(EnergyAsia, September 14 2012, Friday) — Australia’s coal industry said the government’s decision to remove the fixed carbon floor price is a small step in the right direction, but does not address what it says are the fundamental flaws in the national carbon pricing scheme that damages the industry’s competitiveness.

The Australian Coal Association (ACA) listed what it said are the system’s three main flaws, starting with a fixed high carbon price of A$23 a tonne for the next three years, which is 2.5 times the current European price of around A$9 a tonne. (US$1=A$0.95). Meanwhile, coal prices have fallen recently and are projected to remain lower than the high prices assumed by the government

Second, the carbon tax applies to fugitive emissions from coal mines, unlike any of Australia’s international competitors. The European Union (EU)’s Emissions Trading Scheme does not cover fugitives even though the region produces more emissions.

Third, Australian firms can only purchase up to 50% of their permits internationally, ensuring that they cannot reduce their emissions at the lowest possible cost.

Greg Sullivan, the ACA’s acting CEO, said:

“The Australian Coal Association supports an efficient approach to reducing Australia’s carbon dioxide emissions that protects the competitiveness of the Australian coal industry and enables its future growth.

“Linking the floor price of carbon permits to that of Europe is a first step in amending the carbon pricing scheme. However, there is now a critical need for the Australian government to go further and address the fundamental flaws in the scheme in the lead up to price alignment with Europe.

“The government must face the fact the carbon tax is imposing a significant cost burden on the Australian coal industry at a time when coal producers are facing steeply higher costs, tight margins and tougher international competition.

“Under the current scheme, Australian coal producers will be paying an estimated A$15 billion in tax on fugitive emissions over the next decade when our competitors have no such costs.

“Australia is discriminating against its own industry in a highly competitive international coal market.”

Mr Sullivan said Australia needs a climate change policy that sets an efficient long-term price on carbon as part of an international agreement and which also invigorates substantial and sustained investment in a broad range of low emissions technologies, including carbon capture and storage.