Extract from The Guardian
Australia’s global promise to cut emissions seems certain to test Greg Hunt’s determination to resist carbon pricing
- Lenore Taylor, political editor
- theguardian.com,
Greg Hunt vows emissions trading is dead and won’t be revived for 20
years or more. But he has quietly given himself the power to bring back
a form of carbon trading, and he has advice that if he doesn’t use it,
Australia cannot meet the climate promises it has made to the world.
The seeds of an emissions trading scheme are buried in the deal Hunt did with crossbench senators. And the power for them to bloom into a new form of carbon trading also rests with him.
The catch is, if he doesn’t allow this to happen, Australia is very unlikely to meet its 2020 emissions reduction targets, and has almost no chance of meeting the deeper targets it will have to commit to after that.
In a few years the minister is very likely to face a choice – break the Coalition’s promise never to introduce any form of carbon price, or break Australia’s promise to the world about how much we would reduce greenhouse emissions.
Despite the minister’s denials, his own scheme and amendments he developed with independent senator Nick Xenophon clearly leave the way open for him to develop a baseline and credit-style emissions trading scheme in two ways.
The first is through the “safeguards” he will develop to make sure businesses not seeking money from his “direct action” fund don’t increase their emissions and undo all the reductions the government is buying.
The idea is to set baselines that emitters are not allowed to exceed. But Hunt’s own white paper says that “in the unlikely event of baselines being exceeded” he could allow the offending companies to make up for it by “purchasing credits created by other accredited emissions reduction projects”.
The white paper also says that companies that promise a certain quantity of reductions in return for money from the $2.5bn emissions reduction fund, but then don’t manage to live up to their promises, could buy credits from companies that reduce emissions by more than they had envisaged.
Whenever he is asked whether this means Direct Action could morph into a baseline and credit scheme, Hunt always fobs off the question with the same answer – that the government will get “zero revenue” from its policy.
But neither of the trading scenarios envisaged in the white paper – a business that exceeds its baseline buying a credit from another business, or a business that fails to achieve all the emission reductions it has promised buying a credit from another business – would result in the government receiving money. And it would still be a carbon market. The “zero revenue” line is true, but it avoids the real question.
Obviously, Hunt could squash this market before it ever started by setting the baselines so high that no company would ever exceed them and find itself in need of buying a credit.
But there a few reasons this may prove difficult.
First, there are established ways of setting the baselines and scrutinising them, and under the Xenophon amendments the rules governing them can be disallowed by parliament.
Second, analysts agree that without some real limit on total emissions, Australia stands little chance of meeting its target of reducing emissions by 5% by 2020, let alone the deeper post-2020 target we will have to announce next year.
This is especially true after Tony Abbott rejected Xenophon’s suggestion that some of the emissions reduction fund be set aside to buy cheaper international carbon permits if the target was starting to look difficult to achieve. It is understood Hunt was in favour of this idea, as are large sections of the business community and the environment movement, but it was vetoed by the prime minister (who once described buying international permits as being like sending “money … offshore into dodgy carbon farms in Equatorial Guinea and Kazakhstan”..). It was also rejected by the Palmer United Party.
Xenophon says the rejection of international permits is a “bizarre, ideological decision”. He also says the Direct Action scheme could easily become a “springboard’ to a baseline and credit scheme, “depending on the emission baselines”.
And he says that if Hunt made the baselines too easy to comply with, “there’s no way Australia can meet its target”.
On Wednesday, the Reputex analytical firm said it calculated that “on its own” the emissions reduction fund would achieve about one third of the emissions reduction needed to meet Australia’s target.
But the firm, which has been close to the negotiating process – its press release about the deal came before Hunt and Palmer had announced it – added that “while the ERF alone will fall short of Australia’s 5% emissions target”, the “ongoing design of the safeguards mechanism will buy the government time to address any emissions shortfall”.
“The safeguard mechanism is likely to operate akin to a baseline and credit scheme,” the company said.
Hunt says he’s “confident” Australia will meet its target because the decline of manufacturing means emissions are falling without the government doing anything, and because he thinks he’ll be able to buy emission reductions cheaper than he first thought.
