Cutting greenhouse-gas emissions is set to reap a bonanza of up to $20billion for Commonwealth coffers.
In a policy brief out today, the Climate Institute says that, based on economic modelling, an emissions-trading system could yield a dividend of between $7 billion and $20 billion for the nation's revenue in as few as 12 years.
It comes on the same day as the lead government adviser on climate change, Professor Ross Garnaut, brings out his second discussion paper and as the Australian Industry Group's budget submission calls for a $3 billion tax break for business to deal with the Government's climate-change policies.
The Climate Institute said that the lower end of expectations on the emissions-trading dividend, $7billion, was more than what was allocated in last year's budget for community services and the higher end, $20 billion, was more than the allocations for either defence or education. The institute modelling used the target of cutting greenhouse gases by 20 per cent from 1990 levels by 2020.
Climate Change Minister Penny Wong announced this week that a Green Paper on an emissions-trading scheme will be released in July with draft legislation to underpin the system due at the end of the year. The scheme, to begin in 2010, would work by giving domestic polluters the ability to buy carbon credits to off-set their greenhouse-gas emissions. Those credits could be bought in forestry projects in neighbouring countries. The Government is to set a limit on the emissions of greenhouse gases it will allow to be produced under the trading scheme.
The institute brief says, "The size of the emissions trading dividend will be critically dependent on the level of Australia's emission target or 'cap', and design issues such as the treatment of emission-intensive export industries," the policy brief says.
A spokesman for Senator Wong said yesterday that definitive dividends were hard to specify, given the many variables, but welcomed the institute's contribution.
"It would be premature to speculate about revenue from emissions trading," he said. "This would depend on a number of considerations and inputs, including Treasury modelling, the Garnaut review and community and business feedback following the Government's Green Paper in July."
The institute's brief notes Professor Garnaut's warning in his first discussion paper, that emissions trading "will disproportionately affect low-income households", and says that this must be guarded against.
It proposes the dividend could be used for subsidies and incentives for energy-efficient housing and appliances, and increased support for public-transport infrastructure.
It noted suggestions from some stake holders that it could be used on "one-off payments to large emitters to offset the loss of asset value or operating profits" or to "support broader macro-economic reforms such as reductions in payroll and corporate taxation".
"At this stage the core decision facing Government is not how to spend this revenue but what the emission 'cap' or target will be implemented under the trading scheme," the brief says. "Until this is known, it is not possible to comprehensively assess the size of the emissions-trading dividend or consider how it might be appropriately used." The Australian Industry Group Budget submission says the Government should phase in a reduction in company tax to 25 per cent from 30 per cent by 2010 to help business adjust to climate change.
Chief executive Heather Ridout said, "Australian business wants to be part of a global solution to the threats posed by climate change and supports progress on giving shape to a domestic Emissions Trading Scheme.
"However, the scheme will leave many businesses and their employees in trade-exposed industries operating at a disadvantage relative to competitors abroad and it will require a massive investment effort by the business community as products and processes are re-evaluated and re-engineered." with AAP