The cost will be passed on to consumers, adding about $350 a year to the average household energy bill but as much as $1300 for some households.

In the first year, the sale of carbon permits will raise $11.5 billion, all of which will be returned as compensation and adjustment assistance.

Of this, about $4 billion will go to low- and middle-income households, pensioners, carers and veterans through increased pensions and family payments.

The compensation will cover all low-income households, of which about 90 per cent will be better off. Almost all middle income households will receive some assistance, while 60 per cent will be fully compensated.

A couple with two children, one aged under five and the other between six and 12, would be generously compensated up to income levels of $120,000. After that, they go backwards.

Petrol will increase by about 7c a litre but the excise will be cut by the same amount, meaning no net increase. This will cost $2.4 billion.

Compensation for heavy polluting industries with competitors in countries with no scheme was made more generous to include petrol refiners and the liquefied natural gas industry.

Of the $11.5 billion raised, $2.9 billion will be refunded as free permits. The heaviest polluters, such as cement and aluminium producers, will receive free permits for 90 per cent of their emissions, while lesser polluters, such as LNG and petrol refining, will receive permits for 60 per cent of emissions.

In addition, the dirtiest coal-fired power stations will receive $3.9 billion over five years to help keep prices down.

Another $2.15 billion over five years will help coalmining communities as well as small businesses and community organ-isations cope.

The Opposition Leader, Malcolm Turnbull, commissioned an independent economic analysis of the proposal. He said the Opposition would respond in February when the study was finished and when Parlia ment resumed.

With the Greens hostile, Labor will target the Coalition for the necessary Senate support.

A senior Government source said if the Opposition blocked the legislation in the Senate, Labor would fight a second successive election painting the Coalition as climate change sceptics.

Mr Rudd said: "It’s time for the real Malcolm Turnbull to stand up. Is it the Malcolm Turnbull who was supposed to be gung-ho about this 12 months ago, or is it the Malcolm Turnbull of today seeking short-term political advantage?" he said.

Poorer households will benefit

SOME low- and middle-income households will make money from the Federal Government’s $9.9 billion compensation package to offset rises in the cost of living that occur because of the emissions trading scheme.

The Government estimates 89 per cent of low-income earners will receive more assistance than they will need to help them cope with higher prices.

Nearly all middle-income households will receive some assistance and 60 per cent will recoup all of the price rises through government payments.

Modelling on the effects of the scheme assumes that the overall cost of living will rise about 1 per cent.

Energy costs will make up the largest part of the price rises with electricity expected to increase by $4 a week and gas and other forms of fuel by $2 a week.

Low- and middle-income families will receive a combination of one or more increases in Family Tax Benefit payments, the low-income tax offset and the dependency tax offset.

Single parents could receive up to $744 a year extra in assistance, which would leave them $390 a year better off after the price rises begin.

Families with only one parent working and two children still at home will have all their increased costs covered by higher payments, as long as they earn $100,000 or less.

After that the assistance dwindles and cuts out completely at $180,000.

The threshold for a couple with one child where one parent works full time and the other part time is slightly lower at $95,000.

Pensioners, carers and people with disabilities will have their usual rise in payments brought forward from September to July 1 in 2010 to coincide with the beginning of the scheme. This is equivalent to $382 for single people and $320 for couples.

The Government has promised further increases to payments that could begin next year. Those details are likely to be announced in the May budget.

As the Government has already announced, petrol and diesel price rises will be neutralised for the first three years of the scheme. This will be done by lowering the excise to compensate for the rise in prices due to emissions trading.

The executive director of Australian Catholic Social Services, Frank Quinlan, said the assistance measures were welcome but they needed to be matched by education campaigns to help low-income households learn about the continuing effects of climate change.

"We also need to ensure that these households have an opportunity to reduce their energy consumption to protect them from the effects of rising utilities costs for decades to come," he said.

"The careful implementation of such a mitigation strategy also has the potential to provide low-income earners with jobs," Mr Quinlan said.

The executive director of the Brotherhood of St Laurence, Tony Nicholson, called for the retro-fitting of low-income households to help people use less energy.

