Climate Change

Analysis by Professor Robyn Eckersley, University of Melbourne

Loy Yang coal fired power station

Key Points

The Coalition promises:

emissions reduction target of minus 26-28% below 2005 levels by 2030, pledged under the Paris Agreement 2015, and promises to meet this new target without a carbon tax

  • no new climate policies, but promises to undertake consultation after the election, starting in 2017, to determine further post-2020 domestic emissions reduction policies
  • defends existing Emissions Reduction Fund and accompanying Safeguard Mechanism
  • on track to over-achieve Australia’s 2020 emission reduction target of minus 5% from 2000 levels by 2020
  • Large Scale Renewable Energy Target of 33,000 GWh by 2020 (scaled back from 41,000 GWh in June 2015)
  • National Energy Productivity Plan, to be developed by the Council of Australian Governments (COAG) Energy Council

Labor promises:

  • emissions reduction target of minus 45% from 2005 levels by 2030 in accordance with the advice from the Climate Change Authority; will aim for net zero emissions by 2050
  • a 2025 emissions reduction target will be released within one year of being elected, with five yearly reviews thereafter in accordance with the Paris Agreement
  • will scrap the Coalition’s Emissions Reduction Fund and replace it with two emissions trading schemes (ETS), one tailored for the electricity sector and one for the rest of the economy
  • will reinstate the Climate Change Authority (abolished by the Coalition under forward estimates)
  • 50% renewable energy target by 2030; the existing Large-scale Renewable Energy Target will continue until 2020 but a new interim target will be announced in 2017
  • transition away from old coal-fired power plants to clean technology generation
  • modernization review of the National Electricity Market
  • to support workers and communities in the transition away from coal
  • a Strategic Industry Taskforce to maximize job opportunities in the clean energy industry, supported by a Strategic Industry Reserve Fund to support the transition of key industries and agriculture
  • to double Australia’s national energy productivity by 2030, plus new vehicle emissions standards
  • reinvigorate the Carbon Farming Initiative to encourage carbon storage in agriculture, and taking action to deal with broad scale land clearing

The Greens promise:

  • an emissions reduction target of minus 60-80% by 2030 and net zero emissions by 2040
  • a new clean energy economy with at least 90% renewables and doubling of energy efficiency by 2030
  • creation of a new government agency - RenewAustralia – to drive the transition to a new clean energy system
  • Large-scale Renewable Energy Target of 52,500 GWh of electricity generation by 2030
  • repower homes and businesses with clean energy, through modernization of the energy system and community owned renewable energy, and tax incentives to promote use of battery storage by households and businesses
  • reverse auctions for the construction of the lowest cost clean energy assets, with preferences awarded to community schemes and locally-sourced projects
  • pollution intensity standards to enable the gradual, staged closure of coal-fired power stations
  • $1 billion Clean Energy Transition Fund to enable workers and communities to adjust to the transition away from coal
  • re-introduce an emissions trading scheme to include offset markets for agriculture and forestry sectors to earn income from altered practices aimed at restoring the environment
  • coal and gas exporters to pay the full cost of emissions leaking from mining operations
  • no new coal or gas approvals
  • end fossil fuel subsidies to the mining industry and introduce a thermal coal export levy of $3 per tonne
  • ban on political donations from the fossil fuel industry
  • investment in public transport of $25 billion over 10 years sourced via the Greens’ Australian Infrastructure Bank
  • a disaster preparedness plan funded by the coal export levy; to include disaster proofing infrastructure; National Climate Change Adaptation Research Facility and support for state and local governments to invest in strategies to address sea level rise

Context for comparing policies  

In December 2015, Australia was one of 195 countries to adopt the Paris Agreement, which sets up a durable and dynamic framework for reducing global emissions in order to hold global warming below 1.5 to 2 degrees Celsius.  The Paris Agreement requires all parties to develop increasingly stringent emissions reduction targets and associated policies every five years, with an acknowledgement that developed countries should take the lead.  

