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.

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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.

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



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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.

How trade policies can support global efforts to curb climate change


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Eliminating trade barriers on green technologies could help countries to shift away from fossil fuels.
from www.shutterstock.com, CC BY-ND

Adrian Henry Macey, Victoria University of Wellington

Climate change will have a big impact on the global economy as nations seek to adapt to a warmer world and adopt policies to keep global warming below two degrees. In the wake of the US withdrawal from the Paris Agreement, it is important that policies around trade and investment support national efforts to adapt to global warming while trying to curb it. Four issues stand out:

1. Border tax adjustments

Border tax adjustments, or BTAs, refer to import taxes on goods from countries where companies do not have to pay for their emissions.

This is highly controversial and problematic for practical reasons and difficult to reconcile with World Trade Organisation (WTO) compliance requirements. The arguments in favour rest on punishing free riders and protecting the competitiveness of national firms subject to climate change costs in their home country. Such taxes are also held up as a way of avoiding “carbon leakage” caused by production shifting to countries with more lax climate change policies.

The latter two arguments are similar to those that have been applied in the past to environmental protection regulations. The problem with them is that there is very poor empirical evidence for either competitiveness risk or for carbon leakage.
They also rest on the assumption that combating climate change is always a net cost. This is being increasingly challenged.

The argument against BTAs centres on the potential of unilateral measures being used to coerce developing countries. The sensitivity of such measures is shown by the fact that, until very late in the negotiations of the Paris Agreement, developing countries insisted on including the following clause.

“Developed country parties shall not resort to any form of unilateral measures against goods and services from developing country parties on any grounds related to climate change.”

2. Trade liberalisation in climate-friendly goods and services

Eliminating trade barriers on solar panels and other green technologies could help countries to shift away from fossil fuels. This is fully within the scope of the WTO and indeed the mandate of the current Doha trade round. There are several work streams within the WTO covering this area, though progress is slow.

3.International carbon trading and offsets

The Kyoto Protocol includes several mechanisms (Clean Development Mechanism, Joint Implementation and Emissions Trading) that can be used by countries that have tabled a 2020 target (European countries and Australia).

International market mechanisms beyond 2020 have not yet been created under the Paris Agreement but its Article 6 foresees them. Such mechanisms are being developed bottom-up by groups of countries, which can make much faster progress than is possible within the United Nations Framework Convention on Climate Change (UNFCCC).

However, any new mechanisms are likely to be linked in some way to the UNFCCC. There is no coverage of carbon trading under the WTO at present and there appears to be no appetite for bringing it within WTO disciplines.

4. Compatibility of climate measures and trade rules

One fear is that WTO rules will have a chilling effect on climate change measures such as subsidies, technical regulations or bans on certain products. However, Article 3.5 of the UNFCCC (which applies to the Paris Agreement as it does to the earlier Kyoto Protocol) is clear.

It uses WTO language to state that “measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade”. The UNFCCC, like the WTO, acknowledges the legitimate purpose of climate measures, including that they may involve restrictions on trade.

There is ample and growing WTO jurisprudence on measures taken for environmental purposes which confirms their legitimacy in WTO law. The jurisprudence is not static; it evolves with international thinking as expressed in treaties and less formal agreements.

Helpfully the WTO Treaty (1994) included an objective relating to protection and preservation of the environment that went further than the earlier General Agreement on Tariffs and Trade (GATT). This provision has already been used in interpretation by the highest WTO jurisdiction, the Appellate Body.

Conclusions

I expect that some carbon markets will develop amongst carbon clubs. Trading rules will be determined by those countries involved and will rest on the environmental integrity of the units traded.

Border tax adjustments (BTAs) are problematic. Some commentators have predicted a climate change trade war, arguing that countries are vulnerable if their climate measures are seen as inadequate.

This is now an improbable scenario. Any attempt to impose BTAs against countries which have signed up to the Paris Agreement would face enormous practical difficulties. It would also risk undoing the international consensus.

Transparency, peer review and naming and shaming of countries with inadequate pledges (Nationally Determined Contribution or NDCs), or countries that fail to implement an adequate one, may prove more effective than any of these unilateral measures. Evidence from the climate change negotiations is that countries do care about their reputation.

A further resource to encourage countries to act would be carbon clubs, where countries wanting to accelerate their transition to a low-carbon economy would link their climate measures through a common carbon price via their emissions trading schemes.

The threat of BTAs – clearly foreseen by major American companies after the Trump Administration’s decision to leave the Paris Agreement – may be a useful political lever to gain cooperation. But there are other ways of achieving similar ends.

