tag:theconversation.com,2011:/ca/topics/carbon-farming-initiative-13312/articlescarbon Farming Initiative – The Conversation2018-04-06T04:26:18Ztag:theconversation.com,2011:article/941122018-04-06T04:26:18Z2018-04-06T04:26:18ZThe Nationals should support carbon farming, not coal<p>National Party MP George Christensen has invited other Nationals to join the recently formed pro-coal “<a href="https://theconversation.com/the-pro-coal-monash-forum-may-do-little-but-blacken-the-name-of-a-revered-australian-94329">Monash Forum</a>”. But is coal in the best interests of their rural constituents, particularly farmers? </p>
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<a href="https://theconversation.com/the-pro-coal-monash-forum-may-do-little-but-blacken-the-name-of-a-revered-australian-94329">The pro-coal 'Monash Forum' may do little but blacken the name of a revered Australian</a>
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<p>Farmers stand to lose from any weakening of the government’s climate change policies. That is why farmers and their political representatives should be concerned about a current <a href="https://www.environment.gov.au/system/files/consultations/86381168-b3cf-405a-bc79-90eb651c5731/files/safeguard-mechanism-consultation-paper-2018.pdf">review</a> of the government’s greenhouse gas reduction policy. </p>
<p>What is at stake here is the strange-sounding idea of carbon farming. To explain this idea takes several steps, so bear with me.</p>
<p>The policy under review is a legacy of the Abbott era. As prime minister, Tony Abbott abolished the carbon tax and replaced it with an <a href="http://www.environment.gov.au/climate-change/government/emissions-reduction-fund/about">Emissions Reduction Fund</a> (ERF). The ERF was to be used to pay businesses to reduce their carbon emissions, or to capture and sequester (store) carbon dioxide already in the atmosphere.</p>
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<a href="https://theconversation.com/carbon-tax-axed-how-it-affects-you-australia-and-our-emissions-28895">Carbon tax axed: how it affects you, Australia and our emissions</a>
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<p>As it turns out, most of the funding has gone to rural enterprises that have developed various farming projects that qualify for funding – hence the term, carbon farming. </p>
<p><a href="http://carbonmarketinstitute.org/wp-content/uploads/2017/11/Carbon-Farming-Industry-Roadmap.pdf">For example</a>, these projects include:</p>
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<li>regenerating native forest on previously cleared land</li>
<li>changed farming practices to allow for crop stubble retention</li>
<li>capturing and destroying the methane from effluent waste at piggeries.</li>
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<h2>How does carbon farming work?</h2>
<p>To make it all work, the government first created the system of Australian Carbon Credit Units (<a href="http://www.cleanenergyregulator.gov.au/OSR/ANREU/types-of-emissions-units/australian-carbon-credit-units">ACCU</a>s). This system commodifies the outputs of carbon farming, so these can be traded. </p>
<p>In this system, a carbon farmer must show either a reduction in emissions, or carbon sequestration (or ideally both), according to clearly specified criteria. The government will then issue (free of charge) one credit for every tonne of carbon dioxide (CO₂) – or CO₂ equivalent – abated in this way. Farmers can then sell these credits, thus receiving a direct financial return for their efforts. </p>
<p>The <a href="http://carbonmarketinstitute.org/wp-content/uploads/2017/11/Carbon-Farming-Industry-Roadmap.pdf">primary buyer</a> of ACCUs at the moment is the government, via its Emissions Reduction Fund. Farmers (individually or as collectives) who want to embark on carbon farming projects are asked to nominate a price they would need to make it profitable for them to go ahead with the project. Through a <a href="https://theconversation.com/explainer-how-does-todays-direct-action-reverse-auction-work-40152">reverse auction</a>, the fund selects the lowest-price proposals. </p>
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<a href="https://theconversation.com/explainer-how-does-todays-direct-action-reverse-auction-work-40152">Explainer: how does today's Direct Action reverse auction work?</a>
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<p>In this way, the government gets the greatest carbon abatement for the least money. Successful bidders embark on their projects knowing that they have a guaranteed price for their carbon abatement outcomes. There is nothing magical or mystical about it. It is simply the price at which the buyer and sellers of carbon credits find it mutually advantageous to do business.</p>
<p>The average price paid at the last auction round was <a href="http://www.afr.com/business/energy/carbon-price-jumps-in-maiden-run-for-tony-abbotts-emissions-trading-scheme-20180313-h0xfhl">A$12 per tonne</a> of CO₂ abated. This is the current carbon price in this particular market. </p>
<h2>The Safeguard Mechanism</h2>
<p>A second potential set of buyers of carbon credits was created by the Safeguard Mechanism, introduced by the Abbott government. This caps emissions from big industrial emitters in order to to ensure that abatement achieved by the ERF is not offset or cancelled out. </p>
<p>The cap is set at whatever the maximum emission rate from the emitter has been. So it is not designed to reduce emissions from these big emitters, but simply to hold them to current levels. </p>
<p>The scheme covers just over 150 facilities, which are responsible for about <a href="http://www.environment.gov.au/system/files/consultations/86381168-b3cf-405a-bc79-90eb651c5731/files/safeguard-mechanism-consultation-paper-2018.pdf">half of Australia’s emissions</a>. Emitters that go over their limit can remain in compliance by buying enough carbon credits to compensate for their “excess” emissions and <a href="http://www.cleanenergyregulator.gov.au/NGER/The-safeguard-mechanism">surrendering these to government</a>.</p>
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<a href="https://theconversation.com/australias-biggest-emitters-opt-to-wait-and-see-over-emissions-reduction-fund-77160">Australia’s biggest emitters opt to 'wait and see' over Emissions Reduction Fund</a>
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<p>This policy is now beginning to bite. The government has just <a href="http://carbonmarketinstitute.org/safeguard-mechanism-reboots-australias-carbon-market/">announced</a> that in the first period for which the policy has been in effect, some 16 large emitters were in excess and had to buy 448,000 carbon credits to remain in compliance. Among the biggest buyers were:</p>
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<li>Anglo Coal’s Capcoal mining operations</li>
<li>Glencore’s Tahmoor Coal</li>
<li>Rio Tinto’s Alcan Gove aluminium operations</li>
<li>BHP Billiton Mitsubishi Coal/BM Alliance.</li>
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<p>These companies bought their credits from carbon farmers who abated more carbon then they had calculated, and so had a surplus left over for sale. </p>
