what does the ets mean for bbp, page-3

Implant, i was counting on you!

here's an article from Business Spectator. All sounds reasonably positive for BBP. i have asked company on impact and they state still going thru the fine detail before saying anything but at a high level seem pretty satisfied with the position. Hope they share findings once they have fully considered. At least clears the air for potential bidders.

Govt sets carbon reduction target of 5-15% for 2020, offers help to affected industries
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The Spectators
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Carbon pay dirt
By a staff reporter

The federal government has set a narrow carbon reduction target of five to 15 per cent for 2020, but has not allowed for any more ambitious targets to be implemented, even if the major international economies agree to substantially reduce emissions.

The government has also sought to soften the blow of what it describes as the biggest economic reform since the opening up of the economy in the 1980s and 1990s, by agreeing to increases in the multi-billion dollar handouts to affected industries.

Coal-fired power stations will receive handouts totalling $3.9 billion over five years to offset the loss of asset value, while EITEs (emissions intensive trade exposed) industries, will receive annual assistance of at least $2.9 billion in its first year, possibly rising to more than $6 billion by 2020.

The carbon reduction target, announced by Prime Minister Kevin Rudd and Climate Change Minister Penny Wong, falls well below the 25 to 40 per cent target for 2020 recommended by the United Nations for developed economies.

Australia’s target will stand at an unconditional five per cent if no international agreement is reached, and will be increased to a maximum 15 per cent in what the government describes as the “unlikely” event that there is international agreement. Any further reductions in light of an international agreement will not occur until after 2020.

The headline target also falls below the target agreed by the European Union last week of 20 per cent (rising to 30 per cent if there is an international agreement) and the current proposal by President-elect Barack Obama to reduce emissions to 1990 levels.

However, Mr Rudd argues that because of Australia’s higher population growth, its per capita reductions of 27 to 34 per cent will be comparable to the EUs (24-34 per cent) and the US (25 per cent).

The government has estimated revenues from the issuing of permits in fiscal 2010/11 would be around $11.5 billion, based on a nominal price of $25 a tonne of carbon.

All of this will be returned to consumers and industries, with household assistance to cost $3.9 billion in fiscal 2011 to total $3.9 billion, rising to $6 billion the following year, $2.4 billion on a fuel tax adjustment, $3.6 billion to affected industries and 0.7 million to the climate change action fund.

The price of carbon will be set by the market, but the government will implement a price cap of $40, but does not expect this to be exceeded because it has also allowed unlimited import of permits from the United Nation’s clean development mechanism, which could offer Australian companies a lower cost of abatement.

Coal-fired power stations will have around 130,000 permits issued free of charge over the next five years, but only to the most heavily polluting emitters.

Relatively efficient black coal operators who emit 0.85 tonnes of carbon for every gigawatt hour (Gwh) will receive no assistance, but a less efficient black coal power station with a capacity of 1000Mw and which emits 0.95t/Gwh will receive $106 million over five years.

A brown coal generator of the same size that emits 1.3t/Gwh will receive $584 million.

The calculations for assistance to energy-intensive industries have also been expanded.

The category of heaviest emitters who will receive 90 per cent of their permits free of charge has been expanded beyond those who emit 2000 tonnes of carbon for every $1 million of revenue – such as aluminum production, cement, silicon and lime production - to a handful of industries that that emit 6,000t for every $1 million of “value-add”.

The definition for those industries receiving 60 per cent of their permits for free will be lowered from 1500t/$1 million revenue to 1000t per $1 million, which will mean that the LNG, petroleum refining and some steel making industries will now be included.

This means that the percentage of permits to be issued free to EITEs will increase from the proposed 20 per cent under the Green Paper recommendations to more than 25 per cent, and will rise to 45 per cent by 2020 presuming the industries grow along with the rest of the economy.

If these industries achieve higher growth over that period, they could receive 55 per cent of all permits issued for free, in which case the funding for this assistance will need to be sourced from general revenue in the budget.

The rate of assistance per unit of production for businesses will be reduced by 1.3 per cent per annum, a much less ambitious target than the five per cent canvassed in the green paper.

And the method for calculating the qualification for EITE assistance has been expanded so that companies can now draw on four years of production rather than three, taking it back beyond the commodity price boom – a factor that some companies had argued reduced their intensity per dollar of revenue and could have made them illegible for assistance.