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* Mining industry says scheme will increase investment risk
* Manufacturers say without it, uncertainty will grow
* Delay or rejection could trigger early election
CANBERRA, May 29 – Divisions between Australia’s mining and manufacturing sectors emerged on Friday over Australia’s emissions trading scheme (ETS) and the need to pass enabling laws this year to give business more certainty.
The government wants carbon trading to start in July 2011 and parliament to endorse the plan by the end of June this year, but the conservative opposition is promising to block a vote until until after December’s global climate talks in Copenhagen.
Junior climate minister Greg Combet threatened on Wednesday to rethink $9.4 billion of industry assistance if the ETS laws were blocked by the more business-oriented opposition in the Senate.
The mining industry condemned the scheme which it said would increase investment risks and force companies offshore, but Australia’s manufacturing and engineering sector said Australia needed ETS laws by late this year to give investment certainty.
“Our position is that we ought to have legislation this year,” Peter Burn from the Australian Industry Group, which represents Australia’s manufacturing and engineering sector, told a Senate inquiry on Friday.
“We’ve been talking about it for a hell of a long time.”
The ETS faces a major roadblock in parliament’s upper house Senate, where the centre-left government needs an extra seven votes to pass its laws, meaning the government is unlikely to meet its legislative timetable.
The conservative Liberal and National parties want to wait for the outcome of the Copenhagen summit, to see commitments from other countries to curb greenhouse emissions, before deciding on any ETS in Australia.
But Burn said there was no need to wait for the Copenhagen outcome, and said it could still be some years before other major countries clarified their plans to curb carbon pollution.
“We don’t know what other countries are doing. But we ought to, and we can, design a system that accommodates a range of possible outcomes at Copenhagen,” he said.
INCREASED RISK
The Minerals Council of Australia, which represents Australia’s resources industry, said the ETS would increase sovereign risk for mining investments and would see more than 66,000 fewer jobs in the industry by 2030.
“There is no shortage of global resources. Australia has to be very careful it doesn’t get carried away by its own rhetoric about our comparative advantage,” Minerals Council Chief Executive Mitch Hooke told the Senate hearing.
Australia’s scheme aims to cover 75 percent of the nation’s carbon emissions from 1,000 of the biggest polluters, who will need a permit for every tonne of carbon pollution they produce.
The current plan guarantees compensation to big polluters, with major emitters such as iron and steel manufacturers and aluminium smelters to receive 95 percent of carbon permits for free in the first years of the scheme.
But Hooke said most resource companies would not receive any assistance.
“Ninety percent of Australia’s minerals exports will receive no shielding from the impact of this scheme,” he said.
If the legislation is rejected twice or stalled in the Senate, Prime Minister Kevin Rudd could have a legal trigger for an early election on climate policy by November or early 2010.
Rudd, who remains well ahead in opinion polls, is due to hold elections in the second half of 2010.
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