Submission to Climate Change Authority’s second draft report of the Special Review Submission

Mar 16, 2016 - 9:13am

This submission focuses on the implications for future policy of the Paris Agreement and Australia’s commitment to it. The terms of reference for the Authority’s review explicitly require the objectives of this Agreement to be considered. The Climate Institute makes the following key points:

Key points

  1. The Paris Agreement includes a regular ratchet mechanism for national emissions reductions targets, the setting of 2050 emissions goals, and justification and assessment of national and collective actions against the commitment to pursue efforts to avoid 1.5-2˚C global warming above pre-industrial levels. The agreement recognises that this will require rebalancing greenhouse gas sources and sinks and the achievement of net zero emissions.

  2. Achieving the objectives of the Paris Agreement requires the stabilisation of greenhouse gases. This requires total emissions to be limited. Therefore, consideration must be given to the impact that the country’s policy suite will have on an overall carbon budget, and Australia’s contribution to it. When making decisions that in any way involve greenhouse gas emissions, governments and policy makers can no longer avoid the consideration of carbon budgets and the goal of achieving net zero emissions. For example, achieving these goals requires the decarbonisation of the electricity sector well before 2050. Unless this process starts soon – specifically, the sustained replacement of the existing coal generation fleet by around 2035 - disruptive and costly interventions will be required to limit total emissions in line with the objectives of the Paris Agreement.

  3. The Authority has noted that the scalability of a policy framework is important. However, policy mixes appropriate for short-term national targets may not be suitable for the achievement of net zero emissions. Given that achieving net zero emissions before 2050 and shorter term national targets are both important, this points to a policy ‘toolkit’ that can work towards both objectives.

  4. In terms of sending a broad signal throughout the economy of the need to undertake emissions reduction activities, carbon pricing remains an important policy. However, it is currently unlikely that a carbon pricing mechanism, for example through a baseline and credit or traditional cap and trade scheme, would be consistent with achieving both these objectives (net zero emissions and short term national targets) at this time. To set Australia on a credible path to net zero emissions, existing high emissions generation needs to be replaced with zero emissions power generation. A domestic carbon price of >$70-$120/tonne would be needed during the 2020s to begin an orderly transition. Yet, signalling a domestic carbon price of this magnitude seems to be politically infeasible over the next couple of years. Unless backed by other measures, such as a coal closure regulatory measure, weak carbon signals would defer the necessary transformation to a later date.

  5. Overall, failure to deliver a policy framework that is aligned with achieving net zero emissions before 2050 risks further prolonging investment uncertainty, and a much more rapid – and more disruptive – change at a later date. Ultimately the only policy consistent with the Paris Agreement is one that sets a clear and credible pathway towards a net zero economy before 2050.
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