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Malcolm Turnbull was right: Direct Action is a waste of money

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As a member of the Opposition not burdened by harsh political realities, Malcolm Turnbull was free to say what he really thought: that Direct Action was reckless, a fig leaf for climate action, and a waste of money. He was right.

A new study from the Australian National University has underpinned what Turnbull thought then and what he won’t admit now as prime minister: that Direct Action has serious flaws and is largely spending money on projects that were going ahead anyway, delivering “windfall rents” to project developers.

The study by climate economist Dr Paul Burke says that the scheme likely overstates the amount of emissions reduction achieved through Direct Action, and much of the $1.7 billion committed in the auctions to date has been wasted. So much so, that some beneficiaries are referring to it as “cream” and “too good to be true.”

The Coalition government, and environment minister Greg Hunt in particular, has sought to make much of the “cheap” abatement price achieved in the auctions, namely $10.70 in the latest, biggest, handout of taxpayer funds and the $12.10 average so far.

Burke, however, suggests this is no great achievement. “Unfortunately, projects that would have gone ahead even without a subsidy – ‘anyway projects’ have a cost advantage that makes them well placed to win the auctions,” Burke said.

“When projects of this type receive funding, taxpayers’ money is being used ineffectively.”

It is not the first study to come to this conclusion, and it surely won’t be the last. But this comes in the midst of an election campaign, and at a time when scientists are becoming increasingly alarmed by dramatic changes in climate data – particularly the breaching of the key 400 parts per million reading on greenhouse gas emissions – and another month of record high temperatures.

foysters cartoon debate

Embarrassing as it should be for the government, climate change is not, however, becoming a mainstream political issue in this election campaign. It was barely mentioned at the first leader’s debate last Friday, which excluded the only party prepared to make climate change and clean energy a frontline issue, the Greens.

Labor has sought to differentiate itself from the Coalition by unveiling a much higher emissions reduction target by 2020 and recognising that some form of carbon price – even if only an adaptation of a “baseline and credit scheme” – will be needed to achieve it.

Labor, though, is not seeking to make climate change a big issue; wary of the “electricity tax” accusations thrown at it by Turnbull, Hunt and others – even though the Coalition would have to adopt a similar scheme if it was to meet even its own modest emissions reduction targets.

This much was confirmed by a government-appointed review conducted by Energetics, and was to have been the main conclusion of a review by the Climate Change Authority, now dominated by Coalition appointees including the principal author of Direct Action. But this report has been buried until after the election.

Burke comes to a similar conclusion to Energetics, the CCA, and the government’s own advisors: a baseline and credit scheme is the obvious path to evolve Direct Action into something useful.

burke emissionsHis report also comes amid new data that shows while Australia’s coal generation, and emissions, continue to rise following the removal of the carbon price, they continue to fall in major economies.

In the US, coal production declined a record 33 per cent year on year to May 2016, with a total of 102MW of coal-fired power to be closed this decade. In China, total Chinese coal output was down 6.8 per cent year on year, while India slashed coal imports by 15 per cent.

Burke said examples of ‘anyway projects’ include many landfill gas capture projects, which have received Direct Action payments even though they can already generate revenues from their gas. Other projects include upgrades to supermarket lighting and vehicle fuel efficiency; types of activities that happen routinely anyway.

“Some of the funded projects are likely to be providing genuine reductions in emissions. Unfortunately, however, some project categories are rather questionable.”

“Landfill operators have been awarded Direct Action subsidies in each of the auctions. Their projects are often already generating revenues from electricity sales and renewable energy certificates.” One study from Reputex suggested pay-back times of three years in these projects, even without the Direct Action subsidies.

“The biggest winner to date has been vegetation projects. Among these are projects to reduce tree clearing, including of invasive native species near Cobar and Bourke in New South Wales.

“The large payments for these projects are likely to have preserved some vegetation. But some farmers appear to have not actually been planning to clear. If so, funding is going to ‘anyway’ projects.

“Other Direct Action winners include projects to reduce tree clearing. While some of the funding will help preserve vegetation, it is unclear if all farmers included had been planning to clear vegetation.”

Bourke also raises the possibility that some farmers have been using Direct Action payments to fund tree clearing on other properties. “Some projects might even cause a net increase in emissions.”

Burke says there are many other downsides to Direct Action. “These include its administrative complexity, the issue of emissions reappearing elsewhere in the economy, and the subsidy culture it inculcates,” he writes in The Conversation.

Other perverse outcomes include delays to projects that might have happened anyway. Burke says some companies have an incentive to delay emissions-reducing projects until they are registered with the Clean Energy Regulator.

“State and territory governments have an incentive to avoid initiatives that reduce emissions so as to not disqualify projects from the ERF. Such schemes also risk instilling a culture of subsidies and government involvement in project selection.”

He points out that emissions from electricity generation are rising again and the country would be better off returning to what was working: putting a price on emissions.

“Australia has a big challenge ahead in decarbonising our economy. There are many opportunities, but we need to get our policy settings right. It would be better to move on from Direct Action subsidies. An approach centred on pricing emissions makes more sense.”  