"Energy efficiency programs also make permanent improvements to the homes of low-income people. This allows them not only to cut their energy use but also to mitigate the effects of climate change already occurring," Mr Nicholson said.

Job seekers could also be trained to take part in energy efficiency programs and other new jobs created by the trad-ing scheme.

The burning concerns about Captain Reasonable

BEHIND closed doors Kevin Rudd has sometimes described his political persona as "Captain Reasonable".

And it was the captain who took the podium at the National Press Club yesterday, calm, controlled, and, most of all, moderate.

He described climate change as an elephant of an issue, but then proposed not doing anything especially big about it.

He called it "a threat to our people, our nation and our planet", but then announced only the gentlest of responses.

He said the country stood at "the crossroads of history", but then suggested that we choose the course of least resistance.

For heaven’s sake, he seemed to be saying, can’t we all just be reasonable.

Rudd’s carbon emissions plan is crafted as a piece of political positioning, and he said as much himself:

"We will be attacked from the far right for taking any action at all," he said early in his speech.

"We will be attacked from parts of the far left for not going far enough. The Government believes we have got the balance right."

So the environmentalist who tried to shout him down as a sell-out instantly confirmed part of his proposition, and the Minerals Council, calling the plan "the most aggressive in the world" vindicated the rest.

This is Rudd’s political GPS, the sort of logic that guides him to the position he craves, the place he has frequently described as "the reforming centre".

This is the thinking that led him to decide that the only unconditional cut to emissions is to be 5 per cent by 2020.

It’s the centre because it’s midway between the pressure groups. It’s reforming because it can be presented as some sort of progress towards good policy.

Yet it’s such a retreat from Rudd’s campaign rhetoric on climate change as the "great moral challenge of our generation" that the Liberal Party’s pollster, Mark Textor, quipped yesterday "it’s like Sydney house prices – coming down every day."

As battle cries go, it’s hardly "death or glory". Try it: "Follow Captain Reasonable to the reforming centre." Rudd’s plan also rings an alarm about his attitude to the public purse. The Government will over-compensate 2.9 million low-income earners and pay them the equivalent of 120 per cent of the cost of the scheme. Is this really about equity, or is this just an excuse to hand voters money in pursuit of political popularity?

If the Government is really concerned about equity, why won’t single people receive compensation? Rudd wants to be liked by key demographics. And he wants to buy their affection. If this feature emerges as a continuing part of his political persona, it could be a big worry about Captain Reasonable.

The carbon plan is cautious and calculated. Rudd has set the target so low it’s a small target for Malcolm Turnbull to attack.

If the Opposition opposes a cut of 5 per cent as too drastic, can Turnbull seriously retain any pretence to be environmentally concerned? But if the Opposition supports the plan, it will be sidelining itself on one of the biggest political issues. Either way, Rudd is left occupying the reforming centre.

Rudd has set a dilemma for Turnbull, and the Opposition knows it. That’s why it fell uncharacteristically silent yesterday, commissioning economic research to give it a couple of months to respond.

Rudd’s penultimate sentence described his plan as "reasonable and responsible". By following the course of least resistance in crafting the carbon target, and with the selective generosity of the compensation payments, we must wonder whether Captain Reasonable is merely the alter ego of general popularity.

Liabilities for state public servants’ super rise 65%

UNFUNDED superannuation liabilities for NSW public servants have blown out by more than 65 per cent to $32.1 billion in the global financial meltdown, pushing the total amount of state debt to more than $45 billion.

The disclosure was included in the mid-year budget review, made public yesterday, which showed a slightly lower than expected deficit for 2008-9, thanks to a big injection of funds from the Federal Government. As a result, the 2008-9 deficit is forecast to be $712 million; $917 million had been projected in the mini-budget five weeks ago.

NSW has received $840 million in Federal Government payments, $500 million of it being used to repay RailCorp debt and fund maintenance and capital spending in public housing.

