Cap-and-Trade Proposals Raise Fears of Job Losses, Price Hikes

By Patrick Goodenough | July 18, 2008 | 4:57 AM EDT

Announcing a cull of 1,500 jobs, Australia’s national carrier warned Friday that a controversial new carbon dioxide emissions trading scheme could have an even bigger impact on the company and the tourism market.

( – Announcing a cull of 1,500 jobs, Australia’s national carrier warned Friday that a controversial new carbon dioxide emissions trading scheme being promoted by Prime Minister Kevin Rudd could have an even bigger impact on the company and the tourism market.
Announcing the job cuts at a press conference in Sydney, Qantas chief executive Geoff Dixon said the aviation industry had been unfairly singled out in the government’s CO2 plan, which would cost about 100 million Australian dollars ($97 million) a year to implement, the airline said.
“We can’t absorb $100 million in costs,” Dixon said, adding that it “could have a bigger effect than what we are doing here [today].” Dixon predicted the carbon trading scheme would push up airfares and impact domestic and regional tourism.
He blamed the job losses, which will account for about four percent of the company’s total workforce, on rocketing oil prices and a pay dispute.
Outlined on Wednesday, the government’s plan aims to curb CO2 emissions by forcing 1,000 major companies to buy permits, thus putting a price on the emissions, which many scientists blame for climate change.
Companies will be permitted to emit a set amount of carbon, and they may trade if they fall below or exceed their quota.
It will be one of the world’s largest CO2 emissions trading schemes (ETSs). The programs aim to help industrialized countries meet “greenhouse gas” emission reduction targets set by the Kyoto Protocol.
Like President Bush, Rudd’s predecessor John Howard rejected the Kyoto Protocol, arguing that it would harm the economy and noting that major carbon emitters, chiefly China and India, were exempt.
Of the 36 industrialized countries set reduction targets by Kyoto, only the U.S. and Australia did not ratify the protocol. But Rudd campaigned last year on a pledge to reverse course, and he made it his first official action after being sworn in after winning election in November.
The implications of that decision became more apparent this week, with the release of a “green paper” outlining how the ETS would likely work when it comes into effect in July 2010.
The government is proposing that only 30 percent of emissions allowances be allocated to big emitters for free – unlike the ETS operating in the European Union, where 100 percent of allowances were allocated for free. The rest of the permits will have to be bought by the companies, at a market price to be set after federal Treasury figures are released in October.
Big emitting companies initially will pay for 10 percent of their emissions, although this assistance would taper off in time.
The government paper acknowledged that the scheme would push up energy prices, and put forward ways in which low-income families would be compensated, using income derived from the permits. The paper estimated the ETS would raise consumer prices by 0.9 percent in its first year of operation.
Studies have found Australians to be the biggest emitters per capita, although with a population of only 21 million it produces far less in total than many other countries – less than two percent of the world’s total greenhouse gas emissions.
Critics of the government’s scheme argue that even if it were possible for Australia to cut its share of the world’s emissions to zero by 2020, China and India together during that same period would not only have canceled out the reduction, but raised the total by an additional 10 percent.
Qantas was not alone in protesting the likely impact of the ETS.
A leading gas supplier said because the liquefied natural gas (LNG) industry does not emit enough to qualify for free permits – and so would have to pay for all of its requirement – it would take a big hit, possibly jeopardizing billions of dollars worth of LNG projects. (Ironically, LNG is considered one of the “cleaner” forms of energy, emitting less carbon than other fossil fuels.)
Rudd responded by telling reporters Friday that there would inevitably be complaints. “This is not a cost-free, pain-free solution for the future. It involves some hard decisions.”
The government is inviting submissions on its ETS proposals from now until September, and hopes to pass enabling legislation later in the year.
Rudd is urging the official opposition to support the scheme. Opposition treasury spokesman Malcolm Turnbull on Friday noted that companies were being asked to respond to the proposals before the federal Treasury releases the results of its economic modeling, which will give a clearer indication of the cost.
He accused the prime minister of rushing the plan for political reasons.
“In his haste he is jeopardizing jobs and the livelihoods, prosperity of millions of Australians,” Turnbull said in a radio interview.

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Patrick Goodenough
Patrick Goodenough
Spencer Journalism Fellow