Abbott’s climate plan: the non-delivery of an invisible policy

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Tony Abbott’s climate plan will provide no incentive to the biggest polluters to reduce emissions. Instead, they will be eligible for government handouts and may even be allowed to invest in what Abbott once described as “dodgy” international projects.

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Australian Prime Minister Tony Abbott once infamously described carbon trading as “a market, a so-called market, in the non-delivery of an invisible substance to no one.” On international permits he went further, saying it was ”money that shouldn’t be going offshore into dodgy carbon farms in Equatorial Guinea and Kazakhstan.”

Now, it seems, the Abbott government is to allow Australian firms to buy these “dodgy” and “invisible” credits to help solve a problem many within and close to this government claims does not exist – reducing emissions to combat climate change.

The Abbott government’s draft rules on the so-called “safeguard mechanisms” was leaked to The Australian and rolled out to the rest of the world on Wednesday, and contains a bunch of other goodies for big business, and most specifically the largest polluters in the country.

The rules supposedly affect 140 companies, but analysts suggest that less than one quarter of them will be provided with any incentive to reduce emissions.

baseline

The “baselines” for business on the targets that they must not exceed – for fear of attracting a penalty – have been set at their most polluting year in the last five years, which effectively means that between now and 2022 there is no incentive for them to reduce emissions, unless they get a government handout to clean up a particular facility under the Direct Action emissions reduction scheme. They even get the opportunity to change their baselines, particularly in regard to new business.

Miners get an even better deal. They are allowed to increase emissions if, for instance, they have to dig deeper to extract their coal resources.

Energy market analysts RepuTex estimate that Australian high emitting companies will increase their emissions by 20 per cent over the next 15 years under the rules, and there will be no liability for the top 20 emitters – such as the major brown coal generators, and new LNG processing facilities.

“The vast majority of companies will now have multiple ‘get out of jail free cards’ to play, so even fewer companies will now be liable, with most able to re-set their baselines as facilities expand, or gain a concession if emissions intensity decreases, even if absolute emissions rise,” says Reputex CEO Hugh Grossman.

The free licence to the brown coal generators compares to the strict emissions standards that have been imposed in the US, and even in China, which will ensure that the most polluting coal plants are forced to exit the market. In Australia, the brown coal generators are refusing to close down unless they get big handouts from the government to do so.

On the international permits, environment minister Greg Hunt says a final decision will be made in 2017/18, subject to the outcome of the Paris climate conference, and associated accounting rules.

But it seems that the Abbott government is now conceding what has been obvious to everyone but the government itself – without a carbon price Australia has no hope of meeting even its own modest emission reduction targets at a modest price. So now it will try to tap into carbon trading schemes elsewhere, including the controversial and oft-derided UN trading scheme.

“This scheme does what it is designed to do – nothing to reduce pollution,” said Erwin Jackson, the deputy head of The Climate Institute. He said the mechanism is so weak it provides no certainty for business, “leaving us in economic limbo until government and opposition are prepared to send a strong signal to decarbonise the economy.”

This has been a common refrain from big business, and energy companies in particular, saying that they are reluctant to invest in anything until the government comes up with what at least looks like serious policy.

Hunt insists that “only the Coalition” is committed to taking serious action to tackle climate change without hurting Australian families and businesses in the process with a painful carbon tax.

He lauds the ERF, which contracted more than 47 million tonnes of emissions reductions. But the ERF has already been criticised for providing money for projects that already existed, and offering little in terms of “additionality” – in other words, emissions that would not have happened otherwise. Meanwhile, electricity emissions have jumped sharply since the repeal of the carbon price and the cutting of the renewable energy target.


At least the mining industry is pleased. Minerals Council of Australia chief executive Brendan Pearson told The Australian that the government appeared to have taken industry concerns on board.

On that point he is right. As Kobad Bhavnagri, the head of Bloomberg New Energy Finance Australia, described these measures when flagged in May, they provide business 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.

The Australian Conservation Foundation said the proposed threshold for facilities covered by the mechanism is “ridiculously high” at 100,000 tonnes of pollution per year.

“The mechanism sets baselines at a company’s highest level of pollution over a five year period, so there is no incentive for businesses to make their operations more efficient.

“Big polluters would be allowed to re-set their baseline twice in the next ten years. If the government was serious about cutting climate pollution from industry, baselines would be set at the lowest level from the past five years.”

