Lack of climate policy threatens to trip up Australian diplomacy this summit season



File 20180907 190656 1qu49hy.jpg?ixlib=rb 1.1
Australia’s climate stance risks its standing on the world stage.
Shutterstock.com

Christian Downie, Australian National University

Australia has navigated a somewhat stormy passage through the Pacific Islands Forum in Nauru. Scott Morrison’s new-look government faced renewed accusations at the summit about the strength of Australia’s resolve on climate policy.

Australia is neither a small nation nor one of the most powerful, but for many years it has been a trusted nation. Historically, Australia has been seen as a good international citizen, a country that stands by its international commitments and works with others to improve the international system, not undermine it.

But in recent years climate change has threatened this reputation. This is
especially so among our allies and neighbours in the Pacific region, who attended this week’s Nauru summit.




Read more:
For Pacific Island nations, rising sea levels are a bigger security concern than rising Chinese influence


With Australia’s new foreign minister, Marise Payne, attending instead of
the prime minister – not a good look, albeit understandable in the circumstances –
the government came under yet more international pressure to state plainly its commitment to the Paris climate agreement.

Pacific nations may be divided on many issues, but climate change is rarely one of them.

Before the meeting, Pacific leaders urged Australia to sign a pledge of support for the agreement and to declare climate change “the single greatest threat to the livelihoods, security and wellbeing” of the region.

Australia ultimately signed the pledge, but also reportedly resisted a push for the summit’s communique to include stronger calls for the world to pursue the Paris Agreement’s more ambitious goal of limiting global warming to 1.5℃.




Read more:
Pacific pariah: how Australia’s love of coal has left it out in the diplomatic cold


The government now has a chance to catch its breath before international summit season begins in earnest in November with the East Asia Summit in Singapore, followed quickly by APEC in Papua New Guinea and then the G20 summit in Buenos Aires on November 30 and December 1, not to mention the next round of UN climate negotiations in Poland in December.

The G20 is arguably the most important summit, bringing together the leaders of the 20 most powerful nations in the world. It is a forum at which Australia’s
position on the climate issue has already suffered significant diplomatic damage under the Coalition government.

When Australia hosted the G20 Brisbane talks in 2014, the then prime minister, Tony Abbott, worked to keep climate change off the formal agenda. Stiff opposition from several of Australia’s allies forced him to back down.

Other nations will be wary of Australia’s stance at the G20 this time around,
especially following the leadership turmoil in Canberra.

Indeed, with climate policy continuing to divide the Coalition, there is a
significant risk that further missteps on climate change will undermine Australia’s international standing.

A better option

It doesn’t have to be this way. Australia could easily meet its Paris target of cutting emissions to 26-28% below 2005 levels by 2030 with a national climate and energy strategy. But right now Australia is without one, and with Malcolm Turnbull’s passing as prime minister and the demise of the National Energy Guarantee, it looks unlikely to have a strategy in place by the time the G20 rolls around in November.

Australia’s overall greenhouse emissions have been rising for several years now, and many independent projections have Australia overshooting what is in reality a modest target.

But, rather than rectifying the situation, Morrison and his new cabinet have yet to make it completely clear whether Australia will stand by the Paris Agreement at all.

Even if the scenario of a US-style pullout is avoided, Morrison will face mounting pressure from the vocal band of conservatives in his party room not to commit to anything on climate change, be it symbolic or tangible.




Read more:
The too hard basket: a short history of Australia’s aborted climate policies


What the government chooses to do next could have reputational repercussions for years to come.

Australia may not have the might of other nations, but what it has had at times is a reputation as a constructive international partner. This needs to be restored if Australian diplomats are to successfully navigate a disruptive international landscape.

