In 2010, the Coalition’s “great big new tax” scare campaign against carbon pricing helped change Labor leaders’ minds and in the election later that year, both parties had mostly regrettable policies. The Climate Institute’s “Pollute-o-meter,” which measures the abatement potential of party policies, had the Coalition better than the ALP in 2010, but both increasing emissions through to 2020.
The hung Parliament in the last election tossed up a minority Labor Government and a remarkable triangulation of interests. Labor, the Greens and two conservative rural Independents agreed on legislation for a carbon price which began in July 2012 and is to transition to an emissions trading scheme three years later.
Enacting carbon pricing was not smooth. An extravagant scare campaign, and a merciless campaign centred on the government’s mandate, dominated through 2011 and 2012. Now, if elected on September 7, the Coalition threatens to make Australia the first country to demolish a carbon market.
This shifting political landscape has chilled domestic investments in low carbon solutions but sinking energy demand and renewable energy targets supported by the price have had an impact on emissions from covered sectors. Where to from here?
If elected on September 7, the Coalition threatens to make Australia the first country to demolish a carbon market.
Both Labor and the Coalition support the international goal of avoiding a 2oC increase in mean global temperature and the domestic target of reducing emissions by up to 25% below 2000 levels by 2020.
Their paths to achieving those goals are vastly different. The Coalition proposes a voluntary emission reduction fund where the government pays firms for delivering emission reductions. Labor would continue the existing carbon pricing framework, but move to emissions trading a year earlier than planned.
There are major structural differences between the two, including:
- The amount of emissions reductions achieved through the Coalition’s policy is effectively capped by the limit on expenditure from the Federal budget. The policy does not place a legal limit on major emitters, whereas the Labor current policy places a cap over around 60% of national emissions.
- The Coalition’s policy will produce a shadow penalty price on carbon but this price signal applies only to the proportion of emissions above a yet-to-be-determined business-as-usual baseline.
- The current policy will achieve Australia’s targets through a mix of domestic investment and international offsets. The Coalition has stated that it will achieve emission reductions up to the 5% unconditional target through domestic emission reductions alone.
The Climate Institute has recently conducted detailed analysis to assess whether the policies of the two parties can achieve Australia’s commitment of up to 25% reductions by 2020. We have also undertaken a broader qualitative assessment
of the policies of the minor parties and Independents.
Analysis of the current policy
undertaken with the World Resources Institute concluded that the current policy settings allow Australia to meet its agreed emission goals of up to a 25%
reduction in emissions from 2000 levels by 2020. The report also highlighted the degree to which this relies on the purchase of international permits, as opposed to domestic emissions reduction, and depends on a range of factors such as the influence of European permit prices, the maintenance of the legislated large-scale Renewable Energy Target, among others.
This assessment also found that Australia is exposed to volatility in international carbon prices, which may slow the transition needed to achieve longer-term emission reductions. Direct policy interventions to reduce domestic emissions and boost energy efficiency (for example, stronger vehicle emission standards, regulatory approaches to limit fugitive emission increases) would reduce these risks.
Our assessment of the Coalition’s policy tells a different story. Based on modelling from Sinclair Knight Merz and Monash University, we find that even making conservative assumptions, emissions would rise by 8-10% from 2000 levels.
If the Coalition sticks with its policy to just achieve emission reductions in Australia, then the Budget through 2020 is exposed by an additional $4 to $15 billion cost to achieve our 5-25% 2020 target range. Using international offsets could reduce these figures to $190 to $710 million.
The Coalition's policy has changed little since 2010, but the world of climate action has moved on. Today 190 countries now have agreed to finalise an international agreement covering commitments from all major emitters by 2015. China has emerged as the world's renewable energy superpower; mainstream investors are questioning the future of the global coal industry on the back of falling clean energy costs and growing carbon constraints
. Climate change has moved to the highest levels of the USA's and China's strategic dialogue.
Policies that cannot demonstrably meet Australia’s emissions goals risk institutionalising a return to obstructionist climate diplomacy. Such policies also make Australia ill prepared to compete in a low carbon global economy – bad news, given that Australia is already 17th among the G20 on the Low Carbon Competitiveness Index.
If the Coalition wins the election, it will have some serious Parliamentary barriers to removing the current carbon laws. Assuming, as appears likely, it does not have the numbers in the Senate to repeal the laws easily, it could take them until at least late 2014. This also assumes that the Coalition would force the electorate into an early election to get the changes through Parliament; a dangerous political move.
Regardless, domestic public opinion
and international scrutiny and trends would continue to put pressure on a Coalition government to implement emission trading or other more credible decarbonisation signals in 2015 or soon after. Its current policies just do not add up in world moving to reduce emissions.
Think Australia’s election will resolve Australia’s climate policy uncertainty? Don’t hold your breath