<p>But what is most interesting is the <a href="http://www.afr.com/business/energy/carbon-price-jumps-in-maiden-run-for-tony-abbotts-emissions-trading-scheme-20180313-h0xfhl">price</a> that excess emitters were willing to pay for the surplus credits. Most of the sales were in the region of $14-15 per tonne (T), but the price rose to $17-18/T as the deadline approached. </p>
<p>This means that the price spiked at 50% higher than the most recent ERF auction price of $12/T.</p>
<p>Commentators describe this as a secondary market, and the price in this market is exciting news for carbon farmers. <a href="http://carbonmarketinstitute.org/safeguard-mechanism-reboots-australias-carbon-market/">According to Australian Carbon Market Institute CEO Peter Castellas</a>, “Australia now has a functioning carbon market.” Carbon farmers – who make up an increasing proportion of the Nationals’ constituency – will do well if this market expands. </p>
<p>One way to develop the market would be to slowly lower the caps on big emitters so they must either buy more carbon credits or find ways to reduce their own emissions.</p>
<p>From this point of view, there is good reason to progressively and predictably reduce the emissions allowed under the Safeguard Mechanism.</p>
<h2>The current review</h2>
<p>Here’s where we get to the current review. As already noted, the Safeguard Mechanism does not seek to reduce emissions from big emitters. In fact, it allows for an increase in emissions to accommodate business growth. Nevertheless, big emitters are <a href="https://www.smh.com.au/politics/federal/biggest-polluters-get-clear-path-to-hike-emissions-under-plan-20180227-p4z1y1.html">still unhappy</a>.</p>
<p>The government’s review is a response to business concerns. An initial <a href="http://www.environment.gov.au/system/files/consultations/86381168-b3cf-405a-bc79-90eb651c5731/files/safeguard-mechanism-consultation-paper-2018.pdf">consultation paper</a> has proposed making it easier to raise the cap on a company’s emissions as its activity grows. </p>
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Read more:
<a href="https://theconversation.com/an-emissions-reduction-fund-could-work-if-well-designed-20460">An Emissions Reduction Fund could work, if well designed</a>
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<p>If the rules are altered in this way, the demand for carbon credits may stall, and even decline, bringing to an end to this promising new source of revenue for farmers. </p>
<p>That is why members of parliament with rural constituencies should take note. Rural MPs should not sit by and allow the government to respond to the interests of the coal industry and other lobby groups.</p>
<p>Carbon farming depends on reducing the caps under the Safeguard Mechanism, not raising them. This would also be a step in the direction of achieving the emissions reduction target to which Australia agreed at the Paris meetings in 2015.</p><img src="https://counter.theconversation.com/content/94112/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Hopkins does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Proposed changes to the government’s climate change policies may stall, or even close down, the market for ‘carbon farmers’ to profit from reducing carbon dioxide emissions.Andrew Hopkins, Emeritus Professor of Sociology, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/497542015-10-29T01:23:06Z2015-10-29T01:23:06ZAustralia’s plantation boom has gone bust, so let’s make them carbon farms<figure><img src="https://images.theconversation.com/files/99927/original/image-20151028-21086-1cozobl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia has around a million hectares of plantations, much of them no longer commercially viable.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File%3ACSIRO_ScienceImage_644_Pasture_and_Plantation_Comparison_for_Soil_Changes.jpg">CSIRO/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>In the rolling hills of Victoria’s Strzelecki Ranges, among paddocks of pasture and potatoes, stands a simple steel monument to the world’s tallest tree. The tree itself, which stood a mighty 115 m tall, was chopped down in the 1880s so that a registered surveyor could measure it.</p>
<p>Almost a century and a half later, Australia’s attitude to its forests is seemingly no less perverse. </p>
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<a href="https://images.theconversation.com/files/99926/original/image-20151028-21095-1lxzvk4.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/99926/original/image-20151028-21095-1lxzvk4.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/99926/original/image-20151028-21095-1lxzvk4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=797&fit=crop&dpr=1 600w, https://images.theconversation.com/files/99926/original/image-20151028-21095-1lxzvk4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=797&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/99926/original/image-20151028-21095-1lxzvk4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=797&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/99926/original/image-20151028-21095-1lxzvk4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1001&fit=crop&dpr=1 754w, https://images.theconversation.com/files/99926/original/image-20151028-21095-1lxzvk4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1001&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/99926/original/image-20151028-21095-1lxzvk4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1001&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Not chopping it down might have been a more fitting tribute.</span>
<span class="attribution"><span class="license">Author provided</span></span>
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<p>Not far north of where the tree once stood is the Latrobe Valley, dominated by some of Australia’s most carbon-intensive coalmines and power stations. Covering much of the surrounding hills are timber plantations, which store tonnes of carbon. Plantations can be used to soak up emissions – except the current rules don’t officially recognise this.</p>
<p>Intensive plantations don’t count as carbon sinks under Australia’s <a href="https://www.environment.gov.au/climate-change/emissions-reduction-fund/carbon-farming-initiative-project-transition">carbon farming rules</a>. The boom that led to the creation of almost a million hectares of new plantation timber died with the global financial crisis - but with a bit of smart thinking these could be put to use as carbon farms, rather than being allowed to die off and returned to pasture. </p>
<h2>Boom and bust</h2>
<p>The see-sawing fortunes of Australian forestry have largely been driven by government policy. The 1990s saw major policy reforms, which spawned protests (including log trucks <a href="http://tlf.dlr.det.nsw.edu.au/learningobjects/Content/R10817/object/r3031.html">blockading the national parliament</a>) and ultimately resulted in a widespread expansion of timber plantations. </p>
<p>The area of eucalyptus plantations grew from almost nothing in 1998 to about 1 million hectares by 2008, spurred by a massive influx of finance encouraged by the <a href="https://www.comlaw.gov.au/Details/C2004C00970">Managed Investments Act (1998)</a>, which turned plantations into tax-effective investments.</p>
<p>But then came the global financial crisis, which saw Managed Investment Scheme (MIS) companies like Timbercorp and Great Southern Plantations go bust. Shareholders and investors lost out, but the plantations themselves were in the ground. </p>