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  • Chris Fraser

    In spite of all the talking up of the ERF, the moment the price on carbon emissions was removed, national emissions actually went up and continue to go up. That’s because there is no emissions cap. D’Oh !
    So Why do they still call it the Emissions Reduction Fund ? The funds appeared to be there, but they have only contracted to remove 5% of all the emissions they paid for.

  • Rob G

    Voting with the ALP on a carbon price ended Turnbull’s reign, this time around not acting on climate change will end his career. A pity in some ways as he was so passionate about renewables and climate action – now it appears he isn’t (even if he still is).

    • john

      Rob I think his hands are tied until he gets a mandate he has no chance of changing the direction that the party is headed on rather sad but true.

  • john

    As i have been saying from day 1 of Direct Action; Paying for actions that are already in place because of State Government Legislation.
    The ironic part is the State Governments copped the blame for the Vegetation Management Legislation and the Federal Government took the credit for the outcome rather duplicitous to put it polity.
    I notice in the latest payments for reducing clearing, rivers and estuaries flowing into the Great Barrier Reef catchment area, are we really so stupid to not realize there was zero chance of clearing these areas or are we so stupid we think this has been stopped because of direct action?

    • john

      I guess saying stupid was being polite, it is patently clear there is a large gulf separating what has happened and the underlying reasons.

    • Alastair Leith

      meanwhile, prior to the recent end to end bleaching of the reefs, sedimentation from land clearing and overstocking in dry periods was the largest cause of reef deterioration. and QLD is still doing plenty of that. truly an absurd and perverse inverse-world the coalition lives in.

      • john

        Actually you will find it extremely had to find any land clearing in the Eastern Water Shed of the Great Dividing Range adjacent to the Great Barrier Reef.
        You will however find erosion because of past clearing just go look at the river bed levels of the area they are meters higher than 80 years ago.

      • DogzOwn

        but graziers were only trying to make a quid, with Andrew Robb and Barnaby Joyce wetting themselves about huge export opportunities of sugar and beef, thanks to wonders of TPP(hope RIP)

        • john

          The Sugar industry has not expanded.
          The Eastern Water Shed is only used for breeders not fattening in fact hardly any cattle industry in the area.

          • DogzOwn

            Sugar may not have expanded but surer will if TPP. Lateline showed a bunch of embarrassed cattle graziers while ago, cloven hoofs through root mat of grass, causing deep, steep gullies below, creating turbid run off to reef, hanging around for month or 2, shading photosynthesis of plant side of corals and blocking orifices of animal side.

          • john

            True about the damage caused by hoofed animals, however the eastern watershed does not have many cattle in the northern part but further south there is a greater population.
            The run off from land clearing done in years past is a problem.
            Extra the TPP will not do much for Australia, there is not much chance of gaining a larger slice of the hugely subsidized sugar market in the USA the land of free enterprise except when they pay people to supply their own.
            Which means they pay about twice the market price for their own sugar.

          • Alastair Leith

            Sediment coming out of the Fitzroy and Burdekin river is what i’m referring to. Not my area so I’m taking it on advisement from a former QLD Government scientist that the sedimentation is from livestock when the land dries out and vegetation becomes depleted though overgrazing. He says it’s the single biggest cause of reef destruction (prior to latest bleaching event that has effected the pristine northern reef more than anywhere so it’s mostly temperature related).

  • howardpatr

    Don’t hold your breath waiting for Cayman Turnbull to acknowledge this, let alone go anywhere that might lead him into a dialogue with the nation on climate change and the renewable energy future.

    He might dig up another of his Point Piper mates to come out supporting his inaction – like two faced John Symond who contradicted himself re Negative Gearing.

  • DogzOwn

    But ERF hasn’t reduced any emissions at all, they’ve increased. They could have been honest with name like EOF emissions offsets fund. But reason given in Greg Hunt’s office, that targets will be met, is that what counts is emissions per capita, so just keep current rate and achieve emission reduction by population growth!

  • Brian Tehan

    What a sad waste of money. Businesses reducing their emissions by taking action that has a 3 year ROI, like replacing fluorescent lamps with LEDs. I read somewhere that one of the beneficiaries of this particular subsidy is Bunnings, replacing the lighting in their warehouses. Of course, apart from electricity saved, they also save on labour because of the much longer life of the replacement lights. It’s hard to blame them for taking this money from the taxpayers, I guess. The outcome could have been achieved without any subsidy by policies asking companies to report on and reduce their emissions over time. The government could be providing advice to companies on simple ways to reduce emissions and save money, if these companies can’t do the sums themselves. A carbon price or ETS is, of course, what we really need.

  • BsrKr11

    Is anyone really surprised? These results were always the intention….they don’t believe the science. Period

  • Cooma Doug

    I was told that Greg Hunt has three word slogan in his office for his emissions charade…”AXE THE FACTS”

    Seems to have worked well in there.

  • onesecond

    If you think about all the bad and stupid things, that happened just because Australians were stupid enough, to vote for Tony Abbott, one could get very angry.

  • RobS

    So let me get this straight, farmers were paid money to not clear land they had no plans to clear anyway… Unbelievable.

  • mike flanagan

    The art contortionists rarely translates from circus to the political sphere successfully. It is rumoured the new owners of Cirque Du Soleil are in the market for a M and A. Perhaps a post election opportunity could open for Mal the Magnificent?