Climate policy is clearly a threat to our domestic politics and to the job security of Australian prime ministers. With further missteps it could upend our diplomacy as well. Summit season will go a long way towards determining how much of a threat it really is.The Conversation

Christian Downie, Australian Research Council DECRA Fellow, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Advertisements

What Australian states can learn from Trump dismantling climate change policy



File 20180821 30590 1yz2gr2.jpg?ixlib=rb 1.1
President Trump is challenging the US states’ right to set their own emissions targets.
Photo by John-Mark Smith on Unsplash

Sarah Graham, University of Sydney

The Trump administration’s withdrawal from the Paris climate agreement was greeted with dismay around the world. Less well known, but probably just as damaging to emissions reductions, was freezing standards for carbon dioxide emissions from cars in July.




Read more:
Why Trump’s decision to leave Paris accord hurts the US and the world


The erosion of US federal climate policy has made action from individual states far more important. As Australia grapples with yet another failure to implement a national emissions policy, what can we learn from America?

And is it time for Australian states to reach out directly to like-minded states in other parts of the world to tackle global climate issues?




Read more:
Malcolm Turnbull shelves emissions reduction target as leadership speculation mounts


Strong state action

From the outside, the US often looks like a bastion of climate change denial and very large cars, but a group of US states has nevertheless made some of the most dramatic progress in curbing emissions of any jurisdictions in the world.

Consider New Jersey. In 1998, while the Kyoto Protocol was being negotiated (and ultimately rejected by George W. Bush), Governor Christine Whitman ordered that the state pursue an emissions target of 3.5% below 1990 levels by 2005.

Since then, New Jersey has consistently adopted emissions reduction targets in line with global agreements, effectively bypassing the weaker standards at the federal level. Several other, mostly Democrat, states across the nation took similar action during the Bush administration, placing caps on emissions from power generation, establishing internal carbon trading systems, and adopting ambitious state emissions targets.




Read more:
The Trump administration, slanted science and the environment: 4 essential reads


California’s regulation of air quality goes back even further. In response to Los Angeles’ smog problem – arising from a confluence of geographical conditions, warm weather, and high automobile use – Sacramento introduced smog restrictions on automobiles in 1960. This predated both the establishment of the US Environmental Protection Agency and any meaningful federal effort to regulate air quality or car pollution. In 1970, when President Nixon established the EPA and Congress gave teeth to the Clean Air Act, California was granted special waivers to adopt stricter anti-smog measures. The state has done so ever since.

Under Governor Arnold Schwarzenegger, and as part of a much broader climate change initiative, reduction targets for CO₂ emissions from automobiles were added to the existing anti-smog rules. By this time, a number of states were also following California’s more stringent standards. These included states bordering California where auto dealers wished to sell California-compliant cars, but also East Coast progressive states pursuing ambitious climate change plans of their own.

Australian states

Australia is not in exactly the same position as the the US – for example, we are virtually unique in the developed world for having no fuel efficiency standards for cars – but there are some striking similarities.




Read more:
Emissions standards on cars will save Australians billions of dollars, and help meet our climate targets


The policy deadlock at the federal level has made action from states, and even local councils, vitally important.

At the same time as the federal government is struggling to put emissions reduction on the national agenda, Victoria has made a huge commitment to rooftop solar. South Australia, which leads the country in renewable energy generation, is now a net energy exporter for the first time.

While the Queensland state government grapples over the Adani coal mine, a May report found that billions of dollars in renewable energy projects are underway.

The Trump effect

The Trump administration is widely expected to repeal many Obama-era limits on pollution. Auto emissions standards came onto the chopping-block in July, when the administration unveiled its plan to “Make Cars Great Again” by freezing fuel efficiency standards at 37 miles per gallon.

The EPA has also announced that it will revoke California’s waiver to set more stringent standards, which 13 other states including New York now also follow.

In both cases, the Trump administration is seeking not just to relax federal climate standards, but to prevent states from setting more stringent policies should they wish to. And in both cases, these matters will be settled by the courts.

California announced it would lead a legal challenge to protect the waiver on the same day as the administration announced it would revoke it. When the EPA moves to repeal the Clean Power Plan, the same set of states will likely sue to protect it.