<p>Since then, plantation ownership has been <a href="http://www.newforests.com.au/wp-content/uploads/2015/06/New-Forests-MIS-Review.pdf">consolidated</a> into the hands of a few dominant players such as <a href="https://www.newforests.com.au/">NewForests</a>, which acquired more than 700,000 ha, and <a href="http://www.gfplp.com/">Global Forest Partners</a> (more than 150,000 ha). </p>
<h2>An expensive experiment</h2>
<p>Some MIS plantations were poorly sited, in terms of climate and soils, used inappropriate species, or suffered pest or disease problems. Some have been written off, bulldozed and returned to pasture. Many more are likely to be. </p>
<p>Current estimates suggest that a third of the eucalyptus plantations are uneconomic with harvesting unlikely, another third will probably be harvested but are unlikely to be replanted. The rest will form Australia’s future hardwood estate. In this sense it has been a massive and expensive experiment.</p>
<p>This story shows the power of financial incentives, but reflects the problem of using tax inducements to fund an industry. For investors, tax deductions became the primary goal, rather than the quality of the investment.</p>
<p>The plantations’ boom and bust, with its focus on using fast money for fast-growing eucalypts, mostly for pulpwood, has obscured other important opportunities.</p>
<p>First, it shifted the focus away from the opportunities of <a href="http://www.agroforestry.net.au">integrating forestry into farming systems</a>.</p>
<p>Second, the reputation of Australian forestry and forestry investments has almost certainly suffered.</p>
<p>Third, it may have blinded us to the potential of using Australia’s rich diversity of tree species for other purposes. Australia’s genetic gifts to the world include trees that grow prolifically in poor soils, can withstand fire and drought, store carbon, and produce hard, strong, richly coloured timbers. </p>
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<span class="caption">A treasure trove for carbon farmers.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File%3ACSIRO_ScienceImage_714_Eucalyptus_Globulus_Plantation_Australia.jpg">T. Grove/CSIRO/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>Already planted across millions of hectares throughout the world, Australia’s eucalypts, acacias and casuarinas offer a genetic treasure trove for carbon farming. </p>
<p>With much to learn about Australia’s diverse and productive flora – including how to farm it for carbon – it seems perverse that investment in Australian forestry research and education is now declining. </p>
<h2>Carbon crops</h2>
<p>Carbon markets and emerging technologies could fundamentally alter the way we conceive of trees as crops. </p>
<p>With a million hectares of eucalyptus plantation approaching maturity, there is almost certainly an active search for commercial markets for the standing timber - as wood fibre, for bioenergy fuel, or for non-wood products. </p>
<p>Nonetheless, large areas are likely to be reconverted to pasture, resulting in less carbon being stored in these landscapes. But there’s another, even simpler option for what to do with these plantations.</p>
<p>Perhaps it is time to reconsider whether to credit the carbon captured by these trees, given that their plantings were sponsored by our taxes. Changes to the carbon farming rules might make these and other multi-use plantations more viable.</p>
<p>The Australian Forest Industry estimates that Australia’s Kyoto-compliant forestry plantations (those established on cleared land since 1990) offset about 4.5% of Australia’s total emissions, but these are not credited under Australia’s <a href="http://www.climatechangeauthority.gov.au/files/submissions/2014/cfi-review/submission-09-v2.pdf">Carbon Farming Initiative</a>.</p>
<p>There are <a href="http://apo.org.au/files/Resource/review1_0.pdf">no approved CFI methodologies</a> for plantations that sequester carbon and produce commercial timbers, but if there were, multipurpose plantations could form a key plank of Australia’s Direct Action carbon abatement policy. </p>
<p>In addition to carbon, there is potential for plantings that deliver economic development and ecological benefits in terms of restoring landscapes. But new models of plantations are needed, supported with different policy setting that drive their development. </p>
<p>Any large-scale bio-energy or carbon plantings in the future need to heed the lessons from Australia’s plantation boom and bust. In emerging carbon-constrained economies, how we define resources in rural landscapes, including carbon credits, will literally shape our future.</p><img src="https://counter.theconversation.com/content/49754/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jason Alexandra received research funding from the Rural Industries Research and Development to research farm forestry and plantation policies in the late 1990's and has maintained an interest in impacts of policies on how landscapes and plantations are managed since.</span></em></p>The GFC killed off Australia’s timber plantation boom, leaving behind a million hectares of timber. But by recognising the carbon value in these trees, a new industry could grow in place of the old.Jason Alexandra, Honorary Fellow, Charles Darwin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/407282015-04-24T04:23:27Z2015-04-24T04:23:27ZInfographic: emissions reduction auction results at a glance<figure><img src="https://images.theconversation.com/files/79223/original/image-20150424-14568-lbkwc1.jpg?ixlib=rb-1.1.0&rect=4%2C7%2C1014%2C646&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Growth industry: forestry will account for much of the carbon reductions under the first round of Emissions Reduction Fund contracts.</span> <span class="attribution"><span class="source">CSIRO/Wikimedia Commons</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>The results of the government’s first <a href="https://theconversation.com/explainer-how-does-todays-direct-action-reverse-auction-work-40152">reverse auction</a> of carbon-cutting projects have been released. Where is the money going?</p>
<p>The government will spend A$660 million of its A$2.55 billion Emissions Reduction Fund on contracts set to reduce emissions by some 47 million tonnes, more than half of it in “carbon farming” projects to lock up carbon in vegetation.</p>
<p>Federal environment minister Greg Hunt <a href="http://www.abc.net.au/news/2015-04-23/government-buys-47m-tonnes-of-carbon-abatement-in-erf-auction/6415532">described the outcome</a> as a “stunning result” for Australia, pointing out that the average price of A$13.95 per tonne of carbon is cheaper than the previous government’s carbon pricing scheme.</p>
<p>But critics have pointed to the lack of involvement so far from industry sectors that were covered by the previous carbon tax, and the fact that the new scheme is paid for by taxpayers rather than the businesses creating the pollution.</p>
<p>Here are the numbers:</p>
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<p><strong>Review: Anita Talberg, Australian German College of Climate and Energy Transitions, University of Melbourne</strong></p>
