Extract from The Guardian
The Coalition’s climate policy may have passed but the argument it has deferred will eventually have to be revisited
- Lenore Taylor, political editor
- theguardian.com,
Australia has been fighting about climate policy for almost 10
years. Most people wish the argument would go away. Investors just wish
they knew the outcome.
After repealing the carbon “tax” and winning parliamentary backing for its “Direct Action” scheme this week, the Coalition says we have an answer to last 20 years. But that’s not true. The Abbott government has deferred the most controversial element of its own policy – the bit likely to determine whether it can succeed, and the bit that the government would prefer not to talk about.
The government likes to discuss its $2.55bn emissions reduction fund, insisting this is sufficient to meet our immediate international pledge to cut greenhouse emissions by 5% by 2020.
(Actually, in a sensible debate the question should be can Direct Action cut our emissions and set us up for the far, far deeper cuts we will have to make after 2020, but the Australian climate debate long ago parted company with sense.)
Environment minister Greg Hunt says he is sure the fund can meet the 5% target, for three reasons:
1. His feelings. Pressed about how he could be sure the target would be reached he spoke about his “confidence” and his “commitment”. He strongly suggested the government had not done any modelling to counter the conclusions of previous modelling exercises which found Direct Action - with its spending capped at $2.5bn over five years – would fall far short.
2. The fact that he will soon reveal the job has become far easier, before his policy has even started. In 2012 the promise to reduce emissions by 5% of 2000 levels by 2020 was calculated to require the cumulative reduction of 755m tonnes of carbon dioxide from the atmosphere. Last year new government calculations reduced that figure to 431m tonnes. Now calculations by Frontier Economics say the figure could be as low as 225m tonnes, if the renewable energy target (RET) stays in place to drive investment into clean generation, or somewhere around 300m tonnes if the government succeeds in paring back the RET. Official figures are soon likely to confirm this drop.
3. The fact that he has information suggesting that when he calls for tenders, lots of companies and projects will bid to reduce their emissions far more cheaply than he originally calculated. His original calculation was that he could buy emission reductions for about $15 a tonne.
Maths would suggest that if Hunt needs to find 300m tones of abatement and it costs him $15 per tonne, he’s going to need a few more billion dollars than he has. Even at $10 a tonne he could fall short – if the emissions reduction fund is the only thing driving down Australia’s output of greenhouse gases.
But Hunt’s press release hailing his success in getting Direct Action through the Senate says the emissions reduction fund will “help” Australia meet its target. It doesn’t say what else might be “helping”, since the government wants to dramatically reduce the RET and abolish the Clean Energy Finance Corporation.
But hidden in the mountain of detail rushed through parliament on Thursday night are some largely unnoticed provisions that suggest the emissions reduction fund might not have to do the job on its own, depending on yet another climate policy argument that the Coalition has effectively deferred.
The legislation requires Hunt to develop “safeguards” to make sure businesses not seeking money from the fund don’t increase their emissions and undo all the reductions the government is buying.
He will set baselines that emitters are not allowed to exceed. But the government’s 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”.
And an amendment passed on Thursday at the behest of Senator Xenophon said that in this situation, the companies could also buy permits from overseas – despite all the government’s rhetoric about how offshore permits are akin to sinking money into dodgy deals in Kazakhstan.
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.
Hunt fobs off questions about how this is obviously a potential basis for a type of emissions trading scheme by saying the government will get “zero revenue” from its policy. But the scenarios are all about businesses buying permits from other businesses, so the government would never expect to get money, and it would still be a carbon market.
It could also amount to nothing at all if Hunt sets the “baselines’ to allow Australian industry to continue with business as usual. And this is an internal fight he is yet to have. Guardian Australia understands that when cabinet originally considered the detail of Direct Action there were some around the table not keen on having “safeguards” at all. In the end the issue was put off, the fine print to be decided later.
On Wednesday, the Reputex analytical firm 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 if the “safeguards” were allowed to operate like a baseline and credit scheme, the target could be achieved.
Danny Price, who runs Frontier Economics and is co-chair of an expert panel advising Hunt on Direct Action, says Reputex is overly pessimistic about what the emissions reduction fund can do. But he agrees that if the government sets lax baselines for big carbon emitters, the fund might struggle.
“There is no certainty around where the baselines will be set,” he says. “But it makes no sense to leave them at a level where existing emitters don’t have to do anything at all. And we could be far more certain we would reach the target if existing emitters were forced to invest in emission reductions.”
In their submissions to government, the big emitters, not surprisingly, see things differently.
But the decisions about the baselines are going to be made at the same time as the government is learning exactly what abatement can be bought with Direct Action, and at the same time as it will be coming under strong pressure to do more about Australia’s emissions internationally.
