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Australia’s Emissions Reduction Fund is almost empty. It shouldn’t be refilled


Ian A. MacKenzie, The University of Queensland

Australia’s flagship climate policy, the Emissions Reduction Fund (ERF), has come in for fresh questions over whether the emissions allowances offered to big businesses will wipe out much of the progress made elsewhere.

This voluntary scheme – the central plank of Australia’s efforts to reduce greenhouse gas emissions by 26-28% below 2005 levels by 2030 – allows interested parties to reduce pollution in exchange for a proportion of the A$2.55 billion fund.




Read more:
The government is miscounting greenhouse emissions reductions


So far, through successive rounds of “reverse auctions”, the scheme has secured 191.7 million tonnes of emission reductions, at a price tag of A$2.28 billion.

As the budget for this scheme is nearly exhausted, it is important to ask whether it has been a success, or whether Australia’s carbon policy needs a radical rethink. Overall, the answer seems to be the latter.

Safeguards not so safe

Much of the problem stems from the ERF’s safeguard mechanism, which puts limits on the greenhouse emissions from around 140 large polluting businesses. Under the mechanism, these firms are not allowed to pollute more than an agreed “baseline”, calculated on the basis of their existing operations.

The mechanism is described as a safeguard because it aims to stop big businesses wiping out the emissions reductions delivered by projects funded by the ERF. But it doesn’t appear to be working.

The government has already increased the emission baselines for many of these businesses, for arguably specious reasons. Some firms have been given extra leeway to pollute simply because their business has grown, or even just because they blew their original baseline.

Worryingly, on February 21, 2018 the federal government released a consultation document which favours “updating baselines to bring them in line with current circumstances” and suggests that “to help prevent baselines becoming out-of-date in the future, they could be updated for production more often, for example, each year”.

It doesn’t take a genius to realise that if baselines are continually increased over time, the fixed benefits of the ERF will inevitably be wiped out.

This underlines the importance of having a climate policy that operates throughout the economy, rather than only in certain parts of it. If heavily polluting businesses can so readily be allowed to undo the work of others, this is a recipe for disaster.

Contract problems

Even within the ERF process itself, many emissions reduction contracts have already been revoked. This is worrying but also avoidable if the contracts are written correctly.

It is important to note that these contracts run for around seven years, and thus it is possible that the planned carbon reductions never eventuate. Currently only about 16% of the announced 191.7 million tonnes of emissions reduction have actually been delivered.

For the ERF to work effectively, the government needs to know the “counterfactual” emissions – that is, firms’ emissions if they decided not to participate in the ERF. Yet this is completely unknown.

This means that projects that successfully bid for ERF funding (typically the cheapest ones) may not be “additional”. In other words, they may have established these emissions reduction projects anyway, with or without funding from the taxpayer.

Another problem with the ERF is that it is skewed towards projects from lower-polluting sectors of the economy, whereas heavily polluting industries are underrepresented. The largest proportion of signed contracts have involved planting trees or reducing emissions from savannah burning.

Meanwhile, the firms covered by the safeguard mechanism are largely absent from the ERF itself, despite these firms accounting for around 50% of Australia’s greenhouse emissions.

The bare fact is that Australia’s flagship climate policy doesn’t target the prominent polluters.

A different way

Australia’s climate policy has had a colourful past. Yet the economics of pollution mitigation remain the same.

If we want to reduce pollution in a cost-effective way that actually works, then we must (re-)establish a carbon price.

This would provide the much-needed certainty about the cost of genuine pollution reduction. This in turn would allow all major polluters to make strategic, long-term investments that will progressively reduce emissions.

Instead of spending A$2.55 billion to pay for modest emissions reductions that might be cancelled out elsewhere, creating a carbon price will allow for the generation of tax revenue that can be used for a host of purposes.

For example, distortionary tax rates (such as income and corporation tax) could be lowered, or the revenue could be used to fund better schools and hospitals.

A clear example of such a success can be taken from the northeastern states of the US. The Regional Greenhouse Gas Initiative is a cap-and-trade market that sells tradeable pollution permits to electricity companies. Estimates have shown that US$2.3 billion of lifetime energy bill savings will occur due to investments made in 2015.

To tax or cap?

If the ERF is to be replaced, what type of carbon price do we want? Do we want a carbon tax or a cap-and-trade market?