Why this matters globally

These legal fights have global ramifications. The 13 states that follow California’s waiver have a population of 130 million. These states have pledged, through auto emissions standards and clean energy targets, to meet the Paris Climate goals – using their own policy autonomy to circumvent Trump’s withdrawal.

These states have also pledged to pursue independent diplomacy with other national and sub-national jurisdictions around the world, sharing best practise and pursuing climate cooperation.

The EPA has so far lost a number of legal challenges, and is by no means guaranteed to win its case against California. Should these states prevail, Australia has an opportunity to pursue meaningful climate diplomacy directly with the American states.




Read more:
I’m suing Scott Pruitt’s broken EPA – here’s how to fix it


A 130 million-person market for sustainable technologies also presents a substantial opportunity for Australian businesses in the renewables sector.

<!– Below is The Conversation's page counter tag. Please DO NOT REMOVE. –>
The Conversation

American states have a framework in place for international partnerships on climate. State governors and city mayors across the country are eager to brand themselves as international climate change leaders. As Australian federal politics grinds through another round of energy policy and climate change debate, it might be time for Australian states to look outside our borders for inspiration and co-operation.

Sarah Graham, Honorary Associate, University of Sydney

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

The too hard basket: a short history of Australia’s aborted climate policies


Marc Hudson, University of Manchester

Less than three years ago, after Malcolm Turnbull had wrested the prime ministership from Tony Abbott, I wrote an article entitled “Carbon coups: from Hawke to Abbott, climate policy is never far away when leaders come a cropper”.

Less than two weeks ago I wrote again about climate policy’s unique knack of causing leaders to falter, with terminal results for the policies and, often, the leaders themselves.

Now Turnbull has added a new chapter to this saga. He has abandoned the emissions component of his beleaguered National Energy Guarantee, in what has been characterised as a capitulation to a vocal group of backbench colleagues. The climbdown may still not be enough to save his leadership.




Read more:
Emissions policy is under attack from all sides. We’ve been here before, and it rarely ends well


A workable, credible climate policy has been the impossible object that has brought down every prime minister we’ve had for a more than a decade – all the way back to (and including) John Howard.

Howard’s way

Howard had spent the first ten years of his prime ministership denying either the existence of climate change or the need to do anything about it. In 2003, virtually all of his cabinet supported an emissions trading scheme. But, after meeting with industry leaders, he dumped the idea.

The following year Howard called a meeting of large fossil fuel companies, seeking their help in destroying the renewable energy target that he had been forced to accept in the runup to the 1997 Kyoto climate summit.

However, in 2006, the political pressure to act on climate became too great. The Millennium Drought seemed endless, the European Union had launched its own emissions trading scheme, and Al Gore’s documentary An Inconvenient Truth cut through with the Australian public. Late in the year, Treasury came back for another bite at an emissions trading cherry.

In his book Triumph and Demise, journalist Paul Kelly describes how Treasury secretary Ken Henry convinced Howard to adopt an emissions trading policy, telling him:

Prime Minister, I’m taking as my starting point that during your prime ministership you will want to commit us to a cap on national emissions. If my view on that is wrong, there is really nothing more I can say… If you want a cap on emissions then it stands to reason that you want the most cost-effective way of doing that. That brings us to emissions trading, unless you want a tax on carbon.

The moral challenge

Howard’s problem was that voters were not convinced by his backflip. In November 2007, Kevin Rudd – who had proclaimed climate change “the great moral challenge of our generation” – became prime minister. A tortuous policy-making process ensued, with ever greater concessions to big polluters.

In late 2009, according to Kelly’s account, Rudd refused to meet with the then opposition leader Malcolm Turnbull to resolve the outstanding issues around Rudd’s Carbon Pollution Reduction Scheme. Then, in December of that year, Turnbull was toppled by Abbott and the legislation was doomed.

Meanwhile, the Copenhagen climate conference ended in disaster, and although advised to go for a double-dissolution election, Rudd baulked. In April 2010, he kicked emissions trading into the long grass for at least three years, and his approval ratings plummeted.