<p>The Emissions Reduction Fund was legislated as an amendment to the existing Carbon Farming Initiative. It effectively expanded and tweaked the carbon farming scheme to include some projects outside the land sector. As Hunt <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fb7c3903c-728e-40bc-91f4-728ffe55978d%2F0021%22">explained</a> when introducing the legislation to Parliament: “This bill will use positive incentives to reduce emissions, unlock economic activity, boost energy efficiency and improve agricultural productivity.” </p>
<p>This first auction has been effective in capturing the low end of the <a href="http://www.climateworksaustralia.org/sites/default/files/documents/publications/climateworks_lcgp_australia_summary_mar2010.pdf">marginal abatement cost curve</a> without dipping below the zero net-cost line (the point beyond which projects would “pay for themselves”, and therefore shouldn’t in theory be publicly funded). </p>
<p>However, as the final bar graph in this infographic shows, more than half of the purchased abatement is in the form of vegetation sequestration. So what this first auction has failed to do is unlock positive longer-term changes in energy efficiency, especially in the most carbon-intensive industries. </p>
<p>In essence, the land sector is offsetting emissions from the rest of the economy and delaying any real change to emissions intensity.</p>
<p>As the infographic’s carbon abatement task chart shows, there is still work to be done to meet Australia’s 2020 target. And in fact it may be more than is shown in that figure. The first projects purchased through the Emissions Reduction Fund have varying time frames, but many are between 7 and 10 years. Yet less than 6 years remain to meet our 2020 target. </p>
<p>Some of that abatement purchased through the Emissions Reduction Fund (the orange section in the graph) will occur after the 2020 deadline and may not count towards Australia’s international commitment.</p><img src="https://counter.theconversation.com/content/40728/count.gif" alt="The Conversation" width="1" height="1" />
The first round of contracts for Australia’s Emissions Reduction Fund have been awarded, at an average price of just under A$14 a tonne. How do the numbers stack up, and what projects are the big winners?James Whitmore, Deputy Editor: Arts + Culture, The ConversationMichael Hopkin, Deputy Chief of Staff, The ConversationEmil Jeyaratnam, Data + Interactives Editor, The ConversationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/401522015-04-15T01:56:42Z2015-04-15T01:56:42ZExplainer: how does today’s Direct Action reverse auction work?<figure><img src="https://images.theconversation.com/files/77986/original/image-20150415-24664-1aehe7x.jpg?ixlib=rb-1.1.0&rect=34%2C25%2C5691%2C3785&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It's (reverse) auction time for the government's emissions-reduction plans.</span> <span class="attribution"><span class="source">Africa Studio/Shutterstock.com</span></span></figcaption></figure><p>The Emission Reduction Fund (ERF) reverse auction, the first round of which runs <a href="http://www.cleanenergyregulator.gov.au/Emissions-Reduction-Fund/News-and-events/Pages/04-2015/10-April-Essential-reading-before-the-first-auction.aspx">today and tomorrow</a>, is no different to a tender process used by the government to procure other types of goods and services. </p>
<p>The process calls for confidential formal bids from different providers and generally chooses the lowest-priced ones – in this case, the bids are proposals to reduce emissions using money from the A$2.55 billion ERF, the central plank of the federal government’s <a href="https://theconversation.com/au/topics/direct-action-plan">Direct Action</a> climate policy.</p>
<p>In the ERF auction, the Clean Energy Regulator, acting on behalf of the government, buys greenhouse gas emissions reductions at lowest prices through a competitive tender process. The measurement used for the ERF auction is the Australian Carbon Credit Unit (ACCU), where 1 ACCU represents 1 tonne of greenhouse gas emissions reduced. </p>
<p>The ACCUs will be created by successful bidders who propose to undertake specific emissions-reductions projects. Projects can be in the transport, mining, energy, manufacturing, commercial and municipal landfill sectors, and must first be registered with the regulator to be eligible for the auction. Rural projects such as reforestation, reducing livestock emissions, and improving soil carbon levels, are also eligible. </p>
<p>When the auction starts, bids are received from participants who will nominate the project(s), the number of ACCUs offered for sale, and the unit price of ACCU they would be prepared to accept. The bids are made via <a href="https://www.tenders.gov.au/">Austender</a>, an online bidding platform, over a two-day window of for the first auction. No dates have yet been announced for future auctions. </p>
<p>Projects that are above a “benchmark price” will not be selected, while most bids below that level would be accepted. The accepted bids get the bid-price and not the “benchmark price”, meaning that different accepted projects would get different returns to the bidders. </p>
<p>The Clean Energy Regulator sets the benchmark price but this is not revealed to the bidders beforehand. The regulator also has a budget constraint, set by the Government, which cannot be exceeded. The budget for the first auction is not known to the public.</p>
<h2>To the victor, the spoils</h2>
<p>The winning bidders enter into a standard commercial contract with the regulator for the delivery of the promised emissions reductions. Payment will be made only after the projects’ emissions reductions have been achieved and verified. The contract specifies how non-delivery would be dealt with, depending on the specific situation involved.</p>
<p>Unlike the <a href="https://theconversation.com/carbon-tax-axed-how-it-affects-you-australia-and-our-emissions-28895">now-defunct carbon tax</a>, which forced businesses to pay the government for the right to emit, under the ERF the government pays emitters to reduce their emissions. Hence the regulator’s brief is to maximise the returns for the taxpayer dollar.</p>
<p>The key question at the moment is the benchmark price that the regulator would be setting. </p>
<p>The first-round bids may be dominated by the transitioning of the <a href="http://www.cleanenergyregulator.gov.au/Carbon-Farming-Initiative/Pages/default.aspx">Carbon Farming Initiative</a> projects that were started under the Gillard government’s carbon tax regime and which have now been deemed eligible for the ERF. These ACCUs were selling above the A$18 level during the carbon tax era, when they represented better value than the initial A$23-a-tonne mandatory price for emissions. </p>
<p>However, the regulator is now the only buyer for these ACCUs, and it <a href="http://www.cleanenergyregulator.gov.au/Pages/default.aspx">website</a> advises prospective bidders that “the best strategy for success at auction is to bid the lowest price at which it is worth your while to undertake the project. Participants with the most competitive prices will be successful.” </p>
<p>As the ERF is voluntary, this price risk could prompt some potential bidders to adopt a “wait and see” attitude during the first couple of auctions.</p>
