Extract from The Guardian
Industrial sites have spent millions on carbon credits under Direct Action’s ‘safeguard mechanism’
Sixteen Australian industrial sites have breached government-imposed
greenhouse gas emissions limits and had to buy millions of dollars in
carbon credits to offset the infringement.
The breaches came despite big emitters being granted generous carbon limits, in many cases above their highest previous pollution levels.
They were revealed in the first batch of emissions data released under the Coalition’s “safeguard mechanism”, part of the Direct Action climate policy introduced by carbon pricing opponent Tony Abbott.
Labor and industry body the Carbon Market Institute both said the use of Australian carbon credit units – mostly created through land-use based greenhouse gas reduction projects – was evidence the country had a carbon market despite the government claiming otherwise.
The opposition climate spokesman, Mark Butler, said businesses were now trading credits at prices the Coalition had claimed would wreck the economy under Labor. He said it showed the hypocrisy and ineffectiveness of the government’s approach to climate change.
“The Turnbull government should stop trying to mislead the Australian
people and their own backbench,” he said. “[It should] admit that
carbon pricing and trading is not only needed to take effective action
on climate change, but their ineffective climate change policy also
includes carbon trading.”
The Labor-Greens carbon price for all big emitters was $24.15 a tonne when the scheme was repealed and replaced by Direct Action under then prime minister Abbott in 2014. The price had been expected to fall to less than $10 a tonne the following year when international carbon trading began.
Comparatively few credits – about 448,000 – were bought last year under the safeguard mechanism, mostly for $14-$15 a tonne, suggesting a total cost to business of more than $6m.
The majority of the 154 emitters covered by the safeguard mechanism emitted less than their limit, known as a baseline, allowed last financial year. The biggest purchases of credits were by miners Anglo Coal (133,104 tonnes worth at the Capcoal mine in Queensland), Glencore (81,851 tonnes at the Tahmoor coalmine in NSW) and Rio Tinto (68,305 at the Alcan Gove bauxite mine in Arnhem Land).
The environment and energy minister, Josh Frydenberg, did not directly address whether Australia had a carbon market. He said the safeguard mechanism was developed through consultation with a broad cross-section of industry, and provided flexible options for businesses to comply.
He said Labor had introduced a carbon tax that hit households and businesses, and was now promising a deep cut in emissions by 2030 without backing it up with a plan or costings. “In contrast, the government’s approach is to address climate change with policies that ensure we have an affordable and reliable energy system and competitive industries,” Frydenberg said.
Butler said the ALP supported the further development of carbon markets.
The safeguard mechanism was promised to ensure cuts paid for using the main part of Direct Action – the $2.55bn emission reduction fund – were not undone by emissions increasing in other parts of the economy.
Government agency the Clean Energy Regulator sets an emissions limit for each large industrial site based on its highest level of emissions over the previous five years. But companies can apply to have the limit recalculated.
Consultants RepuTex last month found 57 industrial sites had been allowed increased baselines beyond previous emissions levels, prompting claims the safeguard mechanism was pointless. The new data shows eight of these operations breached their increased baseline.
The government is now considering making the safeguard mechanism less tied to historic emissions. A climate policy review released in December suggested emission limits could be loosened so they “increase with production, supporting business growth”.
The Greens climate spokesman, Adam Bandt, said most companies were compliant under the safeguard mechanism only because the system was broken – baselines were either too high to begin with or businesses had been granted higher baselines to avoid breaches.
“When you’ve got a pollution reduction policy that doesn’t reduce pollution, it’s time to start over,” he said.
Environment department data shows national emissions have risen each year since 2014. Under their current trajectory, the department projects emissions would be about 2% higher in 2030 than in 2005. The government’s target is a 26% to 28% cut over that time frame; Labor has proposed a 45% cut.
The Carbon Market Institute chief executive, Peter Castellas, said the safeguard mechanism data showed Australia clearly had a functioning carbon market that had been able to meet the demand of businesses that required credits.
It is understood most credits purchased were from surplus emissions cuts by companies that had won contracts under the emissions reduction. The carbon price spiked to as high as $18 a tonne – well beyond the average $11.90 under the emissions reduction fund – due to limited supply.
