The timing couldn’t have been worse for the government.
Last week, Environment Minister Greg Hunt declared victory in the Coalition’s five year battle against carbon pricing. In less than a week, international developments have revealed how short-sighted his climate policies are.
With the publication of the IPCC Climate Synthesis report over the weekend, we now have the best available advice to suggest what we need to do to avoid catastrophic climate change - to put a cap on pollution while moving as fast as possible to renewable energy.
There doesn’t need to be a trade-off between avoiding catastrophic climate change and economic growth.
Ambitious mitigation would reduce economic growth by around 0.06 percentage points a year or, assuming Australia’s current growth rate is around 3 per cent, ambitious action would reduce it to around 2.94 per cent to ensure we have a safe future climate.
The IPCC report’s release will only spur momentum as the world looks to Paris in December 2015, where countries will try to reach agreement on a global deal to curb emissions beyond 2020. As countries lay their cards on the table in the lead-up, announcing longer term emissions reduction targets with greater ambition, the short-term and inadequate nature of the Government’s Direct Action scheme is going to be mugged by reality.
'The Government’s policy is simply not credible'
Those with emissions trading schemes, such as the European Union and, soon enough, China, will be able to set a feasible long-term ambitious agenda because they’ll have schemes which set an economy-wide limit on emissions. Those with strong policies to close their most polluting power stations, such as the United States, will be able to point to significant emissions reductions.
Australia will have neither. We’ll just have Greg Hunt’s glib assertions about Direct Action.
We will have a grants scheme for polluters that fail to set a viable path for meeting our inadequate 5 per cent target in 2020, let alone a higher target a decade beyond that. A short-term policy fix with no ability to scale up to meet higher targets nor with the inbuilt incentives to drive the economy-wide transformation we need for clean energy.
The policy battle isn’t one between which mechanism we choose to apply – an emissions trading scheme, or a subsidies program the Government is introducing – it’s about which policy has the ability to drive the emissions cuts we’re going to need both now and into the future. And on this score, every reliable economist and climate change scientist is in agreement. The Government’s policy is simply not credible.
The deal last week to secure legislative passage of Direct Action’s centrepiece, the Emissions Reduction Fund (ERF), does virtually nothing to strengthen the policy.
The ERF remains an inadequate and flawed means to deliver emissions reductions of the scale Australia requires to make good on our low 5 per cent target, but also to drive the structural economic transformation to an economy fuelled by clean energy. Market analysts Reputex suggest the $2.5 billion fund may get Australia about a third of the way there, but not much more.
For too long, Environment Minister Greg Hunt has brushed off questions with glib answers professing his confidence in his policy’s ability to reach targets.
One of the key weaknesses in the ERF remains the lack of an effective safeguard. That is, how can we be sure that abatement paid for from one company isn’t simply offset by an increase in pollution from another company? The answer to this, according to the amended legislation, is to establish a safeguard which sets emissions baselines and other rules.
'It is the Australian people who will be forced to pay the price'
However, the amended legislation says little about what the safeguard will look like, leaving the power to set the safeguard rules largely to the Minister.
We should be prepared for the usual parade of industry lobbyists making their way to Canberra to explain to Minister Hunt why their business needs special concessions. Our baseline must be weak, they’ll argue. We’re a special case, they’ll explain. We’re facing serious cost pressures, they’ll assure the Minister. A strong baseline will affect jobs, they’ll warn. They’ll say anything to avoid taking serious action to reduce their industry’s emissions – and it is the Australian people who will be forced to pay the price.
Furthermore, the “concessions” Clive Palmer managed to win from the Government – namely, a commitment to maintain the Climate Change Authority and embark on an eighteen month inquiry into emissions trading – do little. At least the Government is being upfront by declaring it won’t listen to whatever the Authority’s report says.
There is something else Australians concerned about this inquiry need to understand. Despite its independent status, the Environment Minister enjoys significant powers under the Climate Change Authority Act to appoint members. With a number of vacancies currently on the Authority’s board, no one should be surprised if the Government appoints new members to the Authority with thinking more in line with the Minister.
Australia’s domestic political war on climate change took place during a period when international progress on action appeared to be stalled. Now, with momentum growing, the extent to which the Government’s position created a policy strait jacket for itself is about to become very clear.
The events of the past week demonstrate very clearly that the ground moving from beneath the Government’s feet. Unless Australia can break out of its climate policy inertia we may find ourselves increasingly humiliated and isolated on the international stage.