While advantages exist for both, most evidence shows that carbon taxes are more efficient at driving down emissions. Moreover, taxation avoids the potential problems of market power, which may exist with a small number of large polluters.




Read more:
Australia’s biggest emitters opt to ‘wait and see’ over Emissions Reduction Fund


A carbon price would also remove much of the political rent-seeking that is encouraged by Australia’s current policy settings. A simple, economy-wide carbon tax would be more transparent than the safeguard mechanism, under which individual firms can plead for leniency.

The ConversationWith the ERF fund almost empty, the federal government should ask itself a tough question. Should it spend another A$2.55 billion of taxpayers’ money while letting major polluters increase their emissions? Or should it embrace a new source of tax revenue that incentivises cleaner technologies in a transparent, cost-effective way?

Ian A. MacKenzie, Senior Lecturer in Economics, The University of Queensland

This article was originally published on The Conversation. Read the original article.

Our acid oceans will dissolve coral reef sands within decades



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Researchers studied reef sands at Heron Island, Hawaii, Bermuda and Tetiaroa. In this photo, white areas show the predominance of sand on reefs.
Southern Cross University

Bradley Eyre, Southern Cross University

Carbonate sands on coral reefs will start dissolving within about 30 years, on average, as oceans become more acidic, new research published today in Science shows.

Carbonate sands, which accumulate over thousands of years from the breakdown of coral and other reef organisms, are the building material for the frameworks of coral reefs and shallow reef environments like lagoons, reef flats and coral sand cays.

But these sands are sensitive to the chemical make-up of sea water. As oceans absorb carbon dioxide, they acidify – and at a certain point, carbonate sands simply start to dissolve.

The world’s oceans have absorbed around one-third of human-emitted carbon dioxide.

Carbonate sand is vulnerable

For a coral reef to grow or be maintained, the rate of carbonate production (plus any external sediment supply) must be greater than the loss through physical, chemical and biological erosion, transport and dissolution.

It is well known that ocean acidification reduces the amount of carbonate material produced by corals. Our work shows that reefs face a double-whammy: the amount of carbonate material produced will decrease, and the newly produced and stored carbonate sands will also dissolve.

Researchers used benthic chambers (pictured) to test how different levels of seawater acidity affect reef sediments.
Steve Dalton/Southern Cross University

We measured the impact of acidity on carbonate sands by placing underwater chambers over coral reefs sands at Heron Island, Hawaii, Bermuda and Tetiaroa in the Pacific and Atlantic Oceans. Some of the chambers were then acidified to represent future ocean conditions.

The rate at which the sands dissolve was strongly related to the acidity of the overlying seawater, and was ten times more sensitive than coral growth to ocean acidification. In other words, ocean acidification will impact the dissolution of coral reef sands more than the growth of corals.

This probably reflects the corals’ ability to modify their environment and partially adjust to ocean acidification, whereas the dissolution of sands is a geochemical process that cannot adapt.

Sands on all four reefs showed the same response to future ocean acidification, but the impact of ocean acidification on each reef is different due to different starting conditions. Carbonate sands in Hawaii are already dissolving due to ocean acidification, because this coral reef site is already disturbed by pollution from nutrients and organic matter from the land. The input of nutrients stimulates algal growth on the reef.

In contrast, carbonate sands in Tetiaroa are not dissolving under current ocean acidification because this site is almost pristine.

What will this mean for coral reefs?

Our modelling at 22 locations shows that net sand dissolution will vary for each reef. However, by the end of the century all but two reefs across the three ocean basins would on average experience net dissolution of the sands.

A transition to net sand dissolution will result in loss of material for building shallow reef habitats such as reef flats and lagoons and associated coral cays. What we don’t know is whether an entire reef will slowly erode or simply collapse, once the sediments become net dissolving, as the corals will still grow and create reef framework. Although they will most likely just slowly erode.

It may be possible to reduce the impact of ocean acidification on the dissolution of reef sands, by managing the impact of organic matter like algae at local and regional scales. This may provide some hope for some already disturbed reefs, but much more research on this topic is required.

The ConversationUltimately, the only way we can stop the oceans acidifying and the dissolving of coral reefs is concerted action to lower CO₂ emissions.

Bradley Eyre, Professor of Biogeochemistry, Director of the Centre for Coastal Biogeochemistry, Southern Cross University

This article was originally published on The Conversation. Read the original article.