But most observers – and all available modelling exercises (the government hasn’t done any) – are confident he’s wrong. If he is, the government is going to face some difficult choices. And one of them will involve emissions trading.
The seeds of an emissions trading scheme are buried in the deal Hunt did with crossbench senators. And the power for them to bloom into a new form of carbon trading also rests with him.
The catch is, if he doesn’t allow this to happen, Australia is very unlikely to meet its 2020 emissions reduction targets, and has almost no chance of meeting the deeper targets it will have to commit to after that.
In a few years the minister is very likely to face a choice – break the Coalition’s promise never to introduce any form of carbon price, or break Australia’s promise to the world about how much we would reduce greenhouse emissions.
Despite the minister’s denials, his own scheme and amendments he developed with independent senator Nick Xenophon clearly leave the way open for him to develop a baseline and credit-style emissions trading scheme in two ways.
The first is through the “safeguards” he will develop to make sure businesses not seeking money from his “direct action” fund don’t increase their emissions and undo all the reductions the government is buying.
The idea is to set baselines that emitters are not allowed to exceed. But Hunt’s own white paper says that “in the unlikely event of baselines being exceeded” he could allow the offending companies to make up for it by “purchasing credits created by other accredited emissions reduction projects”.
The white paper also says that companies that promise a certain quantity of reductions in return for money from the $2.5bn emissions reduction fund, but then don’t manage to live up to their promises, could buy credits from companies that reduce emissions by more than they had envisaged.
Whenever he is asked whether this means Direct Action could morph into a baseline and credit scheme, Hunt always fobs off the question with the same answer – that the government will get “zero revenue” from its policy.
But neither of the trading scenarios envisaged in the white paper – a business that exceeds its baseline buying a credit from another business, or a business that fails to achieve all the emission reductions it has promised buying a credit from another business – would result in the government receiving money. And it would still be a carbon market. The “zero revenue” line is true, but it avoids the real question.
Obviously, Hunt could squash this market before it ever started by setting the baselines so high that no company would ever exceed them and find itself in need of buying a credit.
But there a few reasons this may prove difficult.
First, there are established ways of setting the baselines and scrutinising them, and under the Xenophon amendments the rules governing them can be disallowed by parliament.
Second, analysts agree that without some real limit on total emissions, Australia stands little chance of meeting its target of reducing emissions by 5% by 2020, let alone the deeper post-2020 target we will have to announce next year.
This is especially true after Tony Abbott rejected Xenophon’s suggestion that some of the emissions reduction fund be set aside to buy cheaper international carbon permits if the target was starting to look difficult to achieve. It is understood Hunt was in favour of this idea, as are large sections of the business community and the environment movement, but it was vetoed by the prime minister (who once described buying international permits as being like sending “money … offshore into dodgy carbon farms in Equatorial Guinea and Kazakhstan”..). It was also rejected by the Palmer United Party.
Xenophon says the rejection of international permits is a “bizarre, ideological decision”. He also says the Direct Action scheme could easily become a “springboard’ to a baseline and credit scheme, “depending on the emission baselines”.
And he says that if Hunt made the baselines too easy to comply with, “there’s no way Australia can meet its target”.
On Wednesday, the Reputex analytical firm said it calculated that “on its own” the emissions reduction fund would achieve about one third of the emissions reduction needed to meet Australia’s target.
But the firm, which has been close to the negotiating process – its press release about the deal came before Hunt and Palmer had announced it – added that “while the ERF alone will fall short of Australia’s 5% emissions target”, the “ongoing design of the safeguards mechanism will buy the government time to address any emissions shortfall”.
“The safeguard mechanism is likely to operate akin to a baseline and credit scheme,” the company said.
Hunt says he’s “confident” Australia will meet its target because the decline of manufacturing means emissions are falling without the government doing anything, and because he thinks he’ll be able to buy emission reductions cheaper than he first thought.
But most observers – and all available modelling exercises (the government hasn’t done any) – are confident he’s wrong. If he is, the government is going to face some difficult choices. And one of them will involve emissions trading.
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