Can Labor and the Coalition finally agree on an emissions trading scheme? A SmartCompany Q&A

They could be some of the most important political talks in decades – today discussions will continue between the Federal Government and Opposition over amendments to Prime Minister Kevin Rudd’s climate change reduction scheme, which will result in the establishment of an emission trading scheme.

It seems like the debate over the ETS has been raging for the best part of two years, but it is only now – since Opposition leader Malcolm Turnbull won the backing of his party on the issue on Sunday – that the Government and the Opposition are finally sitting down for meaningful discussions on the matter.

So can they actually do a sensible deal? And what will it mean for business? Time for a quick SmartCompany Q&A.

This debate has been going on forever. Tell me, where is it at now?

The Rudd Government’s Climate Change Reduction Scheme is designed to reduce emissions by at least 5% by 2020, primarily through the establishment of a carbon trading scheme. Polluters (primarily electricity generators and heavy industry) will be forced to buy carbon credits, with the money raised recycled back to households and businesses to compensate them for higher energy prices.

The Greens hate the scheme because it doesn’t provide big enough emission reductions, so to get the scheme through Parliament the Government essentially needs to do a deal with the Opposition. And that’s where we are at – the Government and the Opposition are in the process of trying to thrash out a deal.

Right. What does Turnbull want?

The Opposition is happy with the 5% emissions reduction target, but they want some changes to the way the emissions trading scheme operates.

Firstly, Turnbull wants more financial assistance for electricity generators, agribusinesses and coal miners.

Secondly, Turnbull wants to move to an emissions trading scheme based on the idea of intensity benchmarks. Under this model, instead of buying permits for all their emissions, power generators would buy permits when they go over an industry-wide emissions benchmark. Turnnbull argues this would mean energy costs rise by 5% in the first two years of the scheme, rather than 20%.

There are some other points too, including suggestions around encouraging energy efficiency.

Anything specific for small business?

The intensity-based trading system would reduce the impact of rising energy costs on small business. If the Government doesn’t agree to the intensity-based system, Turnbull wants specific assistance for small business.

What’s been the reaction to Turnbull’s plan?

Predictable. The Greens hate it because it doesn’t do enough to cut emissions, and the power generators are upset because they say Turnbull’s amendments won’t do enough to protect them from losing money and, in some cases, going out of business. The National Farmers Federation is pleased with the idea of more protection, while the Australian Minerals Council is broadly supportive. And Australia’s big industry groups are just pleased that the Government and the Opposition are finally talking.

How has the Government reacted?

Climate Change Minster Penny Wong has been most polite and says she is prepared to negotiate. The big stumbling block at this stage looks like being around cost. Specifically, the Government wants the Opposition to explain how much each of its amendments would cost taxpayers. The Opposition is yet to respond, but the Australian Conservation Foundation estimated the Coalitions’ scheme would costs almost $9 billion in the first five years of the scheme.

So will we actually get a deal?

Hard to say. There does seem to be a willingness on both sides to get a deal done, but this is such a devise and emotive issue that the negotiations will be very tough.

One factor that might speed up the process is the global climate change treaty talks that will be held in Copenhagen in less than two months. It will not look good for Rudd if he turns up there and tries to portray himself as a world leader on the issue and he can’t get a deal done at home.