In July 2010 Julia Gillard toppled Rudd, and the prime ministership has never been safe from internal dissent since. Not since 2004 has a federal leader won a general election from which they would survive to contest the next.

In the final days of the 2010 election campaign, Gillard made the fateful statement that “there will be no carbon tax under a government I lead”.

That election resulted in a hung parliament, and after meeting climate policy advocates Ross Garnaut and Nick Stern, two crucial independents – Tony Windsor and Rob Oakeshott – made a carbon price their price for supporting Gillard.

The carbon tax war

Gillard steered the legislation through parliament in the face of ferocious opposition from Abbott, who declared a “blood oath” that he would repeal her legislation. After winning the 2013 election, he delivered on his pledge in July 2014. Gillard, for her part, said she regretted not taking issue with Abbott’s characterisation of her carbon pricing scheme as a tax.

Abbott also reduced the Renewable Energy Target, and tried but failed to rid himself of the Australian Renewable Energy Authority and the Clean Energy Finance Corporation.

Abbott’s demise as prime minister was not as directly tied to climate policy as Howard’s, Rudd’s or Gillard’s. Far more instrumental were gaffes such as giving the Duke of Edinburgh a knighthood.

But as Abbott’s government was descending into chaos, Turnbull seemed to many middle-of-the-road voters like the perfect solution: Liberal economic policy but with added climate concern. On today’s evidence, he seems to have been willing to trade that concern away to stay in the top job.

The future?

As of the time of writing – Monday 20 August (it pays to be specific when the situation is in such flux) – it is clear that the NEG is dead, at least in its original incarnation as a means of tackling the climate issue. No legislation or regulation will aim to reduce greenhouse emissions, with the policy now addressing itself solely at power prices.

It is not clear how long Turnbull will remain in office, and one could make a case that he is no longer truly in power. Thoughts now inevitably also turn to what a Shorten Labor government would do in this area if the opposition claims victory at the next election.




Read more:
It’s ten years since Rudd’s ‘great moral challenge’, and we have failed it


The first question in that regard is whether Mark Butler – an able opposition spokesman on climate change – would become the minister for a single portfolio covering energy and environment. The next is the degree of opposition that Labor would face – both from members of the union movement looking out for the interests of coal workers, and from business and industry. If Australia’s environment groups win the battle over Adani’s planned Carmichael coalmine, will they have the heart to win the wider climate policy struggle?

As ever, it will come down to stamina and stomach. Would Shorten and Butler have the wherewithal to face down the various competing interests and push through a credible, lasting policy, in an area where all their predecessors have ultimately failed?

<!– Below is The Conversation's page counter tag. Please DO NOT REMOVE. –>
The Conversation

Will the Coalition government formulate a new emissions policy – one that can withstand the feet-to-the-fire approach that has killed off every other similar effort so far?

Marc Hudson, PhD Candidate, Sustainable Consumption Institute, University of Manchester

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

Why our carbon emission policies don’t work on air travel



File 20180703 116129 1xj9a0q.jpg?ixlib=rb 1.1
The Gillard government’s carbon price had no effect on the aviation industry.
Shutterstock

Francis Markham, Australian National University; Arianne C. Reis, Western Sydney University; James Higham, and Martin Young, Southern Cross University

The federal government’s National Energy Guarantee aims to reduce greenhouse gas emissions in the electricity industry by 26% of 2005 levels. But for Australia to meet its Paris climate change commitments, this 26% reduction will need to be replicated economy-wide.

In sectors such as aviation this is going to be very costly, if not impossible. Our modelling of the carbon price introduced by the Gillard government shows it had no detectable effect on kilometres flown and hence carbon emitted, despite being levied at A$23-$24 per tonne.

If Australia is to meet its Paris climate commitments, the National Energy Guarantee target will need to be raised or radical measures will be required, such as putting a hard cap on emissions in sectors such as aviation.




