Clive saved the CCA, but the polluters win out Opinion Article

Oct 30, 2014 - 1:30pm

This article first appeared in Crikey on 20 October 2014.

John Connor    
CEO, The Climate Institute
 

While retaining the Climate Change Authority and tasking it with a review of whether Australia’s climate action is adequate or in line with what major emitters are doing is a good thing, yesterday’s agreements enabling the government’s Emission Reduction Fund (ERF) will more likely be a millstone than a milestone for the government.

Much of the detail of agreements between the Palmer United Party, independent Senator Nick Xenophon and the government is still to be released. But the short of it is that the government now has support for the ERF and its yet-to-be-determined safeguard mechanism, or more simply emission limits on companies. In return, the government will keep the independent Climate Change Authority (CCA) and enable it to report on the progress of emissions trading and equivalent policies among Australia’s trading partners, like the United States and China.

The agreements with the crossbenchers have made improvements but haven’t established a climate policy with a reasonable chance of achieving even the lowest level of Australia’s 5% to 25% 2020 target range, let alone the deeper decarbonisation of the economy that will be needed beyond 2020. This is because it currently relies on the Emission Reduction Fund’s ability to buy carbon reduction from companies -- an inefficient, uncertain mechanism that risks paying for activities that would have been done anyway. All publicly available independent modelling finds the fund will fall short.

The fiscal problem that the whole fund relies on taxpayer funds to purchase emission reductions rather than polluter payments will remain a drag on ambition and effectiveness.

Unfortunately, Xenophon’s strategic reserve to buy international carbon permits that may have partly helped this didn’t make it into the legislation. This would have greatly reduced the risk that Australia would miss its targets -- or make future emission goals far too unambitious.

Beyond our backyard, countries are focusing on how to cut carbon pollution beyond 2020 -- just a few days ago Europe announced that it would cut emissions by at least 40% by 2030. The US and China are set to announce their post-2020 targets early next year, and most major emitters will put theirs forward by June. These targets aren’t the last word, either -- they’re the opening gambits of the negotiations on a global climate agreement to be signed in Paris in November next year.

Closer to home, Asian nations are developing carbon markets and other ambitious climate policies. In China emissions trading schemes are now active in seven provinces and major cities, and a national ETS for China is being proposed for 2016. South Korea’s national carbon market will launch at the beginning of 2015.

Australia will also need to put forward its contribution early next year and again play ball with others at the climate talks. The CCA will be reporting before and after Paris, meaning that its findings are likely to add to the domestic and international pressure on Australia.

The CCA has already reported that Australia needs to cut carbon pollution by 40% to 60% by 2030. What the CCA will find in this new investigation is that climate policies, whether carbon trading schemes or regulatory regimes, are strengthening and are likely to continue to strengthen over the coming decade. It will likely reach the same conclusion as every previous similar exercise: setting a binding limit on emissions and allowing carbon trading among companies, both domestic and international, is the most efficient way of lowering carbon pollution.

If the government thought it could take a holiday from scrutiny on carbon policy, then yesterday’s agreements shows this is sadly misguided. The CCA’s reviews and the growing level of climate action and commitments will continue to put the taxpayer-supported Emissions Reduction Fund under intense scrutiny and continue discussion of alternatives like emissions trading.

Given the sorry history of many of these funds the government may well find yesterday’s achievement a millstone not a milestone to be celebrated.

John Connor

John Connor is CEO of The Climate Institute. 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.

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