<p>The government thus faces a policy risk. A low benchmark price could discourage participation in future auctions, while a high benchmark price would restrict the purchase volume. For example, at A$18 a tonne, the ERF’s total budget of A$2.55 billion would buy only 142 million tonnes of emissions reductions, which would not be enough to meet Australia’s target of a 5% reduction on 2000 levels by 2020. Other policy measures would be needed to meet that target, at extra cost to the economy. </p>
<p>For now, we don’t know what prices are written on the sealed bids as they are handed in. The regulator will announce the results, including the weighted average price of the successful bids, next week.</p><img src="https://counter.theconversation.com/content/40152/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gujji Muthuswamy received funding from Deakin University for working on aspects of an ARC-funded project looking into carbon risk management.</span></em></p>The federal government is holding the first reverse auction to award contracts for its Direct Action emissions plan. Here’s how it will work.Gujji Muthuswamy, Industry Fellow, Faculty of Business and Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/400882015-04-14T20:21:59Z2015-04-14T20:21:59ZFarming carbon can be a win for wildlife, if the price is right<figure><img src="https://images.theconversation.com/files/77888/original/image-20150414-24615-1h5jjh0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Koalas are one of the threatened species that could benefit from carbon farming. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/neonman/4267153123">christopher charles/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Climate change and the loss of biodiversity are two of the greatest environmental issues of our time. Is it possible to address both of those problems at once?</p>
<p>In Australia, farmers and landholders will this week be able to apply for payments through the Federal government’s <a href="http://www.environment.gov.au/climate-change/emissions-reduction-fund">A$2.55 billion Emissions Reduction Fund</a>. Bidders can request funding for projects that reduce emissions using agreed <a href="http://www.environment.gov.au/climate-change/emissions-reduction-fund/methods">methods</a>, which include approaches relevant to the transport, waste and mining sectors, as well as the land sector: for example, by managing or restoring forests. </p>
<p>Forests hold carbon in vegetation and soils and provide important habitat for native wildlife. Restoring forests in areas where they have been cleared in the past could be good for the climate, good for biodiversity, and generate additional income for landholders.</p>
<p>How well the Emissions Reduction Fund can achieve these benefits will depend on three things: the right approach, the right price, and the right location. </p>
<h2>Farming carbon</h2>
<p>There are a range of approaches available for restoring forests, and they vary in how quickly carbon can be sequestered, cost, and suitability for wildlife.</p>
<p>For example, fast-growing monocultures such as blue gum plantations can sequester carbon very rapidly, but don’t provide ideal habitat for wildlife. Planting a diversity of native trees and shrubs using an approach called <a href="http://www.environment.gov.au/climate-change/emissions-reduction-fund/cfi/publications/factsheet-environmental-plantings-native-trees">environmental plantings</a> is far more wildlife-friendly, but the costs are higher, and carbon is not stored as quickly. </p>
<p>A third possible approach is to <a href="http://www.environment.gov.au/climate-change/emissions-reduction-fund/cfi/methodologies/determinations/native-forest-managed-growth">assist the natural regeneration of vegetation</a>. This can be done by fencing off cattle or by ceasing on-farm practises such as burning or disturbance with machinery. Assisted natural regeneration is the cheapest of these three possible methods, and is also good for biodiversity: our <a href="http://www.sciencedirect.com/science/article/pii/S1462901115000222">recent paper</a> found that it could be a great option for restoring forests in agricultural landscapes across Queensland and northern New South Wales. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/77861/original/image-20150414-14533-fkmez2.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/77861/original/image-20150414-14533-fkmez2.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/77861/original/image-20150414-14533-fkmez2.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/77861/original/image-20150414-14533-fkmez2.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/77861/original/image-20150414-14533-fkmez2.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/77861/original/image-20150414-14533-fkmez2.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/77861/original/image-20150414-14533-fkmez2.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/77861/original/image-20150414-14533-fkmez2.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Brigalow woodlands allowed to regrow for 3-10 years.</span>
<span class="attribution"><span class="source">John Dwyer</span></span>
</figcaption>
</figure>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/77862/original/image-20150414-14550-1bcyr6d.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/77862/original/image-20150414-14550-1bcyr6d.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/77862/original/image-20150414-14550-1bcyr6d.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/77862/original/image-20150414-14550-1bcyr6d.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/77862/original/image-20150414-14550-1bcyr6d.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/77862/original/image-20150414-14550-1bcyr6d.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/77862/original/image-20150414-14550-1bcyr6d.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/77862/original/image-20150414-14550-1bcyr6d.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Regenerated brigalow woodlands after 50 years.</span>
<span class="attribution"><span class="source">John Dwyer</span></span>
</figcaption>
</figure>
<h2>Location, location, location</h2>
<p>Across Australia, there a number of places where growing carbon could be a more profitable option than the current land use. Some of these places are more important for biodiversity than others.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/77881/original/image-20150414-24615-kee9on.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/77881/original/image-20150414-24615-kee9on.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/77881/original/image-20150414-24615-kee9on.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/77881/original/image-20150414-24615-kee9on.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/77881/original/image-20150414-24615-kee9on.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/77881/original/image-20150414-24615-kee9on.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/77881/original/image-20150414-24615-kee9on.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/77881/original/image-20150414-24615-kee9on.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The mulga lands of western Queensland may be worth more as carbon farms than other uses.</span>
<span class="attribution"><span class="source">Don Butler</span></span>
</figcaption>
</figure>