Read more:
Obituary: Australia’s carbon price


Our analysis of domestic aviation found no correlation between the Gillard government’s carbon price and domestic air travel, even when adjusting statistically for other factors that influence the amount Australians fly.

This is despite the carbon price being very effective at reducing emissions in the energy sector.

To reduce aviation emissions, a carbon price must either make flying less carbon intensive, or make people fly less.

In theory, a carbon tax should improve carbon efficiency by increasing the costs of polluting technologies and systems, relative to less polluting alternatives. If this is not possible, a carbon price might reduce emissions by making air travel more expensive, thereby encouraging people to either travel less or use alternative modes of transport.

Why the carbon price failed to reduce domestic aviation

The cost of air travel has fallen dramatically over the last 25 years. As the chart below shows, economy air fares in Australia in 2018 are just 55% of the average cost in 1992 (after adjusting for inflation).

Given this dramatic reduction in fares, many consumers would not have noticed a small increase in prices due to the carbon tax. Qantas, for example, increased domestic fares by between A$1.82 and A$6.86.

The carbon price may have just been too small to reduce consumer demand – even when passed on to consumers in full.

Consumer demand may have actually been increased by the Clean Energy Future policy, which included household compensation.




Read more:
Carbon pricing is still the best way to cut emissions, if we get it right


https://datawrapper.dwcdn.net/CJiPw/2/

The cost of jet fuel, which accounts for between 30 and 40% of total airline expenses, has fluctuated dramatically over the last decade.

As the chart below shows, oil were around USD$80-$100 per barrel during the period of the carbon price, but had fallen to around USD$50 per barrel just a year later.

Airlines manage these large fluctuations by absorbing the cost or passing them on through levies. Fare segmentation and dynamic pricing also make ticket prices difficult to predict and understand.

Compared to the volatility in the cost of fuel, the carbon price was negligible.

https://datawrapper.dwcdn.net/QssWQ/1/

The carbon price was also unlikely to have been fully passed through to consumers as Virgin and Qantas were engaged in heavy competition at the time, also known as the “capacity wars”.

This saw airlines running flights at well below profitable passenger loads in order to gain market share. It also meant the airlines stopped passing on the carbon price to customers.




Read more:
The Paris climate agreement needs coordinated carbon prices to be successful


A carbon price could incentivise airlines to reduce emissions by improving their management systems or changing plane technology. But such an incentive already existed in 2012-2014, in the form of high fuel prices.

A carbon price would only provide an additional incentive over and above high fuel prices if there is an alternative, non-taxed form of energy to switch to. This is the case for electricity generators, who can switch to solar or wind power.

But more efficient aeroplane materials, engines and biofuels are more myth than reality.

What would meeting Australia’s Paris commitment require?

Given the failure of the carbon price to reduce domestic air travel, there are two possibilities to reduce aviation emissions by 26% on 2005 levels.

The first is to insist on reducing emissions across all industry sectors. In the case of aviation, the modest A$23-$24 per tonne carbon price did not work.

Hard caps on emissions will be needed. Given the difficulty of technological change, this will require that people fly less.

The second option is to put off reducing aviation emissions and take advantage of more viable sources of emissions reduction elsewhere.

By increasing the National Energy Guarantee target to well above 26%, the emission reductions in the energy sector could offset a lack of progress in aviation. This is the most economically efficient way to reduce economy-wide emissions, but does little to reduce carbon pollution from aviation specifically.

The ConversationAirline emissions are likely to remain a difficult problem, but one that needs to be tackled if we’re to stay within habitable climate limits.

Francis Markham, Research Fellow, College of Arts and Social Sciences, Australian National University; Arianne C. Reis, Senior lecturer, Western Sydney University; James Higham, Professor of Tourism, and Martin Young, Associate Professor, School of Business and Tourism, Southern Cross University

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

Climate policy is a fiendish problem for governments – time for an independent authority with real powers


Peter C. Doherty, The Peter Doherty Institute for Infection and Immunity

From global epidemics to global economic markets to the global climate, understanding complex systems calls for solid data and sophisticated maths. My advice to young scientists contemplating a career in research is: “If you’re good at maths, keep it up!”