Normally, payments are spread over the five-year funding agreement with the Federal Government "but this time, they’ve given us a bit more up front," the NSW Treasurer, Mr Eric Roozendaal, said yesterday. "So we’ve paid down a bit of rail debt and [will] bring forward some funding in housing."

The global financial turmoil has increased the unfunded superannuation liability to cover the state’s public servants when they retire by $12.7 billion since the budget for 2008-9 was drawn up, and is higher than the $7 billion additional unfunded liability flagged at the time of the mini-Budget.

The world financial turmoil has led to large losses in superannuation funds, and this had been exacerbated by the fall in interest rates, Treasury said.

The sharply higher superannuation liability has lifted the forecast net financial liabilities of NSW to a record $45.2 billion next June.

Even though overall economic activity remains sluggish, NSW will benefit from the aggressive cuts to interest rates by the Reserve Bank of Australia, with further cuts expected, while the State Government continues to spend heavily on infrastructure.

State governments have suffered an unprecedented rise in the differential between interest rates they pay when compared with the Federal Government in recent days, rising to more than 1.2 percentage points, which is than four times the historical difference.

This gap is a result of the Federal Government giving loan guarantees to private banks, but not to state governments. "We are monitoring the situation," Mr Roozendaal said. "It is not a pressing issue for NSW, because we are not in the market … to refinance any of our debt … At the moment the markets are very cautious; there’s still not a lot of credit out there."

The shadow treasurer, Mr Greg Pearce, said yesterday: "Without the Prime Minister handing out the former Federal Coalition Government’s surplus, Nathan Rees and Eric Roozendaal would be looking at a deficit of around $1.5 billion."

Lower burden for the nation’s worst polluters

AUSTRALIA’S biggest carbon-polluting businesses will be delivered assistance worth more than $4.8 billion a year to help them cope with the economic impact of paying a price for their greenhouse gas emissions.

The white paper on emissions trading reveals that the Federal Government has bowed to industry lobbying by allocating free permits to big polluters significantly more generous than it originally proposed in July.

It also reveals the Government will provide sizeable assistance packages to electricity generators burning coal to fire power stations and miners releasing methane into the atmosphere as a by-product of their excavation of coal seams.

The white paper finalises the design of the Government’s emissions trading scheme which will require about 1000 of the country’s most energy-intensive firms to buy permits to cover their emissions of carbon dioxide and other greenhouse gases from July 2010.

By imposing a price on carbon – expected to be $25 a tonne when the scheme starts – emissions trading is designed to create incentives for businesses to reduce the amount of greenhouse gas they release into the atmosphere. But the industry assistance announced yesterday will mean about a third of the permits issued in the scheme’s first year will be free of charge. This will rise to 45 per cent of permits by 2020.

The free permits are designed to help firms facing big cost increases, like electricity generators, and those facing international competition from countries where there is no similar carbon price.

The Prime Minister, Kevin Rudd, said the assistance would support jobs, investment and growth while still creating incentives for industry to lower emissions.

"We have listened closely to the concerns of the business community and made a number of significant improvements to the scheme as a result of their feedback," he said.

Mr Rudd said the increased assistance to industries facing international competition would reduce the risk of "carbon leakage" – where emissions-intensive activities shift to countries without a carbon price, cutting jobs in Australia while doing nothing to reduce global emissions.

The Government’s green paper in July proposed to give 20 per cent of all permits issued under the scheme to these so-called emissions-intensive, trade-exposed businesses – such as aluminium producers, iron and steel makers, petrol refiners and LNG producers – free of charge.

The Government has decided to lift the share of free permits for these businesses to 25 per cent. The white paper says this will be worth $2.9 billion in 2010-11 and will rise in the future to accommodate growth of these sectors.

Mr Rudd said the changes would extend assistance to companies like LNG producers and petroleum refiners who would have been left out under the Green Paper.

The Government also put a figure on its assistance to coal-fired electricity generators, saying it would hand out free permits worth $700 million in the first year and $3.9 billion over the first five years.

Under a separate Climate Change Action Fund, small firms will be eligible for grants to improve the energy efficiency of their businesses and there will also be grants to businesses to research technologies that lower emissions.