Australia’s big fail on climate and energy policies

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Australia is going backwards in climate policies and is being accused of deliberately throttling the renewable industry. This, as pressure mounts for global climate targets to be even more ambitious.


Australia’s environment minister Greg Hunt still insists that the Coalition government’s Direct Action policy is a stunning success and Australia’s great gift to the world. In reality, it is a case of smoke and mirrors.

This truth was highlighted on the ABC Q&A program on Monday night, when opposition spokesman Mark Butler pointed out that the abatement bought in last week’s auction of carbon abatement – paid for by taxpayers – would be offset by rises in carbon emissions from the electricity sector since the carbon price was repealed.

As Canberra consultancy Pitt & Sherry wrote on Monday, electricity sector emissions have risen 4.6 million tonnes in the 12 months to the end of April, mostly as a result of the repeal of the carbon price last June. The government, meanwhile, is hailing the 47 million tonnes of abatement (spread over average of 10 years) it bought at an auction last week as a great victory.

“So, even taking Greg’s 47 million tonnes that he bought with your money a couple of weeks ago, over the next five to ten years, if that (emissions) increase continues, almost all of it is offset by the increase in pollution from the electricity sector,” Butler said. “This is the central problem with this Direct Action policy.”

It’s not the only problem. There is also the question of “additionality”, the test of whether abatement is new, or would happen anyway. This is a question hanging over much of the abatement, and landfill gas plants in particular.

Butler again:

“So Greg is going to hand over millions of taxpayers dollars to the biggest polluter in the country to continue the landfill gas operations that they have been operating in some cases for more than 10 years … so there’ll be some reduction in carbon pollution but it was going to happen anyway. At the same time, AGL is able to continue increasing its carbon pollution from the coal-fired generators it operates in other part of its business.

“This is a hopeless policy and an absolutely irresponsible use of taxpayers dollars.”

That question of “additionality” is a sensitive one in the carbon markets sector. At the Carbon Market Institute Australia Emissions Reduction Summit at the MCG in Melbourne, where some record numbers of people have turned up, many have either won, or are keen to win new contracts, it’s not a question people want to address.

So, what about additionality, would these have happened anyway? “Well, who knows,” responded one, a legal adviser. And that is the problem, no one can really prove one way or another. It is the central problem of handing out money to individual projects rather than having a market price to provide an economy-wide incentive.

At best, the federal government can claim to have merely extended the carbon farming initiative and elements of the greenhouse abatement scheme, which supported landfill. Certainly, the abatement is welcome. But would it have happened anyway? “That’s a counter-factual,” said one. Others agreed. Many wince at the spin being put on the auction by the government. “That’s not helpful,” said one, grateful to have had winning bids in the auction.

Grant Anderson, a partner of Allens, said Direct Action as currently constructed could simply not support the required climate goals. It was ironic that at an average price of $13.95 per tonne abated, it was quite expensive compared to carbon prices in Europe ($10), New Zealand ($6) and internationally ($1-$2).

But it actually gets worse. The scheme to pay some to reduce emissions could be tolerated if there were controls to stop others from lifting emissions without penalty. But that’s not happening.

The so-called safeguards mechanism, which is supposed to regulate that aspect, is hopeless under the current proposed design. Kobad Bhavnagri, the head of Bloomberg New Energy Finance, said new businesses were being provided with a “perverse incentive” of maximising emissions in their first few years, to lock in a higher baseline, from where they could potentially get taxpayer funds to reduce those levels.

Independent Senator Nick Xenophon, who paved the way for Direct Action through the Senate, on the basis of promises not delivered, reiterated his dismay about the safeguards mechanism, which he said made him furious.

He described the government’s climate policy as a “Burlesque” that might win points with big emitters but was impossible to sustain if funds were to come from the budget.

Allens’ Grant noted: “It doesn’t provide any cap… it does not displace emissions which are increased elsewhere.” And he noted, the safeguards mechanism only applied to big emitters, and did not cover 50 per cent of Australia’s emissions.

BNEF’s Bhavnagri gave a damning assessment of Australia’s policy settings, saying that overall Australia was failing miserably in most of the major global trends towards decarbonisation. The policy approach, he said, was basically incoherent.

In some cases, such as the renewable energy target, it might be deliberate. He noted the effective investment freeze in the last 18 months. The government had mishandled the review of renewable energy target. “Perhaps it was handled deliberately that way,” he said.

Australia also had the “glorious distinction” of being the first country to remove a carbon price – an issue highlighted by Gayatri Acharya, the lead economist with the World Bank.

Acharya noted that on the world map of carbon pricing – now including 60 countries – Australia was about to be removed. “Australia was coloured in. We’ve just changed it for this presentation,” she said.

Bhavnagri noted that the replacement for the carbon price, based around Direct Action policy, and its taxpayer-funded auctions, was providing no investment incentive, and was incoherent.

He said this was part of the government’s deliberate attempt to avoid a carbon pricing signal. But it meant that no signal was sent to business to make rational economic decisions about the future.

And it had opened up an administrative nightmare. By choosing to allocate baselines facility by facility, it had left the government open to intense lobbying.

