Dec 21, 2008 - 12:00am

The independent Climate Institute said today it was considering withdrawing its support for the Government’s flawed emissions trading scheme after preliminary analysis shows ballooning levels of compensation to polluters jeopardises the ability even to reach modest emission reductions of 15 per cent.

“The Government has said it is willing to go to 15 per cent reductions, as part of a global deal, but has designed a scheme that sabotages its chances because of the high levels of support to polluters,” said John Connor, CEO of the Climate Institute.

“Even on the minimal 5 per cent 2020 emissions reduction target, polluter handouts mean companies receiving free permits will be able to increase their pollution by 20 per cent, relative to 2000 levels, forcing the rest of the economy to reduce their emissions by 18 per cent.” 

The White Paper is also explicit that if these polluters grow faster than expected the Government would have to bear the risk.¹

A scheme that requires Government to dig ever deeper into the public purse - or for other parts of the economy to work harder - to compensate polluters as their emissions increase would be politically and economically unsustainable - this a potentially fatal flaw and may sink hopes of achieving the 15 per cent target reduction, undermining progress toward  a global deal.”

Further analysis by the Climate Institute of the White Paper package, using Treasury’s CPRS-5 scenario, emissions from industries receiving free permits are projected to rise to 20% above 2000 levels by 2020, but the rest of the economy would have to cut emissions to 18% below 2000 levels. 

If this same approach were maintained under Treasury’s CPRS -15% scenario (or where the Government moved to a 15% reduction target), these industries would increase emissions by 13 per cent while the rest of the economy would need to cut emissions by 29%.

“There are fundamental questions about whether this scheme can deliver even the halfway house to our national interest that a 15 per cent target implies and make the 25 per cent reductions needed impossible, as part of a global effort, to reach the national interest goal of reducing global greenhouse gas levels to 450ppm or lower,” Mr Connor said.

The findings follow earlier Institute analysis that the Government has increased the potential handouts in 2020 to polluters by close to 50% – from the level outlined in the July Green Paper – while more than halving the energy efficiency or “carbon productivity” requirements to a mere 1.3 per cent improvement per year for recipients of the free permits.

The Institute’s Mr Connor described that finding as “corporate welfare without the corporate cleanup.”

“The more we look, the worse this package appears and we will have to seriously look at recommending the whole package goes back to the drawing board.

“The extraordinary level of support for polluters is like a cancer in the heart of our climate and low carbon economy ambitions. It’s time for a fundamental rethink.”

¹ Carbon Pollution Reduction Scheme White Paper Box 12.15; page 12