THE DISTILLERY: Bare-faced cheek
In a 1988 Dirty Harry classic, the belligerent Detective Callahan tells a colleague “opinions are like assholes, everybody has one”. Heaven knows what Callahan would say of Australia’s ETS debate. No angle is unrepresented. No player unheard. And many completely contradict one another.
The Australian has two ... ahem ... opinions. The first and more comprehensive is presented by Matthew Stevens on behalf of big coal. According to Stevens, the industry is the “focus of contemptible discrimination ... even among the extractive industries, it is being left to carry an unjustifiably share of the financial impost of Australia's response to climate change.” He goes on “... both Combet (Wong's assistant in this game of carbon poker) and the CFMEU insist the CPRS will have little or no impact on the levels of production; indeed, that coal miners will continue to survive and thrive through all of this and that we are going to export more, not less, coal.” Stevens’ concludes “this is about finding a rich political tar baby that the government can successfully lump with the cost of carrying its CPRS can ... The risk, of course, is that the government has got that quite wrong, and not just in coal.” The argument here is potentially interesting, but as is usual, Stevens’ passage is clogged with sarcasm and dissembling.
Day-light also fails to reach The Australian’s second opinion. Michael Stutchbury reappears for the first time in a week – presumably he’s on holiday – to offer the brief observation that “Australia’s great climate change contradiction has given to just about every industry that screamed loud enough for a slice of the extra $7 billion of carbon protection included in Canberra's ETS deal ... Thank the muscular dollar. The trick buried amid all the political horse-trading is that it is financed by allowing Australian businesses to buy more emissions permits abroad rather than cut their emissions here ... The stronger exchange rate reduces the estimated global price of carbon permits in Australian currency terms – from $29 per tonne of emissions to $26 – when the scheme ramps up in 2012.” This is potentially a terrific probing. But frankly, what’s the point if it’s a total of 360 words? For instance, what happens to these calculations when the currency inevitably crashes? How are currencies factored into the scheme in general? What are the risk management possibilities? On its own, this simply looks like it's political point-scoring.
Contradicting the sense from The Australian’s opinions that the ETS is ineffective, Robert Gottliebsen of Business Spectator concludes that “ ... the proposed carbon trading legislation effectively wipes out the investors in Latrobe Valley power stations”. In his view, the scheme is so effective that the consequences will be more government intervention. “Among those that look like they have lost their equity is China Light and Power (CLP) of Hong Kong ... CLP had proposed to fund a gas-fired generator but that now will be taken off the table. It will not be easy to gain the global funding to lessen Australian carbon in power generation because in a world where capital is short, Australia will be blackballed by many of the majors – or at least that’s the way it looks at this stage ... So just as the Commonwealth must guarantee brown coal, so they may have to step in and fund new lower carbon power stations.”
Turning another cheek, Tim Colebatch at The Age concludes “ ... it could have been worse”. He goes on “ ... but isn't the aim of emissions trading to drive change, raising prices to give investors the incentive to replace dirty old plants with cleaner new ones? To replace coal-fired generation with gas and wind energy? And prod heavy emitters to find ways to slim down? Yes it is. But it's also the aim to protect jobs, to ensure that power supplies continue uninterrupted, and that heavy emitters do not leave Australia because we have emissions trading and developing countries do not”. Colebatch concludes “It's still a damaged scheme. Too much is exempt ... But at least they are transitional, allowing the possibility that one day this will work as emissions trading is meant to work.”
The Australian Financial Review also throws its trousers at the ETS with two opinions. The first is economics editor Alan Mitchell who disagrees with Gottliebsen and Colebatch that coal-powered generators are sooner or later buggered, arguing that “energy security” was never an issue and that “the main effect of the assistance to generators will be to compensate the owners ... for the loss of future profits". He also runs with the consumer price rises issue and suggests that the billions in compensation would have been better directed this way through “balancing the budget” and protecting “against job losses” by dumping a redundant renewable energy target.
Slapping Mitchell’s behind, the AFR editorial reckons rather “ ... the problem now is that it is hard to see where the costs of greenhouse emissions is going to bite sufficiently to bring about the massive investment in lower-emission energy generation ... The government is trying to skirt this by mandating renewable energy targets.”
Alan Jury writing as Chanticleer, supports Mitchell’s other angle that commentators bewailing corporate suffering are offering a bum-steer. In his view, “the impact of the carbon pollution reduction scheme on corporate Australia will be relatively minimal. A ‘screening analysis’ conducted by Citigroup ... found that carbon costs ‘are unlikely to be material for many ASX100 companies, and will often be passed onto customers'.” Jury sees the ASX, Macquarie Group and Orica as beneficiaries.
One thing is clear. More than one of these commentators is going to be caught trousers-down. Be assured that this column will keep a close vigil, though it is hardly paid enough for such a duty.
Moving on, the other topic du jour is reregulation of financial planners. This column is pleased to report on a consensus, at least today, that the Ripoll Report is rubbish. Michael West of The Sydney Morning Herald writes: “This report carries all the weight and ferocity of a wet lettuce.” He concludes “Ripoll fails to resolve the central conflict of interest in financial services, that is, that under the present structure planners are paid for flogging products, not for providing good advice.” And that “another Storm [Financial] is brewing right now.” The whole piece is terrific. In an AFR op-ed, similar arguments are put by Kevin Davis, professor of finance at the University of Melbourne. The main offering of this column is to challenge the assumption of both pieces, that punters will not pay for financial advice. The only actual market research this column has seen on the topic, published in The Australian, concluded the opposite.
In other comments today, Elizabeth Knight in the SMH reckons Foster's is not a takeover target, nor a good bet given the lack of any “real established growth trajectory”. Malcolm Maiden in The Age looks at the possible litigations facing CSL over its US plasma duopoly (damn, don’t they have an ACCC over there?). And Bryan Frith of The Australian looks into “The rapidly escalating takeover contest for control of iron ore hopeful Polaris Metals" which "appears set to provide a test of ASIC's policy on joint takeover bids".
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