Carbon markets less exciting than a hole in one but big drivers Opinion Article

Sep 30, 2013 - 9:58am

This article was originally published in the Sydney Morning Herald on 30 September, 2013. 

John Connor
CEO, The Climate Institute

Last week I tried to grab some time with my family during the school holidays and sneak out to the golf course to get away from the rollercoaster that is this country's carbon politics and robust climate debate. Whether it was the best week to pick is debatable.

In Europe, hundreds of the world's top scientists and government officials worked on the latest report by the Intergovernmental Panel on Climate Change. On Friday evening they strengthened their warning the world is warming and that activities like the burning of coal, oil and gas are causing it. 

In Australia government officials were working on legislation to make this the first country in the world to dismantle a carbon market.

Well-designed carbon markets remain among the most credible and effective policy tools for reducing dangerous carbon pollution. It is why carbon pricing and carbon markets are increasingly being adopted or explored around the world.
This was made all the more remarkable when IPCC chairman Rajendra Pachauri said there is little chance of avoiding hugely damaging temperature increases unless a price is put on carbon emissions for heavily polluting industries like electricity companies and manufacturers. It is only through a market mechanism, he said, that a large enough and rapid enough response can be achieved in curbing pollution. To many Australians the policy solution of carbon pricing has been tarnished by the bitter politics, the scare campaigns and the apparent complexity. Our research had shown that after a year of operation of the laws there was a growing sentiment to give the carbon laws a go, that opposition had decreased but that it was still not popular or well understood.

Carbon markets are important because they put not just a price, but also a limit on carbon pollution - we can be clear on the environmental outcomes. They are important because they make bigger industries take responsibility for their pollution, rewarding them for developing cleaner alternatives or letting them take the risks of sticking to existing activities. They are especially important because they send a long-term signal to those investing in long-lived infrastructure such as power plants that dirtier investments will face growing risks.

The call from leading businesses in 2006 for a ''long, loud and legal'' carbon pricing signal was among the reasons for the Howard government adopting a pro carbon market policy.

Well-designed carbon markets remain among the most credible and effective policy tools for reducing dangerous carbon pollution. It is why carbon pricing and carbon markets are increasingly being adopted or explored around the world. China has at least seven pilot emissions trading schemes started or under development and California's carbon market is up and running.

The establishment of carbon markets runs the gauntlet of existing economic and political realities and can have flaws. Europe's market demonstrated this with excessive allocation of free permits they are still trying to shake out of the system for it to achieve best results.

Our carbon market isn't perfect but avoided many of these flaws. Our market doesn't cover all of our polluting activities. In areas like agriculture it would be extremely complex to administer, and the politics of covering transport was too hard. The resulting coverage of about 60 per cent of our emitting activities is nonetheless significant.

These and other reasons reinforce that, while carbon markets can play a big part, they aren't the only tool that can - or should - be applied. To use a blatant golfing metaphor they can be the driver, getting some of the biggest distance, but we still need other policies to get to our targets and decarbonise our economy. This is why policies that establish renewable energy and energy efficiency targets are important, why emissions standards for vehicles and power plants are likewise.

However, a carbon market setting a price and a limit on carbon pollution is crucial to delivering the large and urgent reduction targets needed. The Coalition in opposition and in government has affirmed its support for 2020 emission reduction targets of 5 to 25 per cent below 2000 levels. Yet no independent analysis is in the public domain that shows its policies, which include repealing our carbon market, can achieve even the smallest target.

The IPCC report, and the chairman's comments, are extra reasons why the government should reveal any analysis it has that demonstrates its policies will achieve up to 25 per cent reductions before it repeals carbon markets.

The current policy may not be perfect, but throwing it out without a credible replacement is dangerous. When the IPCC chairman spoke of the need for carbon pricing, he joined a growing list of agencies warning the world to price emissions and do it quickly, including the International Energy Agency, the International Monetary Fund and the World Bank.

While it is important for all of us to take holidays occasionally, now is not the time for Australia to take a holiday from credible climate action.

John Connor

John Connor was CEO of The Climate Institute from 2007 to March 2017. Whilst qualified as a lawyer, John has spent over twenty years working in a variety of policy and advocacy roles with organisations including World Vision, Make Poverty History, the Australian Conservation Foundation and the NSW Nature Conservation Council. Since joining The Climate Institute in 2007 John has been a leading analyst and commentator on the rollercoaster that has been Australia’s domestic and international carbon policy and overseen the Institute’s additional focus on institutional investors and climate risk. John has also worked on numerous government and business advisory panels.

Email   Print   Subscribe
Contact us. For further information. Follow us. Join the conversation.

Level 15, 179 Elizabeth St.
Sydney NSW 2000
Tel   +61 2 8239 6299
Fax   +61 2 9283 8154
Site Map