Castellas said industry had not been expected to breach the safeguard mechanism. Its operation augured well for a time when the demand for carbon credits increased.
“Safeguard mechanism baselines will inevitably have to decline if we are to meet below business as usual emissions required under Australia’s Paris agreement commitments,” he said.
The breaches came despite big emitters being granted generous carbon limits, in many cases above their highest previous pollution levels.
They were revealed in the first batch of emissions data released under the Coalition’s “safeguard mechanism”, part of the Direct Action climate policy introduced by carbon pricing opponent Tony Abbott.
Labor and industry body the Carbon Market Institute both said the use of Australian carbon credit units – mostly created through land-use based greenhouse gas reduction projects – was evidence the country had a carbon market despite the government claiming otherwise.
The opposition climate spokesman, Mark Butler, said businesses were now trading credits at prices the Coalition had claimed would wreck the economy under Labor. He said it showed the hypocrisy and ineffectiveness of the government’s approach to climate change.
The Labor-Greens carbon price for all big emitters was $24.15 a tonne when the scheme was repealed and replaced by Direct Action under then prime minister Abbott in 2014. The price had been expected to fall to less than $10 a tonne the following year when international carbon trading began.
Comparatively few credits – about 448,000 – were bought last year under the safeguard mechanism, mostly for $14-$15 a tonne, suggesting a total cost to business of more than $6m.
The majority of the 154 emitters covered by the safeguard mechanism emitted less than their limit, known as a baseline, allowed last financial year. The biggest purchases of credits were by miners Anglo Coal (133,104 tonnes worth at the Capcoal mine in Queensland), Glencore (81,851 tonnes at the Tahmoor coalmine in NSW) and Rio Tinto (68,305 at the Alcan Gove bauxite mine in Arnhem Land).
The environment and energy minister, Josh Frydenberg, did not directly address whether Australia had a carbon market. He said the safeguard mechanism was developed through consultation with a broad cross-section of industry, and provided flexible options for businesses to comply.
He said Labor had introduced a carbon tax that hit households and businesses, and was now promising a deep cut in emissions by 2030 without backing it up with a plan or costings. “In contrast, the government’s approach is to address climate change with policies that ensure we have an affordable and reliable energy system and competitive industries,” Frydenberg said.
Butler said the ALP supported the further development of carbon markets.
The safeguard mechanism was promised to ensure cuts paid for using the main part of Direct Action – the $2.55bn emission reduction fund – were not undone by emissions increasing in other parts of the economy.
Government agency the Clean Energy Regulator sets an emissions limit for each large industrial site based on its highest level of emissions over the previous five years. But companies can apply to have the limit recalculated.
Consultants RepuTex last month found 57 industrial sites had been allowed increased baselines beyond previous emissions levels, prompting claims the safeguard mechanism was pointless. The new data shows eight of these operations breached their increased baseline.
The government is now considering making the safeguard mechanism less tied to historic emissions. A climate policy review released in December suggested emission limits could be loosened so they “increase with production, supporting business growth”.
The Greens climate spokesman, Adam Bandt, said most companies were compliant under the safeguard mechanism only because the system was broken – baselines were either too high to begin with or businesses had been granted higher baselines to avoid breaches.
“When you’ve got a pollution reduction policy that doesn’t reduce pollution, it’s time to start over,” he said.
Environment department data shows national emissions have risen each year since 2014. Under their current trajectory, the department projects emissions would be about 2% higher in 2030 than in 2005. The government’s target is a 26% to 28% cut over that time frame; Labor has proposed a 45% cut.
The Carbon Market Institute chief executive, Peter Castellas, said the safeguard mechanism data showed Australia clearly had a functioning carbon market that had been able to meet the demand of businesses that required credits.
It is understood most credits purchased were from surplus emissions cuts by companies that had won contracts under the emissions reduction. The carbon price spiked to as high as $18 a tonne – well beyond the average $11.90 under the emissions reduction fund – due to limited supply.
Castellas said industry had not been expected to breach the safeguard mechanism. Its operation augured well for a time when the demand for carbon credits increased.
“Safeguard mechanism baselines will inevitably have to decline if we are to meet below business as usual emissions required under Australia’s Paris agreement commitments,” he said.
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