Mr RAMSEY (Grey—Opposition Whip) (20:43): The rise of atmospheric CO2 levels from 290 parts per million in about 1900 to 414 in 2021 is indisputable. The last time CO2 reached these levels in the atmosphere was about four million years ago. While the effects of these levels on the environment are debatable, most would agree it’s causing the atmosphere to heat up. I would be in no position to challenge that consensus.
However, what Australia, which contributes about 1.2 per cent of global emissions, should do about it should be a red-hot topic of discussion. The phrase ‘red-hot topic of discussion’ brings me to the new parliamentary standing orders which the government brought in immediately after coming to government and used its numbers to change. A bill like this tonight is only being debated by one side of politics, and the government has packed up and gone home. I think that is a bit of a disgrace, I must say. I’ve lost count of the number of times I’ve raised the completely nonsensical way in which global emissions are accounted for and broadly summed up by design by Europeans for Europeans. It’s so important that we work to develop more effective technologies in Australia and that we allow technology to lead us to the desired outcome. However, the Albanese government has made policy decisions which have had ramifications that none of us fully understand at this time. This bill, the safeguard mechanism bill, is just another one of them.
To sum it up, Labor is targeting businesses with more than 100,000 tonnes of emissions per annum and is designating a baseline output for these businesses, determined over a decade ago, maybe, with some unspecified scope for variation of this baseline figure. Having said that, the baseline figure is determined for businesses, and it is incumbent upon them to reduce those emissions by 4.9 per cent per annum. This includes industries such as mining, mineral concentration, refining and fertiliser plants. I’ve already spoken on a couple of other bills about the threats of these policies to a new urea plant in Western Australia, which would undoubtably reduce global emissions but almost certainly raise Australian emissions. That in itself is one of those paradoxes that I think really needs to be drawn attention to because of some of the unintended consequence of this legislation. It also affects steelmaking and aviation, but not, it seems, generators that contribute to the electricity grid. The government should be able to explain why that is so, but I find it a bit dumbfounding that, if we’re going to pick on every other industry, why on earth we don’t pick on electricity generators. But I suspect it is because they’re wearing political heat over a number of other statements they have made, including reductions to power prices of $275 a year, which they are unable to deliver on.
In Grey, this legislation puts BHP Olympic Dam, Liberty Primary Steel in Whyalla and SIMEC in Whyalla firmly in the sights, and if those businesses exceed the 4.9 per cent reduction target they can compensate by buying carbon offsets, which the government has capped at $75 a unit, bearing in mind that an Australian carbon unit represents one tonne of emissions. It’s almost certain the cap will immediately go to the $75 capped price, and it’s worth comparing it to Julia Gillard’s $23 carbon tax. It would seem that that has now tripled because it is difficult to see this in any other light but a carbon tax.
Last year $17.7 million in Australian carbon credit units were traded in Australia, and each one, as I said, is worth a tonne. We don’t know exactly how many we are likely to see in the future and how many the industry is going to need because the government has not given us the Treasury estimates that they have developed this policy on. That is clearly not being transparent at all, and they should share that information with the Australian public. Australian emissions last year were around 480 million tonnes, and we know, as I said, that $17.7 million of Australian carbon credit units were traded. Estimates in the market—and, as I said, we don’t have Treasury estimates—are that the market will be well undersupplied, perhaps by 50 per cent, and here’s the kicker: if a business can’t secure enough carbon credits in what is likely to be a short market, they will be fined not by the equivalent of $75 a tonne but by $275 a tonne—$275. This is a massive fine on these industries, which are our big employers. They are the winners of overseas income, of export income for Australia. In many cases, they are the industries that underwrite our standard of living. ‘How big a stick does the government want to hit these industries with?’ is the question that I am asking myself.
Imagine you are the industry, or you own or operate it, with an existing investment in legacy equipment. The equipment may not be all that old. It might have a 10-, 20- or 25-year lifespan, but all of a sudden it’s not suitable for your industry. You’re going to have to buy $75 credits, or maybe even be hit with a $275 fine for not being able to purchase those credits, which you would if only they were available. Imagine the industry that you operate in good faith has no alternative technology available to it. It is a potential economic deathtrap.
