9 November 2011

The Australian Forest Products Association (AFPA) says this week's passing of carbon tax legislation in Australia has left its members with little to smile about.

Prime Minister Julia Gillard said the passing of Clean Energy legislation through the Senate was a major milestone in Australia's efforts to cut carbon pollution and seize the economic and job opportunities of the future. Both houses of parliament have now approved the plan.

For the first time, Australia's biggest polluters will have to pay for every tonne of carbon pollution they emit, a measure that will cut carbon pollution by at least 160 million tonnes a year in 2020 – equivalent to taking 45 million cars off the road, she said.

"We will do this by putting a price on pollution, fostering renewable energy technologies, encouraging energy efficiency and creating opportunities to reduce pollution on the land. Our Clean Energy legislation will also deliver fair and generous assistance to householders while giving certainty to business and investors about Australia's move to a low pollution economy."

Minister for Climate Change and Energy Efficiency Greg Combet said the carbon price mechanism would apply to around 500 of the country's biggest polluters. A fixed carbon price of $23 a tonne will apply from 1 July 2012, moving to a flexible price after three years.

Treasury modelling shows the carbon price will reduce emissions and drive investment in clean energy while ensuring the economy continues to prosper, with 1.6 million jobs to be created by 2020.

"The initial fixed price stage will provide stability and predictability. This will give businesses time to get used to the new system, to understand their obligations and to start planning ways of reducing their pollution," Mr Combet said.

The forest industry, however, is not happy. It says the government in developing its climate policies has ignored feedback from the industry even though it is in the business of creating low emissions intensive materials and sustainably managing forests.

"First, many AFPA members operate in a global marketplace and will face steep competition from producers in countries with no carbon tax. The rate of assistance for these trade-exposed manufacturers in the form of permit allocations will decay over time at an arbitrary rate of 1.3 % per annum. AFPA urged the government to link this assistance to the actions of competitor countries as they set carbon policies but this has been largely ignored," said AFPA chief executive officer, David Pollard.

"Manufacturers of solid and reconstituted wood products will receive no assistance at all, and will suffer a serious erosion of competitiveness from day one," he said.

"Secondly, it will be very difficult for any commercial plantation forestry operation to be recognised in the Carbon Farming Initiative (CFI) because the constraints placed on for-harvest plantation projects are far stricter than on any other activity. This is despite Australia's tree plantations already contributing 20 million tonnes of CO2 equivalent towards Australia's Kyoto target.

"Instead of recognising these home grown carbon stores, Australia will import around 100 million tonnes of carbon credits from overseas by 2020 to meet our emissions reduction target.

"Thirdly, the use of native forest wood waste to produce renewable energy will be banned with amendments to the Renewable Energy Target (RET) Scheme. This is extremely disappointing considering a number of projects in regional Australia are now in jeopardy and waste products from sustainably managed forest operations and processing unable to be utilised.

"The only bright spark under the package is the provision of greater certainty and market access for 'not for harvest' reforestation carbon offset projects, which are likely to become a more important component of a diversified forestry industry into the future.

For more information on the Australian Government's Clean Energy Future Plan, click here.

Sources: Australian Government and AFPA media releases