tag:theconversation.com,2011:/fr/topics/emissions-trading-scheme-6432/articlesEmissions trading scheme – The Conversation2022-08-18T03:19:35Ztag:theconversation.com,2011:article/1887992022-08-18T03:19:35Z2022-08-18T03:19:35ZAustralia may be heading for emissions trading between big polluters<figure><img src="https://images.theconversation.com/files/479793/original/file-20220818-1653-6nv5bh.jpg?ixlib=rb-1.1.0&rect=42%2C64%2C4701%2C3100&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Veeterzy/Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Could Australia soon have a form of emissions trading? Yes, if Labor’s <a href="https://consult.industry.gov.au/safeguard-mechanism-reform-consultation-paper">much-anticipated paper</a> on fixing Australia’s mediocre emissions-reduction framework, released today, is any guide. </p>
<p>At present, Australia relies on the controversial <a href="https://www.dcceew.gov.au/climate-change/emissions-reporting/national-greenhouse-energy-reporting-scheme/safeguard-mechanism#:%7E:text=The%20Safeguard%20Mechanism%20requires%20Australia's,reporting%20and%20record%20keeping%20requirements.">safeguard mechanism</a> to encourage big emitters such as fossil fuel power plants and manufacturers to reduce their pollution. This framework – alongside the <a href="https://theconversation.com/the-governments-2bn-climate-fund-a-rebadged-rehash-of-old-mistakes-112412">Emissions Reduction Fund</a> – was introduced during the Coalition years to reduce carbon dioxide pollution at low cost. </p>
<p>The problem is, it didn’t work. Emissions from large polluters have remained <a href="https://consult.industry.gov.au/safeguard-mechanism-reform-consultation-paper">high</a> since it was introduced in 2016. As the discussion paper states:</p>
<blockquote>
<p>Emissions limits, known as baselines, have allowed business-as-usual operations and aggregate emissions from Safeguard facilities to grow.</p>
</blockquote>
<p>Labor’s discussion paper flags ways to make the mechanism work as intended – most significantly by letting companies sell credits created by cutting emissions by more than they are required to. Companies finding it harder to slash emissions can buy these. Creating this market would effectively create a very useful carbon currency.</p>
<p>You might think this sounds abstract. It’s not. Fixing this mechanism would have a major impact on our future emissions – and the likelihood of reaching our committed emission goals. Getting this right matters. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/479796/original/file-20220818-318-s72dou.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="emissions" src="https://images.theconversation.com/files/479796/original/file-20220818-318-s72dou.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/479796/original/file-20220818-318-s72dou.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/479796/original/file-20220818-318-s72dou.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/479796/original/file-20220818-318-s72dou.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/479796/original/file-20220818-318-s72dou.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/479796/original/file-20220818-318-s72dou.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/479796/original/file-20220818-318-s72dou.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&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 current safeguard mechanism has not worked as intended, with emissions still high.</span>
<span class="attribution"><span class="source">Pexels</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>So what is the safeguard mechanism and why does it matter?</h2>
<p>The safeguard mechanism is a framework to control emissions from large polluters – defined as those emitting more than 100,000 tonnes of carbon dioxide equivalent annually. </p>
<p>This includes industries such as electricity generation, mining, and oil and gas extraction.</p>
<p>It works by giving each facility a benchmark level of emissions they are not allowed to exceed. </p>
<p>If a facility does exceed their benchmark, the regulator gives them a few easy options: reduce emissions, ask for their benchmark to increase, or buy and surrender Australian Carbon Credit Units. These credits come from someone else’s emissions reductions, which the original polluter has to pay for. </p>
<p>The problem is the current safeguard mechanism is not fit for purpose. </p>
<p>As I’ve previously <a href="https://theconversation.com/australias-emissions-reduction-fund-is-almost-empty-it-shouldnt-be-refilled-92283">pointed out</a>, the system is easily gamed. Many high-polluting firms have simply asked for larger benchmarks – and often got them. You can see the incentive – asking for a larger, “better fitting” benchmark is the cheapest option of all, requiring absolutely no change on the company’s part.</p>
<p>This is the fundamental flaw: there is no economic incentive for large polluters to cut their emissions. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1560065497537794048"}"></div></p>
<p>Better systems already exist in other countries. For instance, large polluters in the <a href="https://www.rggi.org/">United States</a> and <a href="https://ec.europa.eu/clima/eu-action/eu-emissions-trading-system-eu-ets_en">European Union</a> are targeted using <a href="https://doi.org/10.1016/j.jeem.2022.102620">pollution markets</a> that have robust economic incentives. </p>
<p>In such schemes, companies that find it very expensive to reduce pollution can buy pollution credits from the market. Alternatively, companies that find it cheap to reduce emissions can sell their credits and make money. Labor’s new discussion paper draws heavily on these successful schemes.</p>
