ETS changes `a minor cost` to budget

The negotiated amendments to the federal government's climate change legislation
would add just under $1 billion to the budget over the next 10 years - minuscule
given the current deficit.
The government's emissions trading system (ETS) - or carbon pollution reduction
scheme - and its amendments were still being thrashed out in the opposition's joint
parties room late on Tuesday.
The alterations were negotiated between the Liberal leadership and the government
but it was still unclear whether they would get a coalition-wide acceptance to allow
the legislation to pass this week.
Treasurer Wayne Swan warned parliament the longer there was a delay in taking an
action on climate change, the greater the cost would be to the community.
"If we don't act now we are sentencing the Australian economy to a very sharp and
dangerous shock at some stage in the future," Mr Swan said.
"In essence, it is about jobs and it's about protecting our economy from the
consequences of dangerous climate change."
The ETS amendments doubled the transitional assistance to the coal sector to $1.5
billion over five years and increased help to electricity providers by $4 billion to
$7.3 billion.
However, the household assistance package was slashed by $6.7 billion over 10 years
to 2019/20.
All up in its new form, there will be an additional cost to the budget from the ETS
of a net $204 million over the four years to 2012/13 and $769 million over the
period to 2019/20, government papers show.
"A couple of hundred million dollars is nothing at all," Nomura Australia chief
economist Stephen Roberts said.
"We are going to be looking swings just in some of the calculations between the
budget and the mid-year economic and fiscal outlook (MYEFO), and they'd dwarf that."
The MYEFO released in November forecast the 2009/10 deficit alone at a mammoth $57.7
billion.
The changes to the ETS proposal create additional expenditure of $1.28 billion over
the period to 2012/13 and $7.01 billion to 2019/20.
However, this is partly offset by cuts of $910 million to the household assistance
package until 2012/13 and $5.76 billion to 2019/20.
This is due to a lower projected carbon price of $26 per tonne of CO2 emissions
compared to $29 at the time of the May budget and was due to the appreciation of the
Australian dollar.
"This will reduce expected price increases for goods and services and lead to a
smaller rise in the overall cost of living impact of the scheme," government papers
said.
But the government is committed to ensuring that about 90 per cent of low-income
households receive assistance equivalent to 120 per cent or more of their cost of
living increases.
Finance Minister Lindsay Tanner said was important to maintain the integrity of the
budget and commended the opposition, in a rare moment of praise, for its handling of
the ETS negotiations.
"The government does face a very substantial challenge to return the budget to
surplus," Mr Tanner told parliament, adding he had approached the negotiations with
"some degree of trepidation".
But he was pleased to say that the proposals negotiated between the government and
the opposition had "only a very, very modest" impact on the budget during the next
10 years.