Nationals leader Matt Canavan accuses Labor of ‘secret GST clawback’ through green tax

Matt Canavan will headline the Nationals’ WA conference this weekend by revealing “Labor’s secret GST clawback,” claiming the State’s resources companies could be hit with up to $6 billion in green taxes.

The Nationals leader is expected to cite new analysis in his address which shows WA’s resources sector will take the billion-dollar brunt of Labor’s renewables transition through ballooning compliance costs of the so-called safeguard mechanism — a key tool which forces big emitters to limit pollution.

The analysis, by conservative think tank Institute of Public Affairs, comes after the Government’s climate department released a consultation paper to inform an upcoming review of the tool, which suggests a more stringent regime after 2030.

The government paper explores options to tighten, restrict and expand the safeguard mechanism rules to help Labor reach its 2035 emissions reduction target of between 62 and 70 per cent and the legislated net-zero by 2050.

In an exclusive interview with The Nightly ahead of his trip, Mr Canavan labelled it effectively “a West Australian tax” — insisting it unfairly penalised the State for taking risks to invest and expand its resources sector.

Mr Canavan said as the policy only targets facilities emitting more than 100,000 tonnes of carbon dioxide equivalent (CO2-e) a year, which means more than a third of the businesses captured by the framework are based in WA’s resources sector.

“If we are to align the safeguard mechanism with that announced national target (62 and 70 per cent by 2035), then the decline rate for businesses is going to increase from roughly 4.9 per cent a year to about 7-8 per cent a year,” he said.

“So, it’s a big, big jump for businesses. I’ve already had some contacting me concerned.”

The new modelling by Institute of Public Affairs has shown if Labor adopted the idea in the consultation paper of creating a target of 68.8 to 54.3 million tonnes CO2-e by 2035, it could cost WA companies up to $6.3 billion by 2034-35.

“Between 2030 and 2035, the costs to WA could be from $6.3 billion to $10.8 billion dollars, and again, that is far and away the highest cost of all States or Territories,” Mr Canavan said.

“WA accounts for about 11 per cent of the population of the country but it’s taking a third of the cost. It’s pretty much a West Australian tax,” he said.

“I’d characterise it as a GST clawback. On the one hand Anthony Albanese is promising a great deal for WA, saying they won’t touch it but this policy is actually taking from WA by putting this massive carbon tax on industry, on WA jobs.”

It comes after a new Productivity Commission report into 2018 GST distribution changes reignited east coast anger over Federal top-up payments which delivered WA an extra $6.6 billion from taxpayers.

After the paper was published, Climate Change Minister Chris Bowen explained the safeguard mechanism review was always slated for three years after the 2023 changes and claimed he believed it had “been pretty effective”.

“It’s reduced emissions by the equivalent of a third of Australia’s domestic aviation each and every year. I think the scheme’s working pretty well, but inevitably after three years it’s time to examine whether it could be working even better, to examine the settings,” he said.

Other ideas included in the consultation papers included lowering the current 100,000 tonnes of CO2-e baseline to a lower threshold — which would expand the number of businesses caught in the scheme.

If adopted, it would mean smaller producers would begin to be captured. It suggested the threshold could be lowered “once or in increments”.

To comply with the safeguard mechanism, businesses can cut their own emissions, buy Australian carbon offsets or credits from other companies, or use flexible options like saving and borrowing credits over time.

Chamber of Minerals and Energy WA chief executive Aaron Morey said the peak body supported the emissions reduction policy for heavy industry and said it was preparing a submission in response to the consultation paper before the September 18 deadline.

The CME said it would advocate for a “stable and reliable” safeguard settings that aligned with the availability of abatement technologies, noting “some of which are not yet deployable at commercially viable scale or cost”.

“CME strongly supports removing the disincentive for safeguard-covered facilities to connect to third-party renewable electricity, which would open a practical and cost-effective pathway to rapid emissions reduction,” he said.

Labor’s net-zero ambition comes amid a juggling act of huge energy demands of building data centres to become an AI hub and establishing a critical minerals industry, while trying to achieve decarbonisation without overwhelming the power grid.

In his recent National Press Club address, Mr Bowen said he would be personally responsible if the Albanese Government failed to meet its climate auction KPIs in the next four years.

“We are making very good progress on many elements of our transition and others, where we’re facing headwinds, which we’ve always been frank about,” he said.

“We’ve faced the international circumstances of now two global energy shocks.

“I’m not famous for walking away from my responsibilities. I run into them, embrace them and do my best to deliver on them. That’s my job.”