The Turnbull government has left open the prospect of using
international carbon credits to help meet Australia’s emissions
reduction targets at lowest cost, a practice Tony Abbott ruled out when
he was prime minister.
While Abbott used to characterise the trade of international credits as “money that shouldn’t be going offshore into dodgy carbon farms in Equatorial Guinea and Kazakhstan” – a new discussion paper, released on Friday, notes that “high quality international units could contribute to lowering the costs of meeting [Australia’s] 2030 target”.
The discussion paper is being used by the federal government to open a conversation about its heavily criticised Direct Action climate policy. The government established a review of the policy last December.
And despite ruling out an emissions intensity trading scheme for the electricity sector late last year, the new discussion paper is completely open ended about what policies might be required to drive the transition to lower emissions technologies in Australia’s energy sector.
The paper notes that executing the necessary transition in the electricity sector will require “careful consideration of its enabling conditions such as the investment climate, security and reliability”.
“Implications for electricity prices, jobs, regions, cost of living
and international competitiveness need to be considered,” the paper
says.
Noting that the electricity sector is currently Australia’s largest source of emissions, the paper says “a less emissions‑intensive electricity sector can also support emissions reductions elsewhere by replacing other, more emissions intensive, fuel sources — for example, in industrial facilities and through electric vehicle uptake”.
When he launched the review of the Direct Action policy in December last year, the energy minister Josh Frydenberg left open the option of reinstating a form of carbon trading in the electricity sector.
But that idea was quickly quashed after a brief government revolt with various figures, including Abbott, declaring the Coalition could never adopt any policy resembling carbon pricing.
Subsequent to that Coalition boilover, the Liberal New South Wales government, major energy users, manufacturers and businesses including BHP Billiton have used the Finkel review – a review of the electricity market running in parallel with the Direct Action review – to reopen the debate about carbon pricing.
These groups have urged the Finkel review of the electricity market to urge the Turnbull government to put a price on carbon or adopt a market mechanism to drive emissions reduction.
A string of peak bodies have already called for the adoption of a market mechanism, including the National Farmers Federation, the Investor Group on Climate Change and the Business Council of Australia, which explicitly called for an emissions intensity scheme.
The current consensus around carbon pricing is a major turnaround in a very short period of time. Three years ago some of the same groups urged the parliament to get out of the way so that Tony Abbott could repeal the Gillard government’s “carbon tax”.
Given most major stakeholders have used the Finkel inquiry to push the government to consider a market mechanism to deliver investment certainty in the electricity industry, and drive emissions reductions at least cost to households and businesses, it is expected these arguments will be submitted by the same groups to the Direct Action review.
The discussion paper released Friday reopens the debate about using international permits by noting the rules for trading international emissions reductions after 2020 are yet to be established.
As the paper notes, international trading of emissions units allows countries to count emissions reductions delivered in another country towards their own targets, which helps to minimise the global cost of achieving abatement.
The paper says Australian carbon credit units are not currently allowed to be exported into international markets.
“Some businesses and business groups have raised the possibility of exporting Australian emissions reductions. This would mean allowing Australian businesses generating ACCUs to sell emissions reductions from their projects to overseas buyers.”
The paper notes that any import and export of carbon units must be done under the rules that facilitate trade of international units, which will be determined under the Paris climate agreement.
Business groups and some of the government’s climate advisers have argued for years that it would be significantly cheaper to meet Australia’s emissions reduction commitments by purchasing international permits.
The paper does not open a discussion about whether the current renewable energy target should continue beyond its current legislated life, noting only that it exists as one of the suite of climate policies.
While Abbott used to characterise the trade of international credits as “money that shouldn’t be going offshore into dodgy carbon farms in Equatorial Guinea and Kazakhstan” – a new discussion paper, released on Friday, notes that “high quality international units could contribute to lowering the costs of meeting [Australia’s] 2030 target”.
The discussion paper is being used by the federal government to open a conversation about its heavily criticised Direct Action climate policy. The government established a review of the policy last December.
And despite ruling out an emissions intensity trading scheme for the electricity sector late last year, the new discussion paper is completely open ended about what policies might be required to drive the transition to lower emissions technologies in Australia’s energy sector.
The paper notes that executing the necessary transition in the electricity sector will require “careful consideration of its enabling conditions such as the investment climate, security and reliability”.
Noting that the electricity sector is currently Australia’s largest source of emissions, the paper says “a less emissions‑intensive electricity sector can also support emissions reductions elsewhere by replacing other, more emissions intensive, fuel sources — for example, in industrial facilities and through electric vehicle uptake”.
When he launched the review of the Direct Action policy in December last year, the energy minister Josh Frydenberg left open the option of reinstating a form of carbon trading in the electricity sector.
But that idea was quickly quashed after a brief government revolt with various figures, including Abbott, declaring the Coalition could never adopt any policy resembling carbon pricing.
Subsequent to that Coalition boilover, the Liberal New South Wales government, major energy users, manufacturers and businesses including BHP Billiton have used the Finkel review – a review of the electricity market running in parallel with the Direct Action review – to reopen the debate about carbon pricing.
These groups have urged the Finkel review of the electricity market to urge the Turnbull government to put a price on carbon or adopt a market mechanism to drive emissions reduction.
A string of peak bodies have already called for the adoption of a market mechanism, including the National Farmers Federation, the Investor Group on Climate Change and the Business Council of Australia, which explicitly called for an emissions intensity scheme.
The current consensus around carbon pricing is a major turnaround in a very short period of time. Three years ago some of the same groups urged the parliament to get out of the way so that Tony Abbott could repeal the Gillard government’s “carbon tax”.
Given most major stakeholders have used the Finkel inquiry to push the government to consider a market mechanism to deliver investment certainty in the electricity industry, and drive emissions reductions at least cost to households and businesses, it is expected these arguments will be submitted by the same groups to the Direct Action review.
The discussion paper released Friday reopens the debate about using international permits by noting the rules for trading international emissions reductions after 2020 are yet to be established.
As the paper notes, international trading of emissions units allows countries to count emissions reductions delivered in another country towards their own targets, which helps to minimise the global cost of achieving abatement.
The paper says Australian carbon credit units are not currently allowed to be exported into international markets.
“Some businesses and business groups have raised the possibility of exporting Australian emissions reductions. This would mean allowing Australian businesses generating ACCUs to sell emissions reductions from their projects to overseas buyers.”
The paper notes that any import and export of carbon units must be done under the rules that facilitate trade of international units, which will be determined under the Paris climate agreement.
Business groups and some of the government’s climate advisers have argued for years that it would be significantly cheaper to meet Australia’s emissions reduction commitments by purchasing international permits.
The paper does not open a discussion about whether the current renewable energy target should continue beyond its current legislated life, noting only that it exists as one of the suite of climate policies.
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