Bridge to bipartisan climate policy exists – if major parties want it: Grattan Institute

Cooling towers at the brown coal-fired Loy Yang power plant in Victoria’s La Trobe Valley. Photo: Supplied Minister for the Environment Greg Hunt. Photo: Chris Hopkins
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A bipartisan approach to tackling climate change is still possible if Labor and the Coalition can get past their “policy bonfire” and develop existing mechanisms to curb carbon emissions, a Grattan Institute report finds.

While an economy-wide carbon price remains “the ideal preferred future climate policy”, the political reality excludes that prospect winning bipartisan support for now.

Still, sufficient flexibility exists within the major parties’ platforms that a “sustainable policy phoenix can yet arise”, the report argues.

The longer big parties threaten to dismantle their opponent’s policy once in office, the less likely companies will have the confidence to fund long-term investments in low-emissions technology, making it harder for Australia to meet its carbon goals.

“We know we’ll all pay eventually, whether it comes from the left pocket or the right pocket,” Tony Wood, the report’s lead author and director of Grattan’s energy program, said.

Common ground to build on includes the remaining bipartisan goal to meet a 5 per cent reduction on 2000 levels by 2020. That target is likely to be reached in part because of favourable accounting but also because of some success in the government’s purchase of emissions reductions, cheaper than the carbon tax, he said.

Beyond 2020, however, the Coalition’s policies are unlikely to set Australia on track to meet its commitment to cut 2005 level emissions by 26-28 per cent by 2030. (See Grattan chart below.) Labor is yet to declare its ambitions.

Emissions rise

The Grattan report comes as the latest emissions data for the electricity sector – which make up about one-third of Australia’s total – show pollution accelerating after the Abbott government scrapped the carbon price in 2014.

The carbon emissions index calculated by energy consultants Pitt & Sherry found emissions in the main electricity market were 5.5 per cent higher in the year to the end of March compared with June 2014 when the carbon tax ended.

While renewable energy’s share is at its highest level in decades – at 13.2 per cent – coal’s share has jumped almost four percentage points to 76.1 per cent since its low in July 2014. Electricity demand is also growing again, accentuating the emissions rise, Pitt & Sherry said. (See chart below.)

Way forward

The Grattan report focuses in large part of those elements of the Abbott-Turnbull government’s climate policies that could be strengthened. These might also be acceptable to a future Labor government because they match the party’s stated aim to introduce an emissions trading scheme.

The Coalition’s $2.5 billion Emissions Reduction Fund is unlikely to be the answer because rewarding businesses to cut pollution relies “increasingly on scarce public funding”, the report said.

Those purchases should cease. Under the Turnbull government’s climate action policies, the contribution of the Emissions Reduction Fund is grouped with the safeguard mechanism – leaving it unclear how big a role purchases alone will make in reaching the 2030 goal. (See Grattan chart below.)

The Grattan report said the safeguard mechanism – intended to place “baseline” limits on individual polluters – offers the mechanism to roll back emissions. Major changes, though, will be needed.

As currently designed, 140 entities emitting at least 100,000 tonnes a year of carbon-dioxide only face penalties if pollution exceeds fixed baselines.

“First, baselines will need to be progressively reduced, consistent with Australia’s emissions reduction target,” the report said. It will also need to be extended to many more sources of pollution since about half of the country’s emissions are now unrestricted, such as transport or agriculture.

While penalties should be imposed on firms that don’t cut emissions, they should be allowed to buy permits to pollute from companies that exceed their reduction goals, or from international markets.

The mechanisms for this transition towards a return to a carbon prices are largely in place, Mr Wood said.

“You’ve put them under the bonnet,” he said. “You can’t see them, and you’re not using them – yet.”

This story Administrator ready to work first appeared on Nanjing Night Net.