Listen to the full interview.
ELEANOR HALL: The news from Europe adds to the uncertainty for Australian businesses trying to adapt to carbon pricing.
Jonathan Jutsen is the executive director of the Australian carbon consultancy, Energetics, and he told Anna Henderson that the effects on the May Budget are likely to be significant.
JONATHAN JUTSEN: The context is we’re getting more and more evidence that climate change is going to be a severe problem for humanity as well as for Australia, and that we need to take more urgent action from an environmental point of view - and this is going to slow down action. Though it should be seen in a context that the European scheme for reducing carbon emissions is a lot more than just a trading scheme.
ANNA HENDERSON: We are seeing reports from Europe about what this means for their emissions trading scheme. Descriptions like ‘this is a body blow for European carbon markets that would reverberate abroad’. Do you agree with statements like that?
JONATHAN JUTSEN: I'm not an expert on the European market but it does appear that actions that were intended to try and push the carbon price back up have not succeeded, at least for now, and that that means that the carbon price will probably continue to decline because of an oversupply due to the European economic situation.
ANNA HENDERSON: So what do you see that meaning for emissions trading schemes as a form of public policy to deal with emissions?
JONATHAN JUTSEN: Well if the scheme is going to be linked to the European price and the Australian scheme of 50 per cent exposed when it goes into the market part of the mechanism in a couple of years, it will certainly drive down the price in the Australian market, providing that they haven't sorted out something by the time our market comes online.
And of course, you know, if there's a change of government you know it might be a moot point.
ANNA HENDERSON: Our emissions trading scheme will be linked to the European system, as you say, in just a few years. Should the Government be rethinking that decision?
JONATHAN JUTSEN: I think that is an issue though as I said if there's a change of government that might be a moot point. We certainly don't want a scheme that provides no substantial signal in terms of making decisions around generation investment.
Though it's very important to understand that the emission trading schemes and the carbon price are only one element of a comprehensive package that's required to improve energy efficiency and to reduce emissions.
So you know I think it's more important, or just as important, that we have a look at what's the total package of measures that's going to be in place under the existing government and you know potentially an alternative government that are going to drive change and allow us to achieve our emissions target. Because the objective is the emissions target, not the carbon price itself. It's a tool.
ANNA HENDERSON: Well how effective do you think the carbon price will be in the meantime before the move to an emissions trading scheme in this kind of climate with this news coming from the European Union? Do you think this will slow down the rate of business investment in new technology to mitigate emissions?
JONATHAN JUTSEN: It's certainly not good news. I mean the combination of a potential change of government and the potential, substantial change of direction, combined with you know increased uncertainty around what the carbon price would be if a market did continue to come into play, does increase the uncertainty around measures that companies should be taking at this time.
Anything that increases business uncertainty makes it more difficult to encourage investment in these areas.
ANNA HENDERSON: And we are going to see in the May budget a downward revision in the expected forecast for what the Government will reap from a carbon price and an emissions trading scheme into the future. Do you think the forecasts will have to be adjusted significantly?
JONATHAN JUTSEN: They probably will. Because the - certainly the forward, the expectation was that the Europeans were going to be able to do something to mitigate against the falls in carbon price in their market. If they can't do that and they continue, the European Parliament continues to not back those measures, and the price continues to fall it clearly will have an impact in Australia because of the 50 per cent linkage.
ELEANOR HALL: That's Jonathan Jutsen from carbon consultancy Energetics speaking to Anna Henderson.