But in the short term the expected forecasts are disastrous for the Coalition, which was relying on unallocated excess revenue from permit sales to pay for its proposed amendments to boost assistance to emissions-intensive industries, small businesses and electricity generators.
The forecast estimates will dramatically lessen the chances of a deal in ETS negotiations between the government and the opposition, ahead of the second Senate vote late next month when the laws could become a double-dissolution trigger.
The Coalition could reject Kevin Rudd’s proposed carbon emissions trading scheme next month even if the Prime Minister accepts all of Malcolm Turnbull’s proposed amendments.
Senate leader Nick Minchin said yesterday there was no guarantee the Coalition partyroom would accept any agreed proposals, sparking government claims the opposition was acting in bad faith in negotiating with it over amendments.
Finance Minister Lindsay Tanner demanded the Opposition Leader intervene to clarify the position.
Opposition emissions trading spokesman Ian Macfarlane has insisted the cost of changes proposed by the Coalition would be covered by revenue from permit sales.
“There’s $50bn in unallocated credits by 2030. And it’s about $20bn by 2020,” he said last week. “That’s how much they are collecting and keeping as a tax. There’s enough money in unallocated credits to fund our scheme — more than comfortably fund our changes.”
But The Weekend Australian expects new government forecasts will show the continued strength of the Australian dollar will dramatically cut revenue generated by the scheme because permits sourced offshore become relatively cheaper in Australian dollar terms.
As foreign permits, from international schemes such as the Clean Development Mechanism, become cheaper, more firms will meet their requirements by buying offshore permits rather than buying Australian permits at auction, and the price they are prepared to pay for Australian permits will be reduced.
Unlike the US, Europe and Japan, Australia is not proposing to limit the amount of greenhouse abatement that can be sourced from overseas.
Strong growth in commodity exports could also reduce the scheme’s revenue. The Climate Institute’s estimate of an $11bn surplus over the first decade of the scheme is based on the government’s assumption of a 3per cent growth in the emissions-intensive industries that qualify for free permits.
The forecast estimates will be the first time the government has provided 10-year costings for its ETS. Climate Institute chief executive John Connor conceded yesterday that “all the risk is on the downside” to his estimate of an $11bn surplus over 10 years.