The ConversationOne example is to require all goods, domestic or imported, to meet sustainability standards. This is potentially allowable under the WTO Technical Barriers to Trade agreement (TBT) as a type of processing and production method. But even if not, the existence of the Paris Agreement – a universal agreement with clear objectives and requirements on all parties to act on climate change – would be a useful reference in any dispute settlement proceedings.

Adrian Henry Macey, Senior Associate, Institute for Governance and Policy Studies; Adjunct Professor, New Zealand Climate Change Research Institute. , Victoria University of Wellington

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

15th-century Chinese sailors have a lesson for Trump about climate policy


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Disruptive technology, Ming Dynasty-style.
Vmenkov/Wikimedia Commons, CC BY-SA

Dave Frame, Victoria University of Wellington

In the early 15th century the Ming Dynasty in China undertook a series of expensive oceangoing expeditions called the Treasure Voyages. Despite the voyages’ success, elements of the elite opposed them. “These voyages are bad, very bad,” we can imagine them tweeting. “They are a bad deal for China.” Eventually these inward-looking, isolationist leaders gained enough power to prevent future voyages.

But this was an own goal. The parochial elites who killed off the Treasure Voyages could stop Chinese maritime innovation, but they could do nothing to prevent it elsewhere. Decades later, European sailors mastered the art of sailing vast distances across the ocean, and created fortunes and empires on the back of that technology (for better or worse). It is hard to see how China’s strategic interests were served by abandoning a field in which they led.

There are some striking parallels in the Trump administration’s decision to renege on the Paris climate agreement. It has been cast as a move to protect America, but in the long run it won’t derail the world’s transition to a low-carbon economy, and instead the US will find itself lagging, not leading.

Trump’s repudiation of the Paris deal is regrettable for at least three reasons. First, because the US is a technological leader whose entrepreneurs are extremely well placed to lead the global low-carbon transition; second, because America’s abdication of climate leadership weakens the global order and sends a wink and a nod to other fossil-fuelled recalcitrants like Saudi Arabia and Russia; and finally because having the world’s second-highest emitter outside the agreement is a clear negative.

That said, US flip-flopping on climate is nothing new. The nation played a strong role in shaping the Kyoto Protocol, only to fail to ratify it. And while that did not help matters, it did not derail international efforts to combat climate change. In fact, the momentum behind climate-friendly initiatives has grown several-fold since the early 2000s.

Viewed in the long run, the latest US defection changes little. Any conceivable future Democrat administration will rejoin the Paris Agreement. But more importantly, the transition to a low-carbon future is not dependent on the actions of a single player.

The criteria for successful climate change policy are hard to achieve but easy to describe: success will come when non-emitting technologies economically outcompete fossil fuels, pretty much everywhere in the world, in the main half-dozen or so sectors that matter.

Beating the ‘free-rider’ issue

A stable climate is what we call a “public good”, similar to fresh air or clean water. The US political scientist Scott Barrett has pointed out that climate change is an “aggregate efforts public good”, in the sense that everybody has to chip in to solve the problem of safeguarding the climate for everyone.

“Aggregate efforts” public goods are especially hard to preserve, because there is a strong incentive to free-ride on the efforts of others, as the US now seeks to do.

But technology can transform this situation, turning an aggregate efforts public good into a “best-shot public good”. This is a situation in which one player playing well can determine the whole outcome, and as such is a much easier problem to solve.

We have seen technology play this role before, in other global environmental issues. The ozone hole looked like a hard problem, but became an easy one once an inexpensive, effective technological fix became available in the form of other gases to use in place of ozone-harming CFCs (ironically, however, the solution exacerbated global warming).

Something similar happened with acid rain, caused by a handful of industrial pollutants. Dealing with carbon dioxide emissions is harder in view of the number of sources, but breakthroughs in five or six sectors could make a massive dent in emissions.

Technology trumps politics

This suggests that solving climate change relies far more heavily on technological innovation and successful entrepreneurship than it does on any single government. Policies in specific jurisdictions can speed climate policy up or slow it down, but as long as no single government can kill the spirit of entrepreneurship, then no country’s actions can alter the long-run outcome.

This is why German climatologist John Schellnhuber is right to say that “if the US really chooses to leave the Paris agreement, the world will move on with building a clean and secure future”.

The low-carbon race is still on, and the main effect of Trump’s decision is to put US innovators at a disadvantage relative to their international competitors.

We have seen these technological races before, and we have seen what recalcitrance and isolationism can do. Just ask the Ming Dynasty, who ceded their maritime leadership and in doing so let Europe reap the spoils of colonialism for half a millennium.

Similarly, the Trump administration can ignore basic physics if it likes, although this is electorally unsustainable – young Americans can see that it is in their own interest to support climate policy. Democracies are imperfect, but over time they have the ability to self-correct.

