By JONATHON HOWARD
THE Warwick Chamber of Commerce and Industry President, David Littleproud, has expressed concern over this week’s report that the European carbon price has plummeted to about $3 per tonne.
Mr Littleproud said the move had the potential to create a $7 billion budget deficit in Australia, as the European economy continues to struggle and the perils of global carbon pricing become clearer.
Mr Littleproud said Treasury modelling had original called for a carbon price of around $24.
“This re-inforced the chamber’s initial view that a market-based mechanism to address climate change was dangerous and that this also showed why governments should not participate in open global markets with effectively taxpayers’ funds,” he said.
“The price slump is the result of a downturn in the European economy with the demand for carbon credits slumping.”
Mr Littleproud said this highlighted the major problem with a market mechanism coupled with such a significant compensation package to low income earners.
“It’s simple economics – if the economy slows then industry slows, which slashes demand for carbon credits and means tax receipts to the government fall thus creating a black hole to pay for all this compensation,” he said.
Mr Littleproud said Australians needed to decide whether they wanted this mechanism to continue, but had to be realistic that compensation could not go with it.
He also said it highlighted the government’s failure to handle the economy appropriately, which has had a serious impact on business and consumer confidence.
Meanwhile, Federal Treasurer Wayne Swan told AAP that it was a folly to take a spot price of the plummeting European carbon price and draw conclusions about the Australian carbon price in years to come.
Treasury is forecasting a carbon price of $29 a tonne in 2015 when a local emissions trading scheme is linked to the European ETS.
This week the EU price dived to less than $4 a tonne.
Mr Swan insists the European carbon price can bounce back and defended Treasury forecasts.
The big difference between the Australian forecast and the latest European carbon price could cost the federal budget up to $7 billion, some experts predict.
“It’s folly to take a spot price for carbon on one day … and transfer that into conclusions over a four year period,” Mr Swan told the ABC.
He said the carbon price in Europe had been higher in the past and economic conditions could improve.
“In the future we could see higher prices,” Mr Swan said.
Mr Swan guaranteed the household carbon tax assistance would stay, even with a potentially lower carbon price in coming years.
The 14 May Budget will include the government’s response to a likely lower market price for carbon from 2015.
