Posted
The central plank of the Morrison Government's
climate policy involves pouring billions of extra dollars into an
emissions reduction program that's not spending its existing funding,
ABC analysis can reveal.
Key points:
- The program designed to sell contracts for emission reduction projects has received extra funding
- But the Emissions Reduction Fund has not spent its existing budget and emission abatement has flatlined
- Analysis of government data shows contracts terminations have meant nearly 20 per cent of expected emission reduction in some auctions did not happen
The Emissions Reduction Fund also appears to be failing in its mission to lower emissions, Government data shows.
In 2014, the Abbott government allocated $2.55 billion to the newly established Emissions Reduction Fund, mostly to pay polluters to emit less greenhouse gas.
The Morrison Government has extended the program with an additional $2 billion and rebranded it the Climate Solutions Fund.
Twice a year, the Clean Energy Regulator holds reverse auctions, where companies bid to win the emissions reduction work.
The cheapest good-quality bids win and are awarded Emissions Reduction Fund contracts.
Those contracts are for a range of projects, including planting trees, stopping tree-clearing and installing energy efficient appliances.
Data shows flatlining of emissions reduction
The ABC examined figures from 10 different datasets published by the Government's Clean Energy Regulator — a series of auction results published in separate PDFs, as well as two spreadsheets containing information about the status of Emissions Reduction Fund contracts and projects.
That analysis shows that since 2017, outcomes from the Emissions Reduction Fund appear to have all but flatlined.
The program has only increased its total of avoided emissions by a relatively meagre 4 million tonnes over four auction rounds, despite signing 123 contracts worth $372 million.
That growth has fallen by 97 per cent, compared to the number of avoided emissions claimed in the first two years of the program.
When total avoided emissions committed by the program are charted over time, after an initial sharp increase, they appear to record almost no rise overall.
Commenting on the ABC's analysis, climate and law expert Tim Baxter from the University of Melbourne said the fund did look like it had stalled.
"The cumulative abatement has stayed relatively static over the last couple of auctions," he said.
"It seems to be puttering out a little bit."
A significant contributor to the near-flatlining of the program is failing contracts — where companies that have pledged to avoid a certain amount of emissions find they are unable to do so.
So far, there have been eight reverse auction rounds in the ERF.
The ABC's analysis reveals in two of those rounds — November 2016 and April 2017 — contract terminations have meant between 17 and 19 per cent of the expected emissions reductions did not happen.
Those numbers are likely to rise, according to Dr Baxter, since it takes time for contracts to be cancelled. So far, none have been cancelled from the last three auctions.
Dr Baxter said it was not clear yet whether we would see the same level of contract failure in more recent auctions, or whether there was a large number of bad contracts signed in those early rounds.
"It could be that this is just the background extinction rate," Dr Baxter said. "That over a few years, we do lose 10 per cent or so."
Revoked contracts mean reductions are not delivered
In total, since the start of the Emissions Reduction Fund, 22 contracts have been cancelled.Those contracts were supposed to avoid more than 13.5 million tonnes of carbon dioxide from being emitted into the atmosphere.
Assuming those contracts were awarded the average price per tonne of avoided emissions, that has meant nearly $145 million was earmarked for emissions reduction that did not occur.
Cancelled contracts could be a result of a number of things such as council permissions not being granted or weather stopping seedlings from growing, but the reason any particular contract is revoked is not made public.
In each case, however, revoked contracts do not deliver the promised emissions reductions.
Associate Professor Paul Burke, an energy economist from the Australian National University, said he was not surprised contracts were failing because this type of policy required the Government to manage a large number of individual projects.
"This was the experience with the Howard-era Greenhouse Gas Abatement Program (GGAP) also. History repeats," he said.
"Ideally, Australia would not rely on a process that involves government sponsorship and monitoring of individual projects."
Contract failures built into the system, regulator says
A spokesperson for the Clean Energy Regulator, which oversees the auctions, told the ABC the failure of contracts was part of the design of the system — it's a form of flexibility that allows more companies to take part.
"The Emissions Reduction Fund is designed to encourage participation by allowing flexibility in some circumstances for contracts that are successful at auction," the regulator's spokesperson said.
"This means that not all projects will come to fruition so it is normal for some contracts to lapse or terminate.
"This flexibility has facilitated project registrations and ensured a high-level of participation under the scheme."
Contracts are only paid after the emissions reductions occur, so money which was earmarked but never actually spent returns to the fund.
Because of that, the amount of money sitting in the fund has stayed relatively stable for two years, currently at $226 million.
Low-cost projects have dried up
At the same time, it seems the Government is having a harder time finding low-cost emissions reductions, causing the average price to rise.The cheapest projects — like avoiding land clearing or burning methane waste gas from landfill — have mostly been exhausted, and more expensive methods of reducing emissions increasingly are being used.
Since 2016, the price of those emissions reductions has soared.
The third auction paid the lowest amount per tonne, offering an average of just $10.26 per tonne of avoided emissions.
Since then, the average price paid to successful bidders has jumped by more than 35 per cent to $13.87 per tonne.
Dr Baxter said the figures seemed to show the Government was struggling to award new contracts.
"It might be that their reserve price has been set too low," he said, adding it was impossible to know for sure since details like that were kept secret.
'You will get less bang for your buck'
Dr Baxter said so long as the reserve price in the auction was set high enough, the Government would definitely be able to allocate its $2 billion over the next decade on emissions reductions because if you pay companies enough, they will reduce emissions."But you will get less bang for your buck," he said.
Dr Burke said the ABC's analysis showed people should not get excited by the promised abatement announced when auctions were completed.
"There is a long way from the auction to actual implementation of a project," he said.
The results of the ABC's analysis were put to the Energy Minister Angus Taylor.
In a statement, he said: "The small number of contracts that will not deliver abatement — currently representing a little over 5 per cent of contracted abatement — will be reinvested in new projects."
"Criteria for project registration is also set at a level to encourage participation and innovation.
"Once registered, some projects are revoked having failed to obtain, [for example], finance or third-party consent. These projects will not, however, have been awarded contracts or issued credits."
Mr Taylor said the ERF had been a great success.
"The $2.5 billion Emissions Reduction Fund has been highly successful in supporting Australian businesses, communities and landholders to reduce greenhouse gases, while improving the local environment and benefitting from new revenue opportunities."
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