CLIMATE SPECTATOR: The carbon tax's muted milestone

Climate Spectator

Australia yesterday hit the 100-day milestone since the introduction of the carbon tax with news of a backflip from one prominent critic of the scheme as the commotion over the legislation fades.

Last year, Coogee Chemicals made news by saying the imminent introduction of the carbon tax would make a planned expansion of its facilities "uncompetitive and unviable”. Not only was it a $1 billion project, but it was also a company operating out of Julia Gillard's electorate – a PR nightmare for the government. But now, according to a report in The Age, the company's $1 billion expansion is still on the table, albeit in a slightly revised form with new investors.

The company, whose chair Gordon Martin was appointed to the Coalition's climate policy advisory panel six months prior to the shelving of the expansion, has insisted the backflip is not because the carbon tax was not as significant as first thought, but rather that changes to the scheme meant the company's project was now viable.

There is no doubt changes to the legislation, which include linking to the EU emissions trading scheme and scrapping the floor price come 2015, will likely result in a boost to the company's forecasts for the years 2015-2018. But perhaps the company also now better appreciates just how lucrative the carbon compensation package can prove. Indeed, at the time the project was apparently being called off, Climate Change Minister Greg Combet made the extraordinary claim that the company would be better off due to free permit assistance.

"It would get more assistance than its total carbon price liability, because the new facility would be operating at much lower emissions intensity than existing facilities," he said.

Combine this net benefit in its initial stages with analyst forecasts being revised down for the carbon price from 2015 and it's not hard to see why a vocal critic will become a quieter observer.

While Coogee is now pressing forward, another noisy detractor – Rusal – is taking a step back and letting politicians bicker over the impact of the legislation on forecast job losses from its Gladstone alumina refinery – Queensland Alumina Limited.

The news of likely cuts being linked partially to "new taxes”, as revealed in The Australian, hardly comes as a shock with Rusal Australia – 20 per cent shareholder in the QAL refinery – led by vociferous carbon pricing opponent John Hannagan.

Hannagan has long fought against carbon pricing and in an opinion piece for the Australian Financial Review in June, was at pains to outline that: "The design of the carbon tax discriminates against coal-sourced energy.”

It would be a worry if a carbon tax didn't discriminate against coal-sourced energy.

"QAL has an average emissions profile when compared with overseas competitors, but the net effect of the government policy is that QAL will pay all of the Australian alumina industry's carbon tax bill,” Hannagan continued.

"This occurs because the Australian carbon tax compensation is based on the average emissions from Australian refineries, not the much higher average of our global competitors.”

So Rusal essentially wants to be compensated for the fact that they have been operating an alumina refinery that is substantially more polluting than other Australian plants. Indeed according to a Grattan Institute analysis, QAL's emissions are close to twice those of an alumina refinery, Yarwun, which is in the very same town of Gladstone.

It's worth noting that the QAL refinery had been considering investing in a gas-fired cogeneration plant for many years which would have dramatically cut its emissions. Instead it chose to hold off and do little to reduce emissions. The very reason for providing free permits on the basis of industry average emissions was to avoid rewarding this kind of do-nothing behaviour in an attempt to inflate free permit allocations.

While Rusal Australia and John Hannagan will keep their attacks coming, unquestionably the carbon tax has largely had a very moderate impact on Australians. Indeed, if it weren't for the perception of a lie and consequent worries of trust, then Labor might even be neck and neck with the Coalition in the polls.

Instead, the Gillard government remains stuck far enough behind for the Coalition to likely have a comfortable win if an election were to be held today. The good news for Labor however, is that the impact of the carbon tax will likely not be a key factor come election time – something many thought unlikely a few months ago given the unrelenting campaign against it.