I’m no mathematician – my research career has focused largely on the complexities of infection and immunity. But as recently retired Board Chair of the ARC Centre of Excellence for Climate System Science, I’ve been greatly informed by close contact with mathematically trained meteorologists, oceanographers and other researchers, who analyse the massive and growing avalanche of climate data arriving from weather stations, satellites, and remote submersibles such as Argo floats.




Read more:
Why Australians need a national environment protection agency to safeguard their health


My perception, based on a long experience of science and scientists, is that these are outstanding researchers of impeccable integrity.

Among both the climate research community and the medically oriented environmental groups such as the Climate and Health Alliance and Doctors for the Environment Australia with which I have been involved, there is increasing concern, and even fear, about the consequences of ever-climbing greenhouse gas levels in the atmosphere.

The growing climate problem

Following the thinking of the late Tony McMichael, a Canberra-based medical epidemiologist who began studying lead poisoning and then went on to become a primary author on the health section of the Intergovernmental Panel on Climate Change’s five-yearly Assessment Reports, I have come to regard human-induced global warming as similar in nature to the problem of toxic lead poisoning.

Just like heavy metal toxicity, the problems caused by atmospheric greenhouse gases are cumulative, progressive, and ultimately irreversible, at least on a meaningful human timescale.

Regrettably, this consciousness has not yet seeped through to enough members of
the Australian political class. The same lack of engagement characterises current
national politics in Russia and the United States – although some US states, particularly California are moving aggressively to develop alternative energy sources.

The latter is true for much of Western Europe, while China and South Korea are committed both to phasing out coal and to leading the world in wind and solar power technology. In collaboration with the US giant General Electric, South Korean and Japanese companies are working to develop prefabricated (and hopefully foolproof) small nuclear reactors called SMRs.

At this stage, China (currently the world’s biggest greenhouse gas emitter) is humanity’s best hope – if it indeed holds to its stated resolve.

Political paralysis

Politically, with a substantial economic position in fossil fuel extraction and
export, Australia’s federal government seems paralysed when it comes to taking meaningful climate action. We signed on to the Paris Agreement but, even if we meet the agreed reductions in emissions, precious little consideration is given to the fossil fuels that we export for others to burn. And while much of the financial sector now accepts that any new investments in coalmines will ultimately become “stranded assets”, some politicians nevertheless continue to pledge tax dollars to fund such projects.

What can be done? Clearly, because meaningful action is likely to impact both
on jobs and export income, this is an impossible equation for Australia’s elected
representatives. Might it help to give them a “backbone” in the form of a fully
independent, scientifically and economically informed statutory authority, endowed with real powers? Would such an initiative even be possible under Australian law?

Realising that reasoned scientific and moral arguments for meaningful action
on climate change are going nowhere fast, some 41 Australian environmental organisations sought the help of the Australian Panel of Experts on Environmental Law (APEEL) to develop the case for a powerful, independent Commonwealth Environmental Commission (CEC) linked to a National Environmental Protection Agency (NEPA).

This week in Canberra, at the culmination of a two-year process, the environmental groups will present their conclusions, preceded by a more mechanistic analysis from the lawyers.

In very broad terms, the new agencies would do for environmental policy what the Reserve Bank currently does for economic decisions. That is, they would have the power to make calls on crucial issues (whether they be interest rates or air pollution limits) that cannot be vetoed by the government.

Of course, that would require a government that is willing to imbue them with such power in the first place.




Read more:
Australia needs stricter rules to curb air pollution, but there’s a lot we could all do now


While it’s a good bet that developing such a major national initiative will, at best, be a long, slow and arduous process, it is true that (to quote Laozi): “A journey of a thousand miles begins with a single step”.

The ConversationWhat is also clear is that “business as usual” is not a viable option for the future economy, defence and health of Australia.

Peter C. Doherty, Laureate Professor, The Peter Doherty Institute for Infection and Immunity

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

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.

