Rio, Woodside criticise govt's carbon scheme

Two of Australia's biggest resource firms launched an attack on government plans to price pollution, opening up a second political front for Prime Minister Julia Gillard over her plan to impose a fixed price on carbon emissions from July 2012.

With the public wary of the plan and the opposition labelling it "a great big new tax on everything", resource giants Rio Tinto Ltd and Woodside Petroleum Ltd called for strong protection from the new cost.

Climate Change Minister Greg Combet said details of compensation for industry were still being considered, and industry would be consulted on final details, but he said fewer than 1,000 companies would have to pay a carbon price.

"A carbon price is paid by the large organisations in our economy on every tonne of pollution that they emit. There's somewhat less than 1,000 entities that are likely to have a liability to pay a carbon price," Mr Combet told reporters.

The number of companies liable to pay for emissions is similar to the number covered by the government's former carbon trade plan, which was twice defeated in parliament and which offered free permits for up to 95 per cent of emissions for firms exposed to overseas export competition.

Global miner Rio Tinto and Woodside, the country's largest oil and gas producer, are among Australia's biggest carbon polluters, with combined emissions of almost 16 million tonnes.

Rio Tinto said the government must offer more generous compensation than under the former carbon scheme, while Woodside, said it should be exempt completely.

"Woodside believes the company's trade-exposed exports should be exempt from any price on carbon, given the absence of an international agreement on pricing greenhouse gas emissions," it said.

Rio Tinto said compensation proposed in 2009 was no longer reasonable for exporting industries, due to the lack of an international agreement to cut emissions.

"Businesses unable to pass a carbon price through to customers, which is most businesses competing in international markets, would simply have to absorb it," Rio's Australian managing director David Peever said.

"Depending on the magnitude of the carbon price, this may be manageable when market conditions are favourable and margins are healthy. But when the cycle turns down, it will inevitably be disastrous," Mr Peever wrote in the Australian newspaper.

Political pressures

Ms Gillard, whose predecessor Kevin Rudd was dumped by her ruling Labor Party last year after two failed attempts to address climate change, said polluters would pay a yet-to-be-determined fixed price, then move to a market-based system within five years.

The plan has put Ms Gillard's one-seat minority government under intense political pressure, with the majority opposition conservatives promising to reject it and warning consumers it will lead to higher electricity and living costs.

Underscoring the political risks, an Essential Media poll on Monday showed almost one in two Australians – or 48 per cent – opposed the carbon price plan, with overall support for Labor slipping a point to 47 per cent.

Only 35 per cent of voters backed Gillard's scheme, and 59 per cent of respondents believed she had broken an election promise not to immediately pursue a carbon price after last year's dead-heat election.

But in a rebuff to Rio Tinto and Woodside, most people were also opposed to compensation for heavy emitters, with 44 per cent opposed to any buffer for trade exposed industries and a massive 68 per cent opposed to help for power companies.

In contrast, 70 per cent wanted compensation for householders and small business, the poll showed, while 47 per cent of poll respondents wanted action on climate change as soon as possible, compared to 24 per cent who wanted to delay action.

The Australian Greens, who help support Labor in the lower house and have a strong voice in the upper house, said the claims of Rio and other "big polluters" should be rejected by the government.

"We should be looking at the real world and when it comes to compensation, it shouldn't be claims by these big corporations," Party leader Bob Brown told local television.

Mr Brown said compensation claims by emissions-heavy industries should be assessed by an independent arbiter or review process, to ensure corporates did not use their political influence to escape costs and leave taxpayers to make up the shortfall.

Rio has estimated the company's annual carbon tax bill would be about $154 million if the tax was set at $20 a tonne for every tonne of carbon pollution.

Rio's export operations would have faced an additional $3 billion cost over 10 years from a carbon emissions trade scheme proposed in 2009 and which offered almost $50 billion in compensation to industry and mining over the first decade.

Mr Combet said he expected Australia's new scheme would be internationally compatible once it moved on from the fixed price, in three to five years, and said there was considerable international momentum to cut global emissions.

Shares in Rio Tinto closed 1.6 per cent lower at $84.15, against a 1.36 per cent drop in the benchmark index. (Reauters)