Parties are also expected to be guided by a long term decarbonisation strategy to meet the global goal of net zero global emissions in the second half of this century to reduce the risks of dangerous climate change.  
If we judge each party’s policies in the light of Australia’s obligations under the Paris Agreement then we need to examine not only the stringency of their emissions reduction targets but also the effectiveness and complementarity of their climate and energy policies.

More than 75% of Australia’s electricity is generated from coal, and the electricity sector is Australia’s biggest single source of emissions.  The decarbonisation of the electricity sector and the aggressive development of renewable energy are therefore crucial to reducing emissions in Australia.  Moreover, the longer the delay in tacking action, the greater the economic, social and environmental costs to the national and global community.

The Coalition

The Coalition has not offered any new policies during the election campaign.  Instead it has defended its Emissions Reduction Fund (ERF) and accompanying Safeguard Mechanism (which is not set to commence until 1 July 2016).  However, the ERF has been widely criticised by experts for lacking credibility for three reasons.  

Emissions Reduction Fund

First, the ERF is a voluntary scheme that reverses the polluter- pays principle by providing payments to polluters to reduce emissions.  It operates via a reverse auction whereby the government calls for voluntary proposals for abatement from business and then purchases abatement from the lowest bidders using consolidated revenue.  
This means the government must increasingly draw down on consolidated revenue to pay polluters as marginal abatement costs rise in line with increasingly stringent mitigation targets over time. If the government wishes to reduce rather than increase the budget deficit then this is not a sustainable policy.

Second, it is difficult for the government to know whether the cheaper proposals are ones that would not have happened anyway, in which case the government could be spending money unnecessarily.   

Finally, most of the emissions reductions purchased by the government thus far are in the land sector, not the electricity sector, which is Australia’s biggest single source of emissions.  The abolition of the carbon tax has seen emissions in the electricity sector rise, which has exacerbated the problem of carbon lock-in in Australia..  

The Safeguard Mechanism

The Safeguard Mechanism, which is not yet in place, is intended partially to compensate for this problem.  This Mechanism, which is effectively a baseline and credit emissions trading scheme by another name, will require big carbon polluters whose emissions rise above an agreed baseline to purchase credits from other polluters who have reduced their emission below their baseline.  

However, the baseline is currently too generous to drive much abatement since it is set on the highest level of reported emissions for a facility over the historical period 2009–10 to 2013–14. 

In sum, the Coalition’s policies lack a decarbonisation strategy and an aggressive renewable energy strategy. In addition, the existing emissions reduction strategy is costly and unsustainable.  However, if the Coalition tightens up the baseline under the Safeguard Mechanism then its policies would become more credible.  It must then eat humble pie and concede that it has put a price on carbon.

Labor

In contrast to the Coalition, Labor has a robust emissions reduction target for 2030, which is the first credible target offered by a major party in Australia.  It is supported by a more cost-effective mitigation policy than the Coalition’s.

Labor’s scheme for the electricity market is a separate and closed cap-and-trade scheme. The scheme for the rest of the economy is a base-line and credit scheme.  The Emissions Trading Scheme (ETS) in the electricity sector, combined with the modernisation of the electricity market, will see the gradual decarbonisation of the electricity sector, although Labor assumes the continuation of coal exports.  

The economy wide ETS will run in two phases to allow business to adjust.  Phase I (2018-2020) will blend a cap and trade with and baseline and credit scheme, while phase II (post 2020) will see the introduction of a cap on emissions that will be progressively reduced over time, with liable entities able to access international offsets (with a possible limit to be negotiated). Agriculture, Road Transport and Refrigerants will to be excluded in Phase I, and reviewed for Phase II to ensure ‘appropriate exemptions’.

Labor also has a more aggressive medium and long-term renewable energy target than the Coalition.

The Greens

The Greens have the most ambitious emissions reduction and renewable energy targets for 2030 and beyond, and a more comprehensive decarbonisation strategy.  They are seeking a transition to a 100% renewable energy system, with a target of 90% renewables by 2030, a more aggressive decarbonisation strategy that includes the phase-out of coal consumption and a coal export levy, the regulation of emissions leaking from mines and the end of fossil fuel subsidies in the mining sector.

Image: Loy Yang coal-fired power station, Victoria. Credit: Takver/Flickr