Australia’s secret ETS starts in five weeks

Alan Kohler
Editor-at-large, The Australian Business Review
Melbourne

Quietly, surprisingly, Australia’s climate change policy has become a bipartisan emissions trading scheme, or ETS … well, almost. The parties might try to manufacture differences for the election campaign, although they haven’t yet, and anyway they don’t really exist.

From July 1, coincidentally the day before the election, the Coalition’s “safeguard mechanism” within its Direct Action Plan will come into force.

One-hundred and fifty companies, representing about 50 per cent of Australia’s total carbon emissions, will be capped by legislation at their highest level of emissions between 2009-10 and 2013-14.

If they emit less than their caps, they will get credits, called Australian Carbon Credit Units (ACCUs), which were created by the Gillard government’s 2011 legislation; if they emit more, they have to buy ACCUs on the market.

The caps specifically include the electricity sector and the ACCUs are “financial products” under both the Corporations Act and the ASIC Act, and can be traded, so an ETS market will be established from July 1.

It is, in short, a classic cap-and-trade ETS, similar in effect to the one legislated by the ALP in 2011, but which unwisely started with a fixed price that could be labelled a carbon tax, and was repealed on July 17, 2014 by the Abbott government, with high-fives and champagne.

What hasn’t been announced or included in the Coalition’s legislation yet is that the caps will start to be reduced from next year, which will make it even more similar in some ways to the Gillard government’s Clean Energy Act 2011.

The legislation that included the Coalition’s ETS was passed by the Senate — with the support of both the ALP and the Greens — on its last day of sitting in 2015, in December.

As it happens, that was the day before the Paris climate conference, called COP 21, got underway, at which an agreement to keep the global temperature increase to 2 degrees was signed by 189 countries, including Australia.

The emissions caps imposed on 150 companies are described by the government as a “safeguard mechanism” to support the Emissions Reduction Fund that is the centrepiece of the Direct Action Plan, in which companies bid at auction for the right to be paid to reduce their emissions. Those auctions have so far resulted in 143 million tonnes of abatement at an average price of $12.10 per tonne, which is much lower than had been forecast by the scheme’s opponents.

The Department of Environment’s website says: “The safeguard mechanism will protect taxpayers’ funds by ensuring that emissions reductions paid for through the crediting and purchasing elements of the Emissions Reduction Fund are not displaced by significant increases in emissions above business-as-usual levels elsewhere in the economy.”

But depending on the gradient of cap reduction that is decided next year, the safeguard itself could end up becoming the central pillar of Australia’s response to the Paris agreement.

That’s because the government almost certainly can’t afford to pay for enough abatement under the auction system to meet its Paris commitments, given the state of the budget.

In fact, the safeguard mechanism becomes a way for the government — Coalition or Labor — to adjust the budget deficit: reducing the “safeguard” caps faster would reduce the amount that the ERF would have to pay out.

The interesting question is why no one is talking about any of this. Obviously the 150 companies involved know about it, and it’s all described in full on the department website, but the fact that Australia has effectively legislated an emissions trading scheme is virtually a secret.

So far, climate change has been absent from the election campaign and will probably remain so — because fundamentally the parties agree now. The only disagreement is likely to be rate of the reduction in the caps, and no one is ready to talk about that yet.

In fact, the idea of a cap-and-trade scheme has been part of the Coalition’s climate policy since well before Greg Hunt went from shadow minister to Minister for the Environment in 2013. He made it a condition of his appointment by Tony Abbott that the science of climate change would be accepted and the emissions reduction target would not change.

Within that, he and Abbott constructed a policy position that could more or less credibly be argued as achieving the abatement targets, while at the same time satisfying three requirements: differentiating their policy from the ALP, not increasing electricity prices and not upsetting the far right of the Coalition.

When Malcolm Turnbull became leader and Prime Minister last year, amazingly, he did not fully understand his party’s climate policy, and in particular the inclusion of a cap and trade ETS, because Hunt had never discussed it in Cabinet. Apparently, he was pleasantly surprised, but decided to maintain radio silence, as part of his broader efforts to keep the conservatives onside.

The whole process has been a remarkable strategy by Hunt: he has effectively steered an emissions trading scheme into Australia’s response to climate change through a ferociously polarised political debate.