<p>Even better, the government can raise serious revenue from this market by initially <a href="https://doi.org/10.1086/717898">auctioning off</a> pollution credits. It’s a win-win: polluters pay and gain a strong incentive to reduce emissions, and the government obtains much-needed revenue at a time when budgets are stretched from the pandemic.</p>
<p>The public funds raised can be significant: the carbon market set up by 12 states in the eastern US has auctioned off pollution allowances since 2008, raising A$5.45 billion to date.</p>
<p>If we want to reach Labor’s <a href="https://theconversation.com/labor-has-introduced-its-controversial-climate-bill-to-parliament-heres-how-to-give-it-real-teeth-187762">target</a> of cutting emissions by 43% (relative to 2005 levels) over the coming eight years, we need a fully functional market-based approach. </p>
<h2>So what are the proposed changes?</h2>
<p>The paper sets out the main proposals for developing the safeguard mechanism, including how to set a baseline of emissions for polluters (and how this should decline over time), the use of offsets, and the introduction of trading.</p>
<p>Trading would be the most significant change. Some companies will pursue emissions reduction with greater vigour – or may find it easier to do so than those in harder-to-abate sectors such as aluminium smelting or steel-making. The ability to sell these avoided emissions rewards these companies. The companies buying the credits have an incentive to cut emissions over time to avoid this cost. </p>
<p>Another proposal is to allow banking and borrowing of these credits over time. This would allow firms reducing emissions today to save credits for the future or, if needed, borrow some from the future.</p>
<h2>The big question: will it work?</h2>
<p>From an economist’s perspective, this is good news.</p>
<p>Allowing firms to trade credits will make the safeguard mechanism more cost-effective and create incentives to actually cut emissions – something lacking in the old version.</p>
<p>But it could work even better.</p>
<p>Under the current proposal, companies in the scheme cannot trade with firms outside it. This cuts the number of market participants and could limit the cost-effectiveness of the scheme. Labor should look at widening the scope and creating a fully fledged market. </p>
<p>And while banking and borrowing pollution credits has been shown to work reasonably well in other <a href="https://doi.org/10.1016/j.reseneeco.2012.05.004">countries</a>, we know it has to be managed well.</p>
<p>If the scheme isn’t properly managed, companies could borrow credits and simply never pay them back. Banked carbon credits could actually lead to higher emissions in the future, when companies draw down on them. </p>
<p>In the EU this became a real concern when the stockpile of banked allowances grew too large. In response, the European scheme’s regulator had to <a href="https://doi.org/10.1086/717898">remove them</a> from the market. The Australian government must learn from this and design the scheme carefully. </p>
<p>But overall? Take this as good news. It is a step towards a goal that has long been out of reach: a well-functioning pollution market.</p><img src="https://counter.theconversation.com/content/188799/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ian A. MacKenzie has received funding from Australian Research Council focusing on managing
carbon offsets to improve Australian climate policy effectiveness.. </span></em></p>Right now, the safeguard mechanism meant to reduce emissions is not fit for purpose. Labor is exploring ways to fix it - and create a proper pollution market.Ian A. MacKenzie, Associate Professor in Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1732452021-12-26T20:28:27Z2021-12-26T20:28:27ZLike songs, the best graphs tell stories. Here are my 10 favourites from 2021<figure><img src="https://images.theconversation.com/files/436251/original/file-20211208-141213-1demhsp.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">sheetmusicdirect</span></span></figcaption></figure><p>“One of the first things you have to decide on with a musical is why should there be songs.”</p>
<p>The person speaking is <a href="https://www.nytimes.com/video/players/offsite/index.html?videoId=1248069062358">Stephen Sondheim</a>, the writer of some of the best songs for musicals in the 20th century, who died in November aged 91.</p>
<blockquote>
<p>You can put songs in any story, but what I think you have to look for is, why are songs necessary to this story? If it’s unnecessary, then the show generally turns out to be not very good.</p>
</blockquote>
<p>I’m no <a href="https://www.abc.net.au/news/2021-11-27/stephen-sondheim-dies/100655760">Sondheim</a>, but as an editor I won’t put a graph into any story unless it is absolutely necessary to tell the story.</p>
<p>When I do, the picture can be worth at least the 800 words that accompany it.</p>
<p>So here are my 10 favourites from the business and economy stories I edited for The Conversation in 2021.</p>
<h2>Some of the best graphs remove doubt</h2>
<p>This graph, from the Bureau of Statistics, leaves no doubt about what happens to consumer spending when lockdowns end.</p>
<p>Released in November, with the national accounts, it uses <a href="https://theconversation.com/sure-the-national-accounts-show-gdp-going-backwards-but-look-at-whats-to-come-172950">bank account data</a> to show what happened to spending on clothes, furnishings, recreation, transport and restaurants and hotels. </p>