Can two clean energy targets break the deadlock of energy and climate policy?



File 20170922 17319 1yjiyih
Climate policy has become bogged down in the debate over a clean energy target.
Shutterstock

Bruce Mountain, Victoria University

Malcolm Turnbull’s government has been wrestling with the prospect of a clean energy target ever since Chief Scientist Alan Finkel recommended it in his review of Australia’s energy system. But economist Ross Garnaut has proposed a path out of the political quagmire: two clean energy targets instead of one.

Garnaut’s proposal is essentially a flexible emissions target that can be adapted to conditions in the electricity market. If electricity prices fail to fall as expected, a more lenient emissions trajectory would likely be pursued.

This proposal is an exercise in political pragmatism. If it can reassure both those who fear that rapid decarbonisation will increase energy prices, and those who argue we must reduce emissions at all costs, it represents a substantial improvement over the current state of deadlock.


Ross Garnaut/Yann Robiou DuPont, Author provided

Will two targets increase investor certainty?

At a recent Melbourne Economic Forum, Finkel pointed out that investors do not require absolute certainty to invest. After all, it is for accepting risks that they earn returns. If there was no risk to accept there would be no legitimate right to a return.

But Finkel also pointed out that investors value policy certainty and predictability. Without it, they require more handsome returns to compensate for the higher policy risks they have to absorb.


Read more: Turnbull is pursuing ‘energy certainty’ but what does that actually mean?


At first sight, having two possible emissions targets introduces yet another uncertainty (the emissions trajectory). But is that really the case? The industry is keenly aware of the political pressures that affect emissions reduction policy. If heavy reductions cause prices to rise further, there will be pressure to soften the trajectory.

Garnaut’s suggested approach anticipates this political reality and codifies it in a mechanism to determine how emissions trajectories will adjust to future prices. Contrary to first impressions, it increases policy certainty by providing clarity on how emissions policy should respond to conditions in the electricity market. This will promote the sort of policy certainty that the Finkel Review has sought to engender.

Could policymakers accept it?

Speaking of political realities, could this double target possibly accrue bipartisan support in a hopelessly divided parliament? Given Tony Abbott’s recent threat to cross the floor to vote against a clean energy target (bringing an unknown number of friends with him), the Coalition government has a strong incentive to find a compromise that both major parties can live with.


Read more: Abbott’s disruption is raising the question: where will it end?


Turnbull and his energy minister, Josh Frydenberg, who we understand are keen to see Finkel’s proposals taken up, could do worse than put this new idea on the table. They have to negotiate with parliamentary colleagues whose primary concern is the impact of household electricity bills on voters, as well as those who won’t accept winding back our emissions targets.

Reassuringly, the government can point to some precedent. Garnaut’s proposal is novel in Australia’s climate policy debate, but is reasonably similar to excise taxes on fuel, which in some countries vary as a function of fuel prices. If fuel prices decline, excise taxes rise, and vice versa. In this way, governments can achieve policy objectives while protecting consumers from the price impacts of those objectives.

The devil’s in the detail

Of course, even without the various ideologies and vested interests in this debate, many details would remain to be worked out. How should baseline prices be established? What is the hurdle to justify a more rapid carbon-reduction trajectory? What if prices tick up again, after a more rapid decarbonisation trajectory has been adopted? And what if prices don’t decline from current levels: are we locking ourselves into a low-carbon-reduction trajectory?

These issues will need to be worked through progressively, but there is no obvious flaw that should deter further consideration. The fundamental idea is attractive, and it looks capable of ameliorating concerns that rapid cuts in emissions will lock in higher electricity prices.

The ConversationFor mine, I would not be at all surprised if prices decline sharply as we begin to decarbonise, such is the staggering rate of technology development and cost reductions in renewable energy. But I may of course be wrong. Garnaut’s proposal provides a mechanism to protect consumers if this turns out to be the case.

Bruce Mountain, Director, Carbon and Energy Markets., Victoria University

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