Liberty Steel in Whyalla produces about 40 per cent of Australia’s steel production. The British owner of Liberty Steel, Sanjeev Gupta, is very enthusiastic about the prospect of green steel, produced from green hydrogen. Of course, it is dependent on green hydrogen that can be supplied at the right price. We know that making steel using hydrogen is technically feasible, but it is not yet known whether it is financially sustainable. I wish Mr Gupta very well in his endeavours to develop green steel in Whyalla; I’d be a very enthusiastic supporter of it, but do I want to cut off my nose to spite my face? No, I don’t. If that can’t be achieved, I don’t want to lose the steel industry in Australia. I’m doubtful whether that industry can support buying carbon credits at $75 a tonne, and I’m very confident indeed that it cannot support paying a $275-a-tonne fine for carbon credits that it could not purchase at $75 a tonne, because they were not available.
We’ve recently spent a fair bit of time in this place, on one bill or another, talking about sovereign risk for Australia. When Arrium went broke and the business in Whyalla went into the hands of a receiver, I argued in the party room, with the Prime Minister and other ministers, that we could not allow this industry in Whyalla to go under, not just because of the jobs it would destroy in Whyalla, and the hollowing out of that city, but because Australia could not afford to lose that steelmaking plant. Whether or not that steelmaking plant can survive under these new rules is yet to be known, but I think there needs to be a safety net in there. There needs to be a safeguard against the safeguard mechanism, as it were.
Nyrstar in Port Pirie is now owned by Trafigura, and I’m very pleased they do own it. It’s a big company that has a very positive attitude to Port Pirie and its smelter down in Hobart. They have built a new, state-of-the-art TSL smelter in Port Pirie and a brand-new sulphuric acid plant. They’re there for the long haul. The smelter in Port Pirie is absolutely essential to the operations of the zinc smelter in Hobart. They take the waste from Hobart and reprocess it in Port Pirie and manage to wring enough out of those residues—which were formerly dumped at sea, I might say—to pay for the smelting process. It’s a very important cog in the wheel. They have a beautiful new TSL smelter, but they also still use a coke-fired blast furnace. There isn’t any technology available to them at the moment to replace that coke fired furnace. They are looking, as the industry worldwide is, at the possibility of using hydrogen in those plants, but at this stage, as far as I know, it’s unproven. Like the steel industry, even once they achieve it, whether it is financially sustainable is another question.
There are also concerns about the adaptability and flexibility of the benchmarking. It’s unclear—to me, at least—how that works and I suspect it’s unclear to most of the industries that are affected by it. However, if the credits and even the fines become a permanent part of those businesses in Whyalla, like Nyrstar and SIMEC Mining, then I doubt their viability.
So what happens? The world needs zinc, lead, gold, silver and other critical minerals. If we drive all that production offshore to a country with no real targets, what have we achieved? We have achieved a worse outcome for the world. It’s why we need to be in pace, setting a good clip on this reform in Australia. The problem is, when you cement in targets—as the government has done with the 43 per cent by legislating it rather than just setting a target, as they are doing with this safeguard measure, putting legislated barriers in place—it is very difficult to take your foot off the pedal when it all comes crashing down.
I hold deep reservations about what this will do for a number of the industries that sit within the electorate of Grey. It’s not only those that sit within the electorate of Grey. I know other members here tonight have been talking about cement, and it’s very right and proper. It is a very energy intensive industry, producing cement to produce concrete. We cannot run a modern industrial society without steel and concrete. They are absolutely essential. They need to be produced somewhere in the world for Australia to use, and I strongly prefer that they be produced in Australia.
I greatly fear that this legislation is a nail in the coffin of those industries, that they will be forced offshore. Those energy intensive industries will find it increasingly difficult to operate in Australia, and we will all be the poorer for it.