The policy will see the government introduce its Emissions Reduction Fund, the centrepiece of the Direct Action plan, in exchange for agreeing to a review of emissions tradingaround the world – despite the government pledging never to return to emissions pricing after repealing the carbon tax in July.
The deal also earns a reprieve for the Climate Change Authority, which will carry out the emissions trading review having now been saved from the government’s earlier plan to abolish the agency.
Below, experts react to the new developments.
Frank Jotzo, Director, Centre for Climate Economics and Policy, Australian National University
Direct Action is a subsidy scheme that gives taxpayers’ money to companies for claimed emissions reductions. It is vastly inferior to putting a price on emissions.
If a future Australian government is serious about significantly reducing emissions in an economically sensible way, then emissions trading or a carbon tax must be brought back.
It is sensible for the Climate Change Authority to investigate other countries’ emissions trading schemes, even though Minister Hunt called it a “gesture”.
The authority’s report will show that many countries have emissions trading schemes in place, and more are coming. Crucially, China now has regional carbon-trading schemes that cover more than twice the emissions under the scheme that was in place in Australia, and a national Chinese scheme is in preparation.
The Authority should also be asked to take stock of the many other policies that countries use to restrain their emissions. These range from aggressive energy-efficiency standards, to support for renewable energy and limits on coal-fired power generation, and of course energy and carbon taxes.
Australia is falling behind on practically all of these measures.
Jemma Green, Research Fellow, Curtin University
The Direct Action policy still gives a worrying sense of being on a diet but without stopping eating cream buns.
Of the standout issues, which I highlighted in my Conversation article in April, many still remain:
One safeguard has been put in place in Direct Action, to ensure that for the sectors not covered by Direct Action, their emissions growth doesn’t dwarf any reductions seen by companies that are reducing emissions inside the Direct Action tent.
Probably the most peculiar thing in today’s announcement was Clive Palmer saying that an emissions trading scheme is the most important thing for Australia, and therefore we will wait until after the United Nations climate negotiations in Paris in December 2015 to see whether Australia will adopt one.
In matters of climate policy, some countries lead and some watch others. If the targets are not reached, these policies will need to be reviewed and new policies introduced. The big question remains: who will be in government when this transpires?
John Quiggin, Professor, School of Economics, University of Queensland
As a Member of the Climate Change Authority, I’m naturally gratified to see that the value of our work has been recognised by the government and the Parliament. Much more important, though, is that the option of an emissions trading scheme has been kept alive and that it will be the subject of rigorous study.
The overwhelming view of economists is that a price-based measure such as an ETS is a critical component of a carbon-mitigation policy and a natural complement to policies of Direct Action.
Caroline Sullivan, Professor of Environmental Economics and Policy, Southern Cross University
What appears to be a compromise on climate policy for Australia will soon become reality, opening the way for carbon-reduction schemes to be put in place across the country. While the focus may be on emissions reduction by large emitters, the fact that the use of overseas carbon offsets has been rejected provides opportunities for organisations in Australian regions to capture some of the potential offset market.
With vegetation and soils having capacity to act as carbon sinks, there is no reason why some of the A$2.5 billion set aside in the government’s Direct Action plan cannot be used to pay for Australian-based offsets to cover that inevitable portion of emissions which will continue to be made under any climate policy scheme.
As we will always need energy, some level of emissions will continue to be produced, so let us consider how this relatively large sum of money can not only help to motivate carbon reductions from large emitters (through the Emissions Reductions Fund), but could also provide a hugely important (and much needed) economic stimulus for rural and regional Australia.
Neil Perry, Research Lecturer, University of Western Sydney
Something is usually better than nothing. The securing of the Direct Action plan in parliament, however, does not fill me with such thoughts.
In my opinion, the carbon pricing scheme fell into this category of something being better than nothing. While the commodification of nature can undermine the conservation of nature, the carbon pricing policy was at least symbolically important. It made some polluters pay for the social cost of their production. It could have, over time, contributed to changing values in society, which is ultimately needed for true environmental protection to take place.
In contrast, despite the rhetoric, the Direct Action scheme is a voluntary emissions reduction policy that simply appeases big polluters. That is, polluters do not have to participate and they are unlikely to unless they see a business case – a window of opportunity to profit from carbon reductions.
This scheme will not contribute to changing societal values and it is not symbolically important because it rewards firms for being big polluters.
Greg Hunt says he wants to concentrate on “practical things in Australia right now that will actually reduce emissions”. If that is the case, he should get behind, and strengthen, the Renewable Energy Target. Instead, the government has increased investment uncertainty in the renewable energy industry by publishing another review that weakens the target.
Ultimately, the only good thing arising from the deal to secure the Direct Action plan is the retention of the Climate Change Authority. The authority will provide a countervailing voice on the Renewable Energy Target and, hopefully, the government will in time learn to trust this voice and implement meaningful emission-reduction targets and policies.
Alan Pears, Sustainable Energy and Climate Researcher, RMIT University
If the scheme is carefully designed, it could support a business-run “baseline and credit” trading scheme – not dissimilar to the ASX.
This would allow the government to say it isn’t implementing an ETS but would give industry the flexibility of a trading mechanism – which industry would prefer.
There was extensive debate over the best form of ETS within Australia (the then Australian Greenhouse Office published an excellent series of explanatory discussion papers) as well as globally. The (by far) majority view of economists and policy makers was to prefer a “cap and trade” model over “baseline and credit”.
For government, the issues seem to be:
This could also cause uncertainty, unfair decisions and encourage game playing within industry, which may create pressures and power games within industry associations. If the trading scheme was industry-run, such intra-industry conflict could become quite nasty, eventually leading to calls for government to take it over…
But this approach would allow the government to maintain its public stance that it is opposed to emissions trading (but industry is free to trade if it wants to), and it could use a package of mechanisms to drive action, including the Emission Reduction Fund and mechanisms that use new names (but utilise the experience gained in recent years) to replace the Clean Energy Finance Corporation, Australian Renewable Energy Agency, Clean Technology Innovation Fund, etc. This would allow the government to “lubricate” progress.
Given its present negative attitude to regulation, which is an effective form of direct action, it is unclear to what extent the government might rely on other policy tools to drive abatement.
This seems to be yet another example where pragmatic compromise and incumbent vested interests will drive policy rather than elegant, optimal policy design. Sounds a lot like tax policy!
Ken Coghill, Associate Professor, Monash University
There are several fundamental weaknesses in the Palmer-Hunt version of Direct Action:
Article originally published in The Conversation.
« ANU’s resources blacklist: social activism, or the shape of things to come?