The ConversationDeveloping polices that regulate the release of environmentally damaging gases is important. Pricing carbon is important. But government policy is not everything. Ultimately, this problem will be solved mainly by technology, because the way out of the jam is by finding new, inexpensive ways for humans to flourish without harming the planet.

Dave Frame, Professor of Climate Change, Victoria University of Wellington

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

Labor’s climate policy could remove the need for renewable energy targets


Tony Wood, Grattan Institute

The federal Labor Party has sought to simplify its climate change policy. Any suggestion of expanding the Renewable Energy Target has been dropped. But there is debate over whether the new policy is actually any more straightforward as a result.

One thing Labor did confirm is its support for an emissions intensity scheme (EIS) as its central climate change policy for the electricity sector. This adds clarity to the position the party took to the 2016 election and could conceivably remove the need for a prescribed renewable energy target anyway.

An EIS effectively gives electricity generators a limit on how much carbon dioxide they can emit for each unit of electricity they produce. Power stations that exceed the baseline have to buy permits for the extra CO₂ they emit. Power stations with emissions intensities below the baseline create permits that they can sell.

An EIS increases the cost of producing electricity from emissions-intensive sources such as coal generation, while reducing the relative cost of less polluting energy sources such as renewables. The theory is that this cost differential will help to drive a switch from high-emission to low-emission sources of electricity.

The pros and cons of an EIS, compared with other forms of carbon pricing, have been debated for years. But two things are clear.

First, an EIS with bipartisan support would provide the stable carbon policy that the electricity sector needs. The sector would be able to invest with more confidence, thus contributing to security of supply into the future.

Second, an EIS would limit the upward pressure on electricity prices, for the time being at least.

These reasons explain why there was a brief groundswell of bipartisan support for an EIS in 2016, until the Turnbull government explicitly ruled it out in December.

Moving targets

Another consideration is whether, with the right policy, there will be any need for firm renewable energy targets. This may help to explain Labor’s decision to rule out enlarging the existing scheme or extending it beyond 2020.

If we had a clear policy to reduce emissions at lowest cost, whether in the form of an EIS or some other scheme, renewable energy would naturally increase to whatever level is most economically efficient under those policy settings. Whether this reaches 50% or any other level would be determined by the overall emissions-reduction target and the relative costs of various green energy technologies.

In this scenario, a separately mandated renewable energy target would be simply unnecessary and would probably just add costs with no extra environmental benefit. Note that this reasoning would apply to state-based renewable energy policies, which have become a political football amid South Australia’s recent tribulations over energy security.

An EIS is also “technology agnostic”: power companies would be free to pursue whatever technology makes the most economic sense to them. Prime Minister Malcolm Turnbull explicitly endorsed this idea earlier this month.

Finally, an EIS would integrate well with the National Electricity Market, a priority endorsed by the COAG Energy Council of federal, state and territory energy ministers. State and territory governments may find this an attractive, nationally consistent alternative that they could support.

Strengths and weaknesses

A 2016 Grattan Institute report found that an EIS could be a practical step on a pathway from the current policy mess towards a credible energy policy. Yet an EIS has its weaknesses, and some of Labor’s reported claims for such a scheme will be tested.

In the short term, electricity prices would indeed rise, although not as much as under a cap-and-trade carbon scheme. It is naive to expect that any emissions-reduction target (either the Coalition’s 26-28% or Labor’s 45%) can be met without higher electricity costs.

Another difficulty Labor will have to confront is that setting the initial emission intensity baseline and future reductions would be tricky. The verdict of the Finkel Review, which is assessing the security of the national electricity market under climate change policies, will also be crucial.

Despite media reports to the contrary, Chief Scientist Alan Finkel and his panel have not recommended an EIS. Their preliminary report drew on earlier reports noting the advantages of an EIS over an extended renewable energy target or regulated closure of fossil-fuelled power stations, but also the fact that cap-and-trade would be cheaper to implement.

Labor has this week moved towards a credible climate change policy, although it still has work to do and its 45% emissions-reduction target will still be criticised as too ambitious. Meanwhile, we’re unlikely to know the Coalition government’s full policy until after it completes the 2017 Climate Change Policy Review and receives the Finkel Review’s final report.

Australians can only hope that we are starting to see the beginnings of the common policy ground that investors and electricity consumers alike so urgently need.

The Conversation

Tony Wood, Program Director, Energy, Grattan Institute

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

What role for the states on climate and energy policy? NSW enters the fray


Anna Bruce, UNSW Australia; Graham Mills, UNSW Australia, and Iain MacGill, UNSW Australia

We’re currently having a national conversation about climate and energy, with reviews of climate policy and the National Electricity Market underway. Up for debate is how the states and federal government will share these responsibilities.