<p>If we’re interested in getting some wins for biodiversity while growing carbon forests, we need to think carefully about the possible opportunities and trade-offs, as the best places for sequestering carbon are not always the most beneficial for biodiversity, and vice versa. </p>
<p>In <a href="http://bioscience.oxfordjournals.org/content/early/2015/02/23/biosci.biv008.abstract">our recent paper</a>, we found that it is possible to identify where growing forests could provide win-wins for both carbon and biodiversity. </p>
<p>For example, the top 25% of priority areas for environmental plantings could sequester 132 million tonnes of CO<sub>2</sub> equivalent annually, which is almost <a href="http://theconversation.com/visualising-australias-carbon-emissions-23816">a quarter of Australia’s annual emissions</a> (excluding those caused by land-use change).</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/77893/original/image-20150414-24642-1uoyj4q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/77893/original/image-20150414-24642-1uoyj4q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/77893/original/image-20150414-24642-1uoyj4q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=601&fit=crop&dpr=1 600w, https://images.theconversation.com/files/77893/original/image-20150414-24642-1uoyj4q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=601&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/77893/original/image-20150414-24642-1uoyj4q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=601&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/77893/original/image-20150414-24642-1uoyj4q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=756&fit=crop&dpr=1 754w, https://images.theconversation.com/files/77893/original/image-20150414-24642-1uoyj4q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=756&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/77893/original/image-20150414-24642-1uoyj4q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=756&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Relative priority areas for restoring 139 threatened ecosystems to 30% of original extent using environmental plantings, where carbon is stored at $20/tonne. Pink areas are higher priority, green is lower priority.</span>
<span class="attribution"><span class="source">http://bioscience.oxfordjournals.org/content/65/4/372</span></span>
</figcaption>
</figure>
<p>These high-priority areas for environmental plantings could restore some of the most threatened ecosystems in Australia. There are 139 ecosystem types across the country that have lost more than 70% of their original extent. If it were possible to restore these ecosystems up to 30% of their original extent, they will have a better chance of surviving in the long term.</p>
<p>Restoring parts of the landscape with these ecosystems is a high priority for biodiversity – not only are the ecosystems rare, but many of the birds and animals that depend on these ecosystems are those that are most threatened. For example the <a href="http://www.gpem.uq.edu.au/docs/Brigalow/ConservingBrigalowLandscapesl.pdf">brigalow woodlands</a> of south east Queensland, of which less than 10% remain, are home to nationally threatened <a href="http://www.environment.gov.au/biodiversity/threatened/species/koala">koalas</a> and a host of other wildlife. </p>
<h2>The right price</h2>
<p>It will generally be more expensive to grow carbon forests that also provide benefits for biodiversity. This is because the places most profitable for land uses such as agriculture are often where the most threatened species and ecosystems are located. </p>
<p>In our analysis, we found that with a price on carbon equivalent to A$5 per tonne, it would not be profitable to restore threatened ecosystems up to 30% of their original extent. This means that without additional funding from another source, there is limited opportunity to achieve wins for biodiversity if the price on carbon is low.</p>
<p>However, a higher price of A$20 per tonne, reflecting Australia’s 2011-2013 carbon price, could allow up to half of the heavily cleared vegetation types to be restored up to 30% without any additional funding for biodiversity itself. At this A$20 price, we also found that it made more economic sense to farm carbon than the existing land use, in over <a href="http://www.sciencedirect.com/science/article/pii/S1462901115000222">1.2 million hectares in Queensland</a>. </p>
<p>This week’s Emissions Reduction Fund auction will be a good first test of how the current approach to carbon farming can provide the dual benefit of restoring habitat for native wildlife and addressing climate change. Our analysis shows that Australia’s climate policies could have a very significant impact on biodiversity - if we think carefully about the right approach, price, and location.</p><img src="https://counter.theconversation.com/content/40088/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Megan Evans is funded by an Australian Postgraduate Award and a CSIRO top-up scholarship.</span></em></p><p class="fine-print"><em><span>Anna Renwick is funded through the University of Queensland ARC Centre of Excellence for Environmental Decisions and the National Environmental Research Program.</span></em></p><p class="fine-print"><em><span>Josie Carwardine and Tara Martin do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With bids open today for the government’s Emissions Reduction Fund, experts explain how storing carbon can be a win for wildlife too.Megan C Evans, PhD Candidate in Environmental Policy & Economics, Australian National UniversityAnna Renwick, Research ecologist, The University of QueenslandJosie Carwardine, Research Scientist, Ecosystem Sciences, CSIROTara Martin, Senior Research Scientist, CSIROLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/357172014-12-22T05:32:38Z2014-12-22T05:32:38ZClimate Change Authority calls for delayed renewables deadline<p>The Climate Change Authority has recommended that the government move back the deadline for the large-scale Renewable Energy Target by three years, from 2020 to 2023, rather than risk jeopardising investment by reducing the target itself.</p>
<p>The recommendation was made in one of two reviews released by the authority today, covering two climate policies: the <a href="http://www.climatechangeauthority.gov.au/node/267">Renewable Energy Target (RET)</a>, and the now defunct <a href="http://www.climatechangeauthority.gov.au/node/271">Carbon Farming Initiative (CFI)</a> together with its successor, the <a href="https://theconversation.com/au/topics/emissions-reduction-fund">Emissions Reduction Fund (ERF)</a>. </p>
<h2>Renewables: defer, don’t cut</h2>
<p>The CCA’s <a href="http://www.climatechangeauthority.gov.au/node/267">key recommendations for renewables</a> are that the large-scale RET, which calls for Australia to have 41,000 gigawatt hours of renewable energy capacity by 2020, should be maintained, but the target year deferred by three years. Meanwhile, the authority recommends that the small-scale Renewable Energy Target, which offers subsidies for domestic solar power, should be left as it is.</p>
