Australia has no credible policies to meets its emissions targets

Australia has begun to address climate change. We have committed to reducing greenhouse gas emissions by 26-28 per cent below 2005 levels by 2030. Yet we do not have a comprehensive, credible domestic policy framework to achieve this target. We do not even have bipartisan support for the central planks of such a framework, which is essential for such an important public policy issue.

The government has a suite of policies in place to meet its current target of reducing emissions by five per cent below 2000 levels by 2020. These will need to be re-engineered, if not redesigned, to meet the 2030 target and any additional targets the government may commit to in future.

The Labor Party is consulting on a target of reducing emissions by 45 per cent below the 2005 baseline by 2030. It has also committed to a cap on emissions of unspecified coverage, an associated emissions trading scheme and an aspiration to generate 50 per cent of Australia’s electricity from renewables by 2030.

We have consistently maintained that an economy-wide, market-based scheme is the most effective and efficient means of reducing Australia’s emissions. This remains the case. But adoption of market-based schemes, such as cap and trade schemes, has been inconsistent and politically fraught both in Australia and internationally.

If these issues cannot be overcome, policymakers in Australia need to look at alternative options that achieve the current 2030 target (and, potentially, more stringent targets) without straying too far from the efficient ideal.

Bipartisan support is essential for whatever mechanisms are adopted. Firms are unlikely to make long-term investments to reduce their emissions unless they are confident that policies are stable.

Despite political agreement on targets, Australia has lacked political consensus on climate change policy since 2008.

In our new working paper we assess a range of policy options that could reduce emissions, including cap and trade emissions trading, carbon tax, intensity baseline emissions trading, emissions purchasing, regulation and tradeable green certificates. We assess each policy for:

∙ credibility: ability to meet the volume of emissions reductions required by current and future targets;

∙ political viability: capacity to evolve from current policy settings and achieve bipartisan support;

∙ flexibility: ability to adjust to changes in targets, political devel- opments and technological change;

∙ adaptability: potential to move towards an economy-wide market- based scheme over time;

∙ public acceptability: ability to be understood and accepted by the community; and

∙ low cost.

None of the plausible policies fulfils all of the criteria. The task is to find solutions to the limitations of an individual policy, or to combine policies so that collectively they satisfy the criteria.

(See table below, please click to enlarge).

grattan emissions table

This article is an extract from a paper written by Grattan Institute’s Tony Wood, David Blowers and Greg Moran.

Comments

8 responses to “Australia has no credible policies to meets its emissions targets”

  1. david_fta Avatar
    david_fta

    You’re wrong about a carbon tax.

    All we need to do is

    1) institute a Consumption Tax on Fossil Fuel (FFCT) at a rate of $92 per tonne carbon contained in the fuel; this equates to $25 per tonne emitted CO2.

    2) Adjust Income Tax thresholds, Company Tax rate and adjust welfare benefit so that the FFCT, along with all other taxes, doesn’t take too much money out of the productive economy. It also allows business and individuals the funds to purchase equipment and technology that doesn’t use fossil fuel.

    3) Each year thereafter, increase the rate of the FFCT by a further $92 per tonne carbon contained in the fuel, and further adjust other taxes and benefits around it.

    We repeat step 3 as required to achieve the required decrease in fossil fuel consumption. A heads-up for you: long before 2030 it will be generally recognised that the world requires complete cessation of all fossil fuel consumption – so bothering about reaching some non-zero “target” in the interim doesn’t mean much.

    1. david H Avatar

      How about doing this another way which I think would be easier to administer and would greatly stimulate the investment in renewable energy.
      Renewable energy is typically low on operating costs but high on CAPEX. Current depreciation rules for wind and solar power generation require the capital to be written off over a 20 year period. If legislation was passed to reduce this period to 10 years and for the scheme to be mandated for a minimum of say 20 years, then there would be an immediate uptake in large scale renewable energy projects.
      The low operating costs of RE would reduce the wholesale price of electricity and force high operating cost (fossil fuel) power stations out of the market at no cost to the tax payer.

      1. david_fta Avatar
        david_fta

        Goodness, I’d not thought of that, excellent idea.

        Let’s have the lot – accelerated depreciation for renewable CAPEX – there’s also CEFC funding to consider – plus FFCT.

        1. Chris Fraser Avatar
          Chris Fraser

          We also need government subsidies to fossil fuelled generation reduce at the same rate that government subsidies to renewables increase. Soon enough, they are all on a level playing field at no net extra cost !

          1. david_fta Avatar
            david_fta

            I’d even forgotten to include that. Trying again, we now have

            Ending fossil fuel subsidies, accelerated depreciation for renewable CAPEX – there’s also CEFC funding to consider – plus FFCT.

            So much for my “All we need …”

          2. david H Avatar

            Having solved the governments problem, all we need now is for them to implement it!

          3. david_fta Avatar
            david_fta

            Morrison should have delayed the MYEFO

  2. Chris Avatar
    Chris

    Turning Direct Action or the ERF into a Baseline and Credit scheme seems like the easiest, cheapest, most achievable option. If the focus is on the electricity sector then Australia needs a meaningful way of incentivizing the closure of coal fired power. What Paris should indicate to policy makers is that what the world needs is action – the time for perfectly constructed complexity is over. In the next decade we need to close these stations – in no particular order: Hazlewood, Yallourn, Liddell, Eraring, Callide A , Gladstone, along with the NSW, SA and Vic stations already closing this should go a good way to getting to a realistic emissions reduction target – as long as a good portion of the replacement load is at zero or very low emissions. And for this you need a RET that works to fund wind, solar and other large scale generation assets. Hybrid solar and batteries should take a growing chunk out of NEM load, and to reduce the total load requirements even further Australia needs to have enforceable Regulation in regards to vehicle emissions, building energy consumption and appliance efficiency.

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