Following the recent statewide blackout in South Australia, the federal government pointed the finger at Labor states’ “aggressive”, “unrealistic” and “ideological” renewable energy targets.

Victorian Premier Daniel Andrews returned: “Rather than peddle mistruths, Malcolm Turnbull and Barnaby Joyce should start providing some national leadership and focus on developing a renewable vision beyond 2020.”

It might seem to be yet another partisan, ideological stoush between a Liberal federal government and three Labor state governments.

However, the Liberal-led New South Wales government has now also entered the fray, with a 2050 emissions target that will almost certainly require complete decarbonisation of the electricity sector within the next 25 years.

And to achieve this, renewables will have a key, many would argue overwhelming, role to play.

What are the states already doing?

NSW released its climate policy framework in November, joining Victoria, South Australia and the ACT with an aspirational target to reduce carbon emissions to net zero by 2050.

While NSW didn’t announce a renewable target, the majority of states now have one. Queensland is seeking 50% renewable generation by 2030, Victoria 40% by 2025 and South Australia 50% by 2025.

Tasmania’s generation is already mostly renewable (albeit mostly conventional hydro generation). The Australian Capital Territory looks set to achieve 100% renewables by 2020 and the Northern Territory has announced a 50% target for 2030.

At present, the federal government has a renewable energy target of around 23.5% renewable electricity by 2020 and a 2030 target of 26-28% greenhouse emission reductions from 2005 levels. These ambitions fall way below those of the states.

And way below the almost complete electricity sector decarbonisation by 2040 that the International Energy Agency says is required globally to avoid dangerous global warming.

What does the law say?

Constitutionally, energy policy in Australia is a matter for state governments. The development and implementation of the National Electricity Market over the past two decades has been achieved through the Council of Australian Governments (COAG), with harmonised legislation in each state.

State governments therefore have the constitutional scope to act both independently and in consort to achieve clean energy related goals.

Whether they should choose to do this, however, is another question. There is an obvious national context including Australia’s participation in international climate change processes such as the UN Framework Convention on Climate Change.

National policy coherence also has value in avoiding uncoordinated policies that can adversely impact investment incentives, increase compliance costs, and generally lead to less efficient outcomes.

While suitably ambitious, nationally consistent, legislation under federal government leadership may be ideal, it hardly seems realistic at present. The apparent divisions within the federal government seem likely to prevent useful progress, even with the two reviews.

It might well be a choice between state leadership or very little leadership over the next few years. And these years will be key to setting Australia on a clean energy path fit for the future.

New South Wales’ climate plan

The NSW climate change policy framework proposes to meet the net zero target through a number of policy “directions” to reduce emissions. It also proposes adaptation measures to cope with the warming that is already underway.

The emission reduction directions include: enhancing investment certainty for renewables; boosting energy productivity (energy efficiency); capturing other benefits of reducing emissions (such as improved health from reduced air pollution) and managing the risks; and growing new industries in NSW.

These are to be advanced through government policy, government operations, and advocacy. Specific initiatives are to be outlined in a set of action plans, including a climate change fund and an energy efficiency plan, which are currently under consultation.

A further advanced energy plan will be developed in 2017. This will include provisions for the future role of renewable energy. Clearly the government will not be able to achieve its aspirational emissions target in the absence of a transformation of the energy system, so how will renewable energy figure in the absence of a state target?

While we can’t preempt the plan, the policy framework defines advanced energy to not only cover renewable generation itself but also how it is integrated into industry structures and adopted by end users.

Given the importance of integration in transitioning the energy system, such a broad focus could usefully complement the activities of other states as well as NSW.

The policy also emphasises collaborating with the commonwealth and other states through COAG.

NSW: a climate advocate?

Combined state action has historically played a key role in federal climate policy. It was bottom up pressure from states that resulted in the Howard government’s initial emissions trading scheme (ETS) proposal in 2007.

The Garnaut review that formed the basis of Kevin Rudd’s ETS was originally commissioned by Labor state governments.

On this point SA Premier Jay Wetherill has taken the lead in calling for a national emissions trading scheme to be implemented through harmonised legislation at a state level.

While this seems unlikely to be a feature of NSW’s advocacy in 2017, continued failure by the federal government to advance climate and energy policy might require such types of coordinated state efforts.

In this light, state government efforts do not appear “ideological”. That would seem to better describe the federal government’s present opposition to even exploring promising emission reduction options.

And while it is too soon to know if NSW’s climate policy is fit for the future, it certainly represents welcome progress, and provides a basis that can be built upon.

The Conversation

Anna Bruce, Lecturer in the School of Photovoltaic and Renewable Energy Engineering, UNSW Australia; Graham Mills, , UNSW Australia, and Iain MacGill, Co-director, Centre for Energy and Environmental Markets, UNSW Australia

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