Improved CPRS for safer climate, jobs, investments Media Release

Mar 27, 2009 - 9:08am

At its appearance today before the Senate Standing Committee on Economics, the independent Climate Institute urged the Government and Senate to improve the CPRS Bill and surrounding policy to help achieve a “double dividend” of an effective global climate agreement and an Australian economy prospering in a carbon-constrained world.

“The costs of climate change are upon us now, as are the job and economic opportunities of climate action,” said John Connor, CEO Climate Institute.

“Delaying appropriate action would be a big mistake, rusting the Australian economy onto its inefficient and polluting base and exposing the economy and vulnerable communities to the impacts of high energy prices when economies rebound.”

The Climate Institute’s submission highlighted the importance of an effective emissions trading scheme as an important part of a broader package of policies including energy efficiency, clean energy incentives, low carbon infrastructure investments and financial regulatory reform.

While the legislation was described as providing a framework that has improved on many of the mistakes of other trading schemes, the Institute pointed to key amendments necessary before it could support the scheme. These focus on three main areas:

  • Amending the objects of the Act and the process for setting scheme caps and gateways to require consideration of the Government’s own statement of the national interest in stabilising global greenhouse gas levels to 450 ppm or lower and enabling Australia to do its fair share of at least 25% reductions of 1990 levels by 2020, in the context of global efforts to that national interest goal;
  • Ensuring public assistance to emission intensive trade exposed industries (EITEIs) and generators is more firmly linked to investment in the transition to low carbon technologies and that there is greater transparency both of those firms receiving support and of real and proxy carbon prices in competitor countries;
  • Increasing the amount of permit revenue directed to low carbon technology research and to financing mitigation and/or adaptation in developing countries.

“Without these or similar amendments and commitments we risk poisoning the ambition in global climate talks and rusting the Australian economy onto its highly polluting and inefficient base,” Mr Connor said.

“The excessive and poorly targeted support for big polluters, insufficient low carbon investment incentives and ignored portfolio climate risks, will create a ‘sub-clime’ economic bubble as sure to burst as the US sub-prime bubble.

“We need amendments and further action to help ensure a safer climate and jobs and investment in an Australian economy prospering in a low carbon world.”

Summary of key recommendations

The Climate Institute submission includes a number of recommendations for the CPRS in response to the exposure draft legislation.

  1. The legislation should be structured in a way that allows the flexibility for Australia to accept a 2020 target consistent with the national interest in Copenhagen in December 2009. In the context of a global effort to that target, Australia’s fair share is at least 25 per cent reductions of 1990 emissions by 2020
  2. The legislation should require the Minister to consider Australia’s national interest of stabilising greenhouse gas levels at 450 ppm or lower when setting targets, caps and gateway.
  3. The legislation should include a commitment to review, recalibrate and ultimately remove the assistance for EITEIs as soon as a new international agreement enters into force and/or Australia’s trading partners introduce domestic policy measures resulting in a direct or indirect carbon price.
  4. A trigger should be placed in CPRS legislation to review EITEIs assistance as soon as any new international agreement is negotiated, with changes flowing from the review immediately where this involves no material net disadvantage (contingent on the agreement entering into force).
  5. The default carbon productivity improvements for EITEIs assistance should be increased to at least 4% per annum. It could also place a cap on the growth of free permits.
  6. The Productivity Commission, or similar organisation, should be empowered to annually report to the Parliament on real, proxy and shadow carbon prices in competitor countries.
  7. Assistance should be tied to a requirement for recipients to prepare and publically report annual and externally audited statements on abatement opportunities. For example, by strengthening the Energy Efficiency Opportunities program including through: extending to greenhouse gas emission abatement opportunities for those receiving EITEI assistance, stronger public reporting requirements on energy efficiency opportunities with longer paybacks; and greater external auditing. Mandatory uptake of energy efficiency opportunities should be foreshadowed as a future option, pending a full evaluation of the EEO program.

The legislation should include a commitment to move to full auctioning of carbon pollution permits, with revenue to be channelled towards the following priorities: vulnerable low income communities; research, development and deployment of clean technologies; and support for adaptation and mitigation in developing countries.

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