Trading tax for gas | Features | The Australian

Trading tax for gas

BUSINESS is pushing for more tax concessions to help it develop technologies to cut greenhouse gas emissions before Australia joins the nascent international regime to trade rights to carbon pollution.
Submissions to Prime Minister John Howard's taskforce on an emissions trading system were released yesterday with a strong message from business that any such trading market should cover all industries and comply with overseas schemes.
Industrial operations that cut greenhouse pollution can sell emission rights directly or indirectly to other businesses, providing an overall incentive to reduce emissions of greenhouse gases, mainly carbon dioxide, that most scientists blame for global warming.
Qantas recommends that purchase of a carbon-emission credit be tax deductible, potentially imposing a huge cost on the public purse. A national employer body, the Australian Chamber of Commerce and Industry, says research and development concessions should be increased for climate-friendly technologies, particularly if they may then be exported.
A common theme in the submissions is that government could accelerate depreciation concessions - that is, give a bigger tax break on newer machinery - to provide an incentive to replace old polluting technology with the latest low-emission versions.
"Aircraft have an effective useful life in excess of 20 years," Qantas argues.
"Many old-technology aircraft are still some years away from retirement and economically there is little justification for early phase-out of these aircraft. Incentives to accelerate such a process might see faster utilisation of the latest available technology. This concept would also be true of many other industries."
The ACCI says, in the absence of an agreed model for an emissions trading scheme, "the emphasis of policy measures should be on the provision of incentives to undertake the development of new technologies to reduce and abate emissions. A domestic emissions trading regime should not be implemented until all issues raised by business have been subjected to a cost-benefit analysis and the international emissions trading framework has been finalised."
But even Australia's energy-intensive aluminium industry has accepted the need for a carbon trading scheme to slow growth in emissions. But it says it will be a significant challenge for Australia - "being among the first wave of countries to adopt an emissions trading scheme" - to make sure energy-intensive industries remained internationally sustainable.
It says enough time will be needed to bring the new regime into place and industry will have to be supported by a transitional program that meets the operational and economic needs of different sectors.
Alcoa says any scheme must also include constantly updated information for market participants, "similar to a stock exchange model". Alcoa calls for any scheme to have broad sectoral coverage, specifically calling for agriculture, transport, stationary energy, industry and land use and forestry to be included. Permits to emit carbon should be a form of property rights, issued by the federal Government, it says.
Qantas argues emitters should initially be granted free credits and the Government should "allow for the cost of the purchase of the carbon credit to be tax deductible".
In other submissions, the Australian Conservation Foundation calls for a scheme to reduce emissions by 60 per cent to 90 per cent by 2050 but, in contrast to business groups, argued that permits should be a licence, not a right.
The Australian Dairy Industry council says greenhouse gas emissions from farms should not be directly included.
CSR, which sells sugar, ethanol, aluminium, property and building products, says it supports emissions trading in principle, but "it is vital to any trading scheme that Australia's energy intensive, trade-exposed industries are held even and this would be a pre-requisite to our support".
Hydro Tasmania supports emissions trading, regardless of whether global or not, because "the costs of delaying Australia's response to the carbon abatement challenge are far greater than the costs of commencing immediate abatement activity".
Timber Queensland says an Australian scheme should be developed as soon as practicable because a global one could take decades to evolve.
Reporting by Joseph Kerr, Sid Marris and Asa Wahlquist