It’s arguably a bit like Nixon in China — only a conservative minister could have done it.

cont.......

I noticed armpit hasn't started any threads decrying labors proposed ETS over the last week or two. He seemed to start a new one every day before that 

Why has climate change disappeared from the Australian election radar?
May 23, 2016 12.39pm AEST

Two weeks into a protracted election campaign, it is looking ever-more likely that climate change is to be placed way down the order of business – at least for the major parties.

The contest over climate change that characterised the previous three elections seems to have disappeared off the political radar despite the issue being more urgent than ever. Since the Paris climate summit, global average temperatures continue to break month-on-month records.

Just a few weeks after the summit, the North Pole was briefly not even able to reach freezing point – in the middle of winter. And just this month, Cape Grim surpassed a 400 ppm baseline minimum.

Then there is the truly frightening climate spiral developed by Ed Hawkins from the University of Reading. It shows what an El Niño amplified global temperature has climbed to. The spiral assumes a tight-knit but ever-expanding ball until April 2015, when the spiral line starts to separate dramatically from the ball. This year it careers dangerously close to the 1.5℃ threshold.



The diminishing political and media spiral on climate

While global temperatures may be spiralling out of control, the opposite appears to be happening with the climate issue attention cycle in Australia.

Apparently, climate is less important than jobs and growth – or, in Labor’s case, health and schools.

A big part of this change in political climates is undoubtedly the Paris summit itself. The political triumphalism of the summit belies the scientific pessimism of so many climate scientists and activists.

Kevin Anderson from Manchester University’s Tyndall Centre for Climate Change Research even declared the summit to be “worse that Copenhagen”, in that it is based on out-of-date science, does not include aviation and shipping, and includes negative emissions in its scenarios for achieving abatement.

On the other hand, after the collapse of talks at Copenhagen, some activists see no choice but to climb aboard with the Paris agreement, insofar as it at least signifies a mainstream seachange in action – even if the actual measures are inadequate. The INDCs that came out of the conference still put the world on a path to 3.5℃.

Yet so many politicians from around the globe have sought to convince their constituents that the climate problem is all but solved. The Coalition is banking on such a sell to the Australian electorate as it gambles with a climate attention minimisation strategy. Much of this sell has been left to the “best minister in the world” Greg Hunt, both before and after the Paris summit.

Hunt has already claimed success on meeting the 2020 target, and with strategies to meet the 2030 target.

Little of the Government’s progress in meeting the 2020 target is due to reducing emissions. Rather it has been the reduction in land-clearing, consumer-driven domestic solar, and the decline in manufacturing that have been decisive in meeting the 2020 targets.

The Guardian’s Lenore Taylor has pointed out that while the Coalition is bringing back the “carbon tax” scare campaign of 2013, its own scheme would have to draw on the “safeguard mechanism” component of Direct Action – which is itself a disguised ETS – to have any chance of meeting the targets.

Short of leaning on this mechanism, the only other option the Coalition has is to increase the taxpayer-funded emissions reduction fund to a level that would make a mockery of any claims to budget responsibility.

Add to this the fact that recent academic research on Direct Action has reaffirmed its status as a form of corporate welfare that is allocated to projects that would have happened anyway. And all this is in an Australia that has increased its already high emissions 3% since 2000.

Shifting voter attitudes on climate

But have Hunt’s strategies worked on the Australian electorate? Not according to a recent ReachTEL poll of 2,400 respondents on May 9, which revealed that 56% believed the government needed to do more to tackle global warming.

64% said they would be more likely to vote for a party that has a plan to source 100% of Australia’s electricity from renewable sources like wind, solar and hydro in the next 20 years.

Prime Minister Malcolm Turnbull seems to have switched off his personal barometer on climate as an issue that is too politically fraught. In 2010, he said:

    We know that the consequences of unchecked global warming would be catastrophic … We as a human species have a deep and abiding obligation to this planet and to the generations that will come after us.

But since then, Turnbull appears to have sacrificed his convictions to the climate-illiterate backbench of his party.

Labor has not done much better. While it has more ambitious 2030 abatement targets than the Coalition, it has been particularly silent in reminding voters of its climate policy alternative.

cont....

Oh no the spiral of D E A T H.

Its a dead issue apart from this Lee bloke!

Thanks for your input though Lee!