<p>The recommendations contrast with the <a href="https://theconversation.com/review-calls-for-renewable-energy-target-cuts-what-it-means-29787">Warburton review</a> of the RET, released in August, which called for cuts to the large-scale target, and the government’s subsequent policy announcement that it wanted to <a href="https://theconversation.com/planned-cut-to-renewable-energy-target-a-free-kick-for-fossil-fuels-33317">cut the target to around 27,000 GWh</a>.</p>
<p>The new review carefully points out that the original RET objective was for renewables to deliver at least 20% of the then-projected electricity supply by 2020. But the authority adds that it does not see anything “magic” about the idea of implementing a so-called “real 20%”, or indeed in targeting any particular percentage of future demand. </p>
<p>The CCA has emphasised the importance of stable signals for the growth of renewable electricity to limit greenhouse gas emissions, and the risks for both the renewable industry and society created by uncertainty over the target.</p>
<p>The review says that slashing the RET will do little to solve the current problems of excess electricity generation capacity, in that it won’t save the existing electricity generators from the pain of managing excess capacity. </p>
<p>Indeed, it seems obvious that, if the RET is cut, the electricity industry, governments and some commentators will lose a convenient scapegoat, and will be exposed to even more sceptical public scrutiny over electricity prices. Meanwhile, renewable energy growth would lose its momentum, at significant cost to Australian efforts to cut greenhouse gas emissions.</p>
<p>While the government seems likely to ignore the CCA’s advice, its efforts to protect the existing electricity industry by attacking renewable energy seem doomed to failure. Already, several state and territory governments (such as those of the ACT and South Australia) and consortia of local councils (including the City of Melbourne and others) are filling the gap by seeking bids for renewable electricity supply. </p>
<p>Meanwhile, the takeup of rooftop solar panels continues to grow, while electricity demand continues to decline. Multi-level democracy at work!</p>
<h2>Keep farming carbon</h2>
<p>In its <a href="http://www.climatechangeauthority.gov.au/node/271">other review released today</a>, the CCA concludes that the original Carbon Farming Initiative – which provided incentives to cut emissions in sectors such as agriculture, landfill and forestry that are unsuited to carbon trading – did its job reasonably well. </p>
<p>Established by the previous government to complement carbon pricing, the review estimates that the initiative cut Australian greenhouse gas emissions by 10 million tonnes in its four years of operation. But the authority says it involved intense administrative work and had high transaction costs.</p>
<p>CCA observes that many lessons seem to have been taken on board from the CFI for application to the government’s new Emissions Reduction Fund, which is basically an expansion of that approach. However, the ERF is still an administratively complex, expensive and risky approach with limited potential to cut emissions beyond a few percent. </p>
<p>The Authority recommends that extra attention be paid to ensuring that larger projects actually deliver emissions cuts beyond what would have happened anyway: otherwise Australian tax payers would just be paying for “hot air”. </p>
<h2>Unwelcome advice?</h2>
<p>Both of the CCA’s reports seems to confirm the view that “polluter pays” policies such as carbon pricing are more efficient, cheaper and more effective than “pay the polluter” policies such as the ERF. Given that the government this year repealed the carbon price and introduced the ERF, the government is hardly likely to welcome this advice.</p>
<p>It is unfortunate that these two reports, along with several other important reports (such as Pitt&Sherry’s <a href="http://www.sa.gov.au/topics/water-energy-and-environment/energy/government-energy-efficiency-initiatives/national-energy-efficient-building-project">building energy regulation report</a>), have been released just before Christmas, when many specialist media commentators are on leave and many people’s attentions are focused elsewhere.</p>
<p>Of course, this is a long-held tradition among governments of all persuasions, aimed at minimising the negative impacts of inconvenient information. We will have to wait until the new year to see whether the government heeds the Climate Change Authority’s advice.</p><img src="https://counter.theconversation.com/content/35717/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Pears has carried out consulting work for many sustainable energy organisations and provides policy advice to a variety of organisations. At present he has no paid roles for such organisations. He is an honorary adviser to the Energy Efficiency Council, Climate Alliance and Alternative Technology Association</span></em></p>The Climate Change Authority has recommended that the government move back the deadline for the large-scale Renewable Energy Target by three years, from 2020 to 2023, rather than risk jeopardising investment…Alan Pears, Sustainable Energy & Climate Researcher, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/337362014-11-03T19:28:44Z2014-11-03T19:28:44ZDirect Action could deliver a useful outcome: carbon trading<p>There’s little point in getting too excited just yet about the details of Direct Action and its merits (or otherwise) as compared with emissions trading.</p>
<p>Why? Because all of the current debate about Australia’s response to climate change is focused on paths that are completely inadequate compared with the action that climate science tells us we must take. If we were really serious, we would no longer be trying to expand our fossil-fuel production. </p>
<p>If we were serious, we would increase the <a href="https://theconversation.com/au/topics/renewable-energy-target">Renewable Energy Target</a>, rather than the government proposing to <a href="https://theconversation.com/the-pitfalls-of-using-renewable-energy-as-a-political-football-33356">cut it</a>. We would introduce aggressive energy-efficiency measures, instead of shutting down and emasculating programs. We would protect the carbon stored in our forests. And we would be actively helping to cut emissions in developing countries.</p>
<p>We would still pursue Direct Action, but also put a price on carbon. As I have <a href="https://theconversation.com/direct-action-vs-carbon-pricing-we-can-have-it-all-20095">pointed out here before</a>, the two aren’t mutually exclusive.</p>
<p>Putting together a credible set of carbon policies will mean finding ways of extracting ourselves from the political morass we are now in.</p>
<p>Even Direct Action, based on the <a href="http://www.environment.gov.au/climate-change/publications/emissions-reduction-fund-white-paper">Emission Reduction Fund</a>, is opposed by many within the federal government who see climate change as a left-wing conspiracy or an otherwise trivial issue. </p>
<p>While Labor is now once again <a href="http://www.smh.com.au/federal-politics/political-news/carbon-price-on-bill-shortens-agenda-as-he-goes-to-electorate-20141010-1148xe.html">waving the flag for a price on carbon</a> via an emissions trading scheme, it has shown a remarkable level of generosity to high-emitting industries and a badly misjudged approach to Direct Action, demonising the idea despite having previously encouraged direct initiatives such as the <a href="http://www.climatechange.gov.a%20CONu/reducing-carbon/carbon-farming-initiative">Carbon Farming Initiative</a>. </p>
