Sunday, September 9, 2012


 In the Age Newspaper on 5 September, 2012


BIG business believes the carbon tax has become little more than a wealth distribution mechanism following the decision of the federal government to scrap plans to pay the nation's dirtiest coal-fired power plants to shut down.
One of the nation's most senior business figures, speaking on the condition of anonymity, has told the National Times that it was time to question the purpose of a carbon price if the largest and dirtiest polluters were going to continue on a business as usual basis.
''It's nothing more than a wealth redistribution system,'' the figure said.
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Energy Minister Martin Ferguson announced this morning he had ended buy-out talks with the owners of five emissions-intensive power plants: Playford B in South Australia; Collinsville in Queensland; and Energy Brix, Hazelwood and Yallourn, all in Victoria.
The plants' owners were asking for more money than the government was prepared to pay. Mr Ferguson said ''there remains a material gap between the level of compensation generators have sought and what the Government is prepared to pay''.
''I have said throughout this process that we had a set envelope of funding and were not willing to enter into contracts at any cost – this is about the responsible expenditure of public funds.''
Under the planned ''contract for closure'' program, the Gillard government had earmarked an undisclosed sum of money - in the billions of dollars - to pay some or all of these plants to shut down over the second half of the decade.
The aim was to remove 2000 megawatts of emissions-intensive coal-fired power to help Australia cut its greenhouse gas output.
It has long been speculated that power generators believed their coal assets were worth more than had previously been thought, given depressed global carbon prices, the rising price of gas and other factors.
Prime Minister Julia Gillard explained that the government had not received a "value for money" proposal and stood by her resources minister.

"Minister Ferguson went about his duties diligently but Minister Ferguson and this government was not going to accept a proposal that wasn't value for money," Ms Gillard told reporters in Perth.

Ms Gillard also insisted that the carbon price was doing its job and Australia was on target to reduce carbon pollution.

Opposition Leader Tony Abbott said that the Coalition had never wanted to shut plants down and that the government's plan had been "economic lunacy".

This is despite the Coalition having previously said it expected to pay for one of Victoria's generators to shut and convert to gas under its $10.5 billion Direct Action policy.

"We always wanted to clean them up not to shut them down," Mr Abbott told reporters in Bendigo today.

"We've never wanted to shut down perfectly good businesses that are employing hundreds in some cases thousands of people."
Mr Ferguson said the future price of carbon - likely to be affected by the government’s decision to scrap the $15 carbon floor price from 2015 and link to Europe's scheme - was ‘‘only one factor and a very minor factor’’.
Rather, recent forecasts for lower energy demand - which will also lead to lower overall carbon emissions - meant that  there were ''serious questions around the value for money'' of the proposals to buy out the power plants.
The coal plant buyout was supposed to accelerate investment in cleaner energy sources such as gas and renewables. But the forecast drop in electricity demand in coming years means there is less need for investment in new baseload energy, reducing the case for building new gas plants or wind and solar farms.
This in turn means existing coal plants should be economically viable for longer than they would if energy demand were rising, and the government would not get the crucial benefit of a faster switch to greener energy.
Coalition energy spokesman Ian Macfarlane said the end of the talks demonstrated ‘‘more proof that the carbon tax is a flawed and destructive policy’’.
‘‘This chaos has now deepened,’’ he said. ‘‘By abandoning the program the Gillard government is causing yet more uncertainty for the power industry, leaving power stations to keep operating under the carbon tax regardless of the consequences for electricity-generation costs.’’
Greens leader Christine Milne said the end of the talks represented ‘‘a breach of trust on the part of the government and a short-sighted failure’’.
The power plant phase-out was supposed to accelerate Australia’s transition to cleaner energy. Senator Milne said her party would now ‘‘use every political and parliamentary lever we can to speed up the transition to a clean energy economy’’.
Tony Mohr of the Australian Conservation Foundation called on the government to reconsider the $5.5 billion in carbon tax compensation going to coal power under a separate stream of funding - $1 billion in cash and $4.5 billion worth of free carbon permits.
‘‘There’s no ‘value for money’ in giving $5.5 billion in freebies to our dirtiest coal fired generators,’’ he said.
Mark Wakeham of Environment Victoria branded Mr Ferguson’s announcement ‘‘a devastating blow to Australia’s clean energy future’’.
‘‘You can’t have a clean energy future with power stations like Hazelwood continuing to operate indefinitely - it becomes hollow rhetoric,’’ he said.
Coalition climate spokesman Greg Hunt said the government should apologise to coal plant workers who had their ‘‘lives put on hold while the Government was attempting to end the workers’ jobs’’.
with Judith Ireland