On energy efficiency, Australia had a virtual policy-free zone. There were no efficiency standards on cars. On electric vehicles Australia was virtually not on the map, and there were virtually no incentives for the uptake of EVs, as occurred in other countries.

Only in distributed technologies was Australia leading the way, and that was mostly as a result of high electricity prices, and significant investment by individual households.

Bhavnagri said small-scale solar PV was now an “unstoppable force”, and every available household would have solar PV on the roof. By 2030, it would be 50-60 per cent.

Energy storage would follow. The learning curve was following that of solar PV, which displayed a 70 per cent fall in recent years.

The basic problem with Australian government policy is that it is not designed to reach the 2°C target agreed by all nations. In fact, it doesn’t mention it, choosing to model its energy and abatement policies on the 4°C scenario that is basically business as usual.

But as Paris draws closer, where a global agreement is expected that will provide the pathway to such goals, there is an increased push to ramp up those targets to a level that would seek to cap global warming at 1.5°C, increasing the odds of avoiding the runaway consequences of climate change.

James Hansen repeated his call for such a target on ABC Radio National on Tuesday morning, and earlier this week 20 nations that make up the Climate Vulnerable Forum, chaired by Philippines, urged the UN Framework Convention on Climate Change to reconsider the current 2°C climate goal.

It said three new independent reports qualified 2°C as “inadequate”, posing serious threats for fundamental human rights, labour and migration and displacement, among other factors.

“The reports underscore just how much difference even half a degree of additional heat makes for people’s lives, for working conditions and for the movement of people. When we see that warming emissions from the energy sector actually stalled last year despite economic growth, or if we look at the unpredicted pace of low-carbon tech uptake, arguments not to strengthen our aims start to wear thin,” said spokesman person Mary Ann Lucille L. Sering. The countries include Philippines, Vietnam, Vanuatu, Kiribati, and Tuvalu.

Australian Greens Senator Christine Milne called for “a complete overhaul of policies to make climate top of mind.

“The major parties teaming up to cut the Renewable Energy Target, which will kill jobs and investment in large-scale solar, is the last thing they should be doing right now. We need more ambition, not less, in all areas of Australian policy and that’s sorely lacking in this parliament.”  

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  • Alastair Leith

    Great coverage of the issues in detail G&S. Thanks.

  • Ken Dyer

    16,000,000 tonnes. That’s how much Hazelwood pumps out every single year. In the next 10 years, Hazelwood will pump out 160,000,000 tonnes of toxic emissions. That’s 113,000,000 more tonnes than Greg Hunt’s much vaunted Emission Reduction Fund is supposed to achieve. What a joke. For the same expenditure, you could mothball Hazelwood, and build solar and wind farms that would provide all the power Victoria needs. The Abbott Government has dropped the ball big time, and are the laughing stock of the entire renewable world.

    • Coley

      But nobody is ‘laughing’
      On one hand you have people who are very concerned by the ability of the FF lobby to hijack a government.
      And on the other, I have no doubt, you have people and organisations who want to replicate what the Australian FF lobby have achieved.

  • Rob G

    The true colours of both major parties was clearly seen on the Q and A show. While Greg Hunt bumbled his way along singing the praises of ‘Direct inaction’, in an almost hysterical performance, Mark Butler, by contrast appeared level headed and straight talking. “There are no climate deniers in my party…”. He openly talked about staying within the 2 degree cap and trashed the viability of ‘Direct inaction’.

    Hunt is struggling to convince anyone that his policy will achieve anything. And in the same manner Abbott attacked the Carbon price with the “AXE THE TAX!” slogan, we can see this coming back to bite them come 2016. “STOP TAXPAYER $$ GOING TO THE BIG POLLUTERS”.

    Hopefully Paris can put enough pressure on this government to bring about some real action. Or maybe as one rumour has it, Abbott will release a ‘friendly’ budget and then call an election… Then hopefully we can go to PAris with a new government that is serious about action.

  • Coley

    Just to clarify, Abbot & Co have removed the carbon tax and are combating GW by paying farmers to plant trees?

    • nakedChimp

      pretty much.

    • JeffJL

      No. Just paying farmers not to chop down trees.

  • Chris Fraser

    Tragically yes. It makes much more sense to large emitters to permit the emissions cap to be removed, so that income tax could be paid by everybody else to carbon farmers, to do the work of emissions abatement. And the harder they pollute, the more they are aware taxpayers will have to work to reduce the impact of their emissions. It is a classic case of Dimmwits – or Don’t Include Me Mr Wabbott In The Solution.

    • Coley

      Are these the same farmers who are causing CC problems with major deforestation in Australia?
      So, the FF lot can emit as much as they want but their emissions will be curbed by paying farmers not to cut down trees?

      I’m hoping someone will come along and explain I’m wrong on this!

      • Chris Fraser

        Not only are they going to have trouble justifying their abatement tax, but our enquiries to them are going to multiply from here.How do we like our Government paying Foresters to agree not to cut down rangeland trees on land not suitable for agriculture, and which trees weren’t going to be cut down anyway ? Another classic fail of the ‘additionality’ test.They walk among us …