<p>Regardless of their ostensibly contrasting stances, both major parties are deeply committed to growing fossil fuel production for export. </p>
<h2>Given this mess, what do we do?</h2>
<p>Individuals, community groups, local governments, progressive businesses, and some state governments are acting in many constructive ways, despite the failures and, in many areas, active opposition of our political and business leaders. </p>
<p><a href="https://theconversation.com/sorry-joe-hockey-canberra-is-australias-home-of-wind-farms-26243">Investment</a> in energy efficiency and renewable energy, <a href="https://theconversation.com/au/topics/divestment">divestment</a> to shift capital away from high-emission industries, growing support for <a href="https://theconversation.com/au/topics/public-transport">public transport</a>, lifestyle changes of many kinds, and innovative business and financing models are just some examples.</p>
<p>The <a href="https://theconversation.com/why-is-electricity-consumption-decreasing-in-australia-20998">recent decline in electricity consumption</a> partly reflects the effectiveness of these actions. </p>
<p>Indeed, Australia may well achieve its 2020 target of a 5% reduction in emissions in spite of, rather than because of, the efforts of our leaders. This will doubtless be claimed as a policy success, rather than an egregious failure to do even more with the opportunity. But that’s politics, I guess.</p>
<h2>Direct Action as a base for progress</h2>
<p>We do need to at least begin to rebuild a national government path forward on climate. And, believe it or not, last week’s <a href="https://theconversation.com/government-agrees-to-inquiry-into-emissions-trading-scheme-33599">chaotic events</a> do provide some basis for this. If we were back in 1990, when carbon pricing was first discussed, the government’s grudging pledge to conduct a review into emissions trading might even be seen as significant progress. </p>
<p>At the moment, the Direct Action deal does no more than offer a glimpse of hope that we can plot a pragmatic course on climate policy. It also offers scope for climate deniers and free-market advocates to establish a sham scheme that does nothing but increase subsidies to certain industries. </p>
<p>Nor does it avoid the cost of putting a price on carbon: the money simply comes from the taxpayer rather than requiring polluters to pay. Overall, achieving a given level of abatement is likely to cost more under Direct Action, because it is more difficult to target low-cost options and avoid subsidies.</p>
<p>That said, it now looks as though independent senator Nick Xenophon and economist Danny Price (who advises both Xenophon and environment minister Greg Hunt) are in the box seats to drive progress. We also have a basis to progress some moderately useful, potentially unnecessarily expensive, “direct action” measures. Maintaining the existing Carbon Farming Initiative, originally established by Labor and supported by the Coalition, is important.</p>
<p>Meanwhile, the Emissions Reduction Fund – while not as efficient as a wider carbon price covering more of the economy – will deliver emissions reductions within those businesses who successfully bid to receive taxpayer funding.</p>
<p>The fine print on Xenophon’s proposed “safeguard” mechanism to prevent emissions blowouts under the Direct Action scheme will be critical. If this is weak, as envisioned by the government, we are wasting time we no longer have. If an effective framework is introduced, it could form a basis for a “baseline and credit” emissions trading scheme, which could be run by industry if the government doesn’t want to be accused of a backflip, having promised never to return to what it views as the dark days of carbon pricing. </p>
<p>Perhaps the forthcoming emissions trading review, to be carried out by the <a href="http://www.climatechangeauthority.gov.au/">Climate Change Authority</a>, could focus on practical ways of making this approach workable and politically acceptable.</p>
<p>Setting these safeguards, however, sounds simple in principle but is tricky in practice. It would involve giving each participant in the scheme a “baseline” emissions level, above which they would pay carbon-related penalties. But, as we have seen with existing baseline and credit schemes, including the <a href="http://unfccc.int/kyoto_protocol/mechanisms/clean_development_mechanism/items/2718.php">Clean Development Mechanism</a>, Carbon Farming Initiative, and energy-efficiency trading schemes in <a href="http://www.resourcesandenergy.nsw.gov.au/energy-consumers/sustainable-energy/efficiency/scheme">New South Wales</a> and <a href="https://www.veet.vic.gov.au/Public/Public.aspx?id=Home">Victoria</a>, getting baselines right is much easier said than done. </p>
<p>In our present political context, baseline and credit has some important advantages over the “cap and trade” approach used by Labor. First, emitters only pay for emissions above the baseline, not all emissions, so it’s cheaper for them. Second, they can gain credits for reductions below the baseline, which they can sell to those who exceed their baselines, giving them scope for profit. A smart business can win a generous baseline, so its chances of profit far exceed its risk of costs. </p>
<p>A baseline and credit scheme could also include internationally sourced permits, subject to government approval of the types of permits and the extent to which they could be used. This is no different from the situation under cap and trade. </p>
<p>If appropriate governance mechanisms are built in, the baselines can be tightened over time, to reduce the scope for gaming and windfall profits. This might work better than Labor’s carbon price tactic of giving free permits to emissions-intensive industries, which effectively locked in subsidies. It also allows Clive Palmer to claim support for his suggested “dormant” emissions trading scheme, because any future tightening of baselines would increase the emphasis on trading.</p>
<p>Progressive tightening of baselines could also transition to a cap and trade scheme. By progressively tightening the baselines, a higher proportion of emissions would attract a carbon price. Meanwhile, the scheme could be gradually expanded to include a wider range of businesses and activities. </p>
<p>You never know, by 2020 we might actually have a useful carbon policy. And it might, in an alternative political reality, be called Australia’s emissions trading scheme.</p><img src="https://counter.theconversation.com/content/33736/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Pears AM provides advice to a range of sustainable energy and community groups. He and his superannuation funds own shares in the renewable energy industry. He sometimes receives funding from sustainable energy industry organisations and individual companies although, at present he is not receiving such funding.</span></em></p>There’s little point in getting too excited just yet about the details of Direct Action and its merits (or otherwise) as compared with emissions trading. Why? Because all of the current debate about Australia’s…Alan Pears, Sustainable Energy & Climate Researcher, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.