In the meantime, TCI describes the mechanism as more of a pollution “trampoline” than a safety net. Jackson notes, “Business and global capital will continue to sit on their hands or invest in other countries that are serious about cleaning up and modernising their economies.”

Which is exactly what the likes of Meridian Energy and others have said they will do.

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13 Comments
  1. john 4 years ago

    A fairly sad behind the scene explanation of just what direct action and the ERF really mean.
    However the spin has and will be out there touting this wonderful move, while companies who actually build RE plants leave the country. Australia; which is universally envied by every northern hemisphere country as being blessed with the strongest natural RE assets together with skilled work force and good legal framework; comes up with these porky pie in the sky policies.
    I guess this is the kind of framework only a bunch of lawyers would frame.
    .

  2. Jacob 4 years ago

    I guess they really want to lose the 2016 federal election.

    • john 4 years ago

      They want to win it and are not going to do anything that will in any way lose one vote from their present voters.

      • Jacob 4 years ago

        They are forecast to lose.

        • john 4 years ago

          Just remember that on voting day that people will cast their vote as to how they feel on that day.
          To the majority of voters this subject is minor.
          Their major thoughts are which policy is going to look after me not some discourse about targets or how it works.
          So I do not think this will have any real effect either way with the small number who really decide the government that is about 10% of the electors.

          • Jacob 4 years ago

            It is strange.

            All the opinion polls suggest that Shorten is preferred PM and Labor leads the 2 party preferred.

            Yet the betting firms say LNP are more likely to win the 2016 election.

            Maybe there will be “income tax cuts” in the 2016 budget and people will vote for a pathological liar who rules by instinct.

            He said in his book that instinct is as good as intellect!

          • Geoff James 4 years ago

            I’m afraid the betting firms are a better predictor. I guess for opinion polls people imagine themselves having more idealism and strength of principle than they turn out to have on election day. So people say they will do one thing but put their money on another thing! Just part of being human.

            I’m optimistic there’ll be a change of government next year – or possibly a change of leader this year, though what to do with all those advisors? But a security or economic threat at the wrong time would play into Tony Abbott’s hands. Really, beheadings are pretty bad, but the worst thing a terrorist could possibly do is distract the voting public at the wrong time.

          • Jacob 4 years ago

            What kind of advisors?

          • Geoff James 4 years ago

            I mean that Tony Abbott has surrounded himself by people with aligned views. I don’t know much about the internal operations of the LNP, or the Labor Party for that matter, but it’s clear that an awful lot goes on behind the scenes in both parties that has a dramatic effect on public policy. So if Malcolm Turnbull, for example, becomes leader, can he succeed even with his best efforts? He was undermined by his own party last time and their sentiment hasn’t changed.

            https://reneweconomy.com.au/2015/tony-abbott-doesnt-believe-in-climate-change-his-business-advisor-says-77562

            “Apart from Newman, who continues to write extraordinary tirades about climate science in The Australian, Abbott appointed climate denier Dick Warburton to head the review of the renewable energy target, and put those with similar views in charge of reviews of the banking industry (David Murray), and the commission of audit (Tony Shepherd).”

          • Barri Mundee 4 years ago

            I agree that to the majority of voters this is likely to be a minor issue. Far more serious in its impact to most is the state of the economy and jobs specifically.
            This country is trending to a recession and that may well “unelect” the Abbott government.

      • onesecond 4 years ago

        Maybe the other parties should emphasize more the possible scenario of Australia being overrun by Southeast-Asian climate refugees, while Australias agriculture and marine economy collapse and all high tech firms have left the country while absolutely noone wants to buy coal anymore. Not an implausible scenario at all I might add.

  3. Mike Dill 4 years ago

    In the end economics will rule the day. Distributed renewables already cost less than the grid. It will not matter if there is a target or credits, as small retailers buying wind and solar are already finding a niche in the market. Coal will (slowly) continue to get more expensive to get out of the ground, and wind and solar will continue get cheaper. The big power plants will continue to find it uneconomical to play on a level field, and scream for more subsidies. It will take longer than I would like but in a decade or two they will be gone.

  4. Rob G 4 years ago

    Newsflash for Greg Hunt. Sorry mate, you won’t be in office in 2017/18 so thankfully you won’t be making anymore terrible decisions.

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