The Australian Industry Group today released an independent report by Ernst and Young which assesses the Government and Opposition climate change policies.

Ai Group Chief Executive, Heather Ridout, said: "This timely analysis was commissioned in the understanding that whether it's the Government or Opposition who ultimately determine the direction of climate policy, both sides share the same very challenging targets and business will bear a major share of the burden of adjustment."

The report was commissioned by Ai Group to help members and the broader community understand and assess the two major proposals to reduce Australia’s greenhouse gas emissions. Ernst & Young's independent assessment considered the Government and the Opposition policies (as currently understood) against principles Ai Group has developed in consultation with members to guide our contributions to the climate change policy debate. Ernst & Young was also asked to develop constructive suggestions for improvement where the policies fell short of these principles.

"Ernst and Young found that as they currently stand, neither the Government nor the Opposition policies fully meet our principles for climate policy. Both need significant improvements in critical areas, and the report makes constructive suggestions for such improvements," Mrs Ridout said.

"In Ai Group's view the parties have considerable work left to flesh out their policies. We support the recommendations of this report for improving both sets of policies.

"In particular, based on the Ernst and Young report, we believe that to meet Ai Group principles the Government policy needs to:

  • Adopt strong measures to maintain industry’s competitiveness, including a higher level of assistance to a broader set of industries than previously suggested in the 2009 Carbon Pollution Reduction Scheme
  • Ensure the scheme actually reduces uncertainty and minimises costs, by:
    • Providing firm, predictable and ongoing rules for the scheme;
    • Committing clearly to allow access to international permits during the flexible price period and to maximising opportunities for international linking; and
    • Locking in an early move to trading.
  • Put in place a clear process to cut back the existing, ineffective and wasteful tangle of high-cost policies across Australia that threaten to double up carbon burdens on business.

"As well, based on the Ernst and Young findings, we believe the Opposition policy could be improved by:

  • Demonstrating how processes for business participation in the Direct Action plan - particularly the costs of establishing baselines for all large emitters – can be streamlined;
  • Clarifying how the penalty system for exceeding baselines will work;
  • Lowering abatement costs by extending the baseline-and-credit aspects of the proposal, including allowing and incentivising trading among participants;
  • Developing an internationally credible system for delivering soil carbon and involving thousands of farmers with low administrative costs; and
  • Providing greater certainty to investors in the electricity sector around the rules that will apply over time to their huge long-lived investments.

"Both the Government and the Opposition gave full cooperation to Ernst and Young in this exercise. It will closely inform our ongoing efforts to ensure business priorities are reflected in policy development," Mrs Ridout said.

Ai Group’s principles for climate policy were developed over several years of close involvement in the debate. At their highest level, those principles are:

  • The competitiveness of Australia’s trade-exposed industries cannot be eroded;
  • Australia should be able to meet its emission reduction targets at least cost;
  • Climate policy must respect existing investments to avoid acute short-medium term disruptions while supporting efficient long-term investment in the energy and other sectors;
  • A central feature of policy should be supporting research and development (R&D) of new approaches to emissions reduction and refinement of existing approaches; and
  • Compliance costs and regulatory burdens should be kept to a minimum.

Read the full report and Ai Group's summary.