And that means even after the carbon tax repeal, and the establishment of Greg Hunt’s new fund, and all the bitterness and shouting, the climate policy fight is still not done.
After repealing the carbon “tax” and winning parliamentary backing for its “Direct Action” scheme this week, the Coalition says we have an answer to last 20 years. But that’s not true. The Abbott government has deferred the most controversial element of its own policy – the bit likely to determine whether it can succeed, and the bit that the government would prefer not to talk about.
The government likes to discuss its $2.55bn emissions reduction fund, insisting this is sufficient to meet our immediate international pledge to cut greenhouse emissions by 5% by 2020.
(Actually, in a sensible debate the question should be can Direct Action cut our emissions and set us up for the far, far deeper cuts we will have to make after 2020, but the Australian climate debate long ago parted company with sense.)
Environment minister Greg Hunt says he is sure the fund can meet the 5% target, for three reasons:
1. His feelings. Pressed about how he could be sure the target would be reached he spoke about his “confidence” and his “commitment”. He strongly suggested the government had not done any modelling to counter the conclusions of previous modelling exercises which found Direct Action - with its spending capped at $2.5bn over five years – would fall far short.
2. The fact that he will soon reveal the job has become far easier, before his policy has even started. In 2012 the promise to reduce emissions by 5% of 2000 levels by 2020 was calculated to require the cumulative reduction of 755m tonnes of carbon dioxide from the atmosphere. Last year new government calculations reduced that figure to 431m tonnes. Now calculations by Frontier Economics say the figure could be as low as 225m tonnes, if the renewable energy target (RET) stays in place to drive investment into clean generation, or somewhere around 300m tonnes if the government succeeds in paring back the RET. Official figures are soon likely to confirm this drop.
3. The fact that he has information suggesting that when he calls for tenders, lots of companies and projects will bid to reduce their emissions far more cheaply than he originally calculated. His original calculation was that he could buy emission reductions for about $15 a tonne.
Maths would suggest that if Hunt needs to find 300m tones of abatement and it costs him $15 per tonne, he’s going to need a few more billion dollars than he has. Even at $10 a tonne he could fall short – if the emissions reduction fund is the only thing driving down Australia’s output of greenhouse gases.
But Hunt’s press release hailing his success in getting Direct Action through the Senate says the emissions reduction fund will “help” Australia meet its target. It doesn’t say what else might be “helping”, since the government wants to dramatically reduce the RET and abolish the Clean Energy Finance Corporation.
But hidden in the mountain of detail rushed through parliament on Thursday night are some largely unnoticed provisions that suggest the emissions reduction fund might not have to do the job on its own, depending on yet another climate policy argument that the Coalition has effectively deferred.
The legislation requires Hunt to develop “safeguards” to make sure businesses not seeking money from the fund don’t increase their emissions and undo all the reductions the government is buying.
He will set baselines that emitters are not allowed to exceed. But the government’s 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”.
And an amendment passed on Thursday at the behest of Senator Xenophon said that in this situation, the companies could also buy permits from overseas – despite all the government’s rhetoric about how offshore permits are akin to sinking money into dodgy deals in Kazakhstan.
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.
Hunt fobs off questions about how this is obviously a potential basis for a type of emissions trading scheme by saying the government will get “zero revenue” from its policy. But the scenarios are all about businesses buying permits from other businesses, so the government would never expect to get money, and it would still be a carbon market.
It could also amount to nothing at all if Hunt sets the “baselines’ to allow Australian industry to continue with business as usual. And this is an internal fight he is yet to have. Guardian Australia understands that when cabinet originally considered the detail of Direct Action there were some around the table not keen on having “safeguards” at all. In the end the issue was put off, the fine print to be decided later.
On Wednesday, the Reputex analytical firm 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 if the “safeguards” were allowed to operate like a baseline and credit scheme, the target could be achieved.
Danny Price, who runs Frontier Economics and is co-chair of an expert panel advising Hunt on Direct Action, says Reputex is overly pessimistic about what the emissions reduction fund can do. But he agrees that if the government sets lax baselines for big carbon emitters, the fund might struggle.
“There is no certainty around where the baselines will be set,” he says. “But it makes no sense to leave them at a level where existing emitters don’t have to do anything at all. And we could be far more certain we would reach the target if existing emitters were forced to invest in emission reductions.”
In their submissions to government, the big emitters, not surprisingly, see things differently.
But the decisions about the baselines are going to be made at the same time as the government is learning exactly what abatement can be bought with Direct Action, and at the same time as it will be coming under strong pressure to do more about Australia’s emissions internationally.
And that means even after the carbon tax repeal, and the establishment of Greg Hunt’s new fund, and all the bitterness and shouting, the climate policy fight is still not done.
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