<hr>
<p><strong>Selected Victorian spending data</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434925/original/file-20211201-15-38vvlr.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Aggregated bank data. Index for May 2020 = 100.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/articles/impact-lockdowns-household-consumption-insights-alternative-data-sources">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>While the effect is clear, and beautifully illustrated, it can be interpreted in two ways. One is that lockdowns are to be avoided because they suppress ordinary life. </p>
<p>The other is that Victoria’s long lockdown was caused by the failure of the NSW government to lockdown <a href="https://www.abc.net.au/news/2021-12-02/policy-failures-caused-the-historical-decline-in-economic-growth/100664322">quickly enough</a> and hard enough as the Delta variant spread, meaning lockdowns are to be embraced, and quickly. </p>
<p>Another graph that removed doubt is this one showing what Australia’s July 2012 to July 2014 carbon price did to <a href="https://theconversation.com/vital-signs-marketing-is-getting-in-the-way-of-markets-that-could-get-us-to-net-zero-171602">greenhouse gas emissions</a>, excluding those related to land use and forestry that are subject to government directives.</p>
<hr>
<p><strong>Australian emissions excluding land use, land-use change and forestry</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/431464/original/file-20211111-27-mha6a7.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/431464/original/file-20211111-27-mha6a7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/431464/original/file-20211111-27-mha6a7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=285&fit=crop&dpr=1 600w, https://images.theconversation.com/files/431464/original/file-20211111-27-mha6a7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=285&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/431464/original/file-20211111-27-mha6a7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=285&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/431464/original/file-20211111-27-mha6a7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=358&fit=crop&dpr=1 754w, https://images.theconversation.com/files/431464/original/file-20211111-27-mha6a7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=358&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/431464/original/file-20211111-27-mha6a7.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=358&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Million tonnes of carbon dioxide equivalent per annum, updated quarterly.</span>
<span class="attribution"><a class="source" href="https://www.climatecouncil.org.au/wp-content/uploads/2019/04/Climate-Cuts-Cover-Ups-and-Censorship.pdf">Climate Council, Department of Industry</a></span>
</figcaption>
</figure>
<hr>
<p>Whatever else is said about the carbon price, its effect on emissions is clear. </p>
<p>Also clear, and enormous when you look at it, is what our current system of adjusting JobSeeker only in line with the consumer price index will do to it compared to the age pension, which is adjusted in line with wages.</p>
<p>The projections in this graph derive from the mid-year intergenerational report which looks forward 40 years. </p>
<p>After 40 years – unless there’s an extra increase, and one wasn’t allowed for in the intergenerational report – JobSeeker will be a <a href="https://theconversation.com/when-covid-is-behind-us-australians-are-going-to-have-to-pay-more-tax-164707">mere fraction</a> of the pension.</p>
<hr>
<p><strong>JobSeeker and age pension as projected in intergenerational report</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/412051/original/file-20210720-15-jrjreu.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Payment for a single person, dollars per fortnight. JobSeeker, pension indexed to intergenerational report inflation projections.</span>
</figcaption>
</figure>
<hr>
<p>Also shrinking, with unfortunate consequences for <a href="https://theconversation.com/paying-off-a-home-loan-used-to-be-easier-than-it-looked-its-now-harder-heres-why-161873">Australians with mortgages</a> and Australians trying to get them, has been wage growth.</p>
<p>The government has been forecasting a return to the 3-4% wage growth we once had in <a href="https://theconversation.com/its-the-budget-cash-splash-that-reaches-back-in-time-114188">every budget</a> since 2012, save for the last two.</p>
<p>Right now public sector wages growth, which used to lead private sector growth, is well below 2%. Private sector growth has started to climb, but it is well short of where it was.</p>
<hr>
<p><strong>Wage price index</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/436258/original/file-20211208-25-idgl6u.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/436258/original/file-20211208-25-idgl6u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/436258/original/file-20211208-25-idgl6u.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=247&fit=crop&dpr=1 600w, https://images.theconversation.com/files/436258/original/file-20211208-25-idgl6u.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=247&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/436258/original/file-20211208-25-idgl6u.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=247&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/436258/original/file-20211208-25-idgl6u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=310&fit=crop&dpr=1 754w, https://images.theconversation.com/files/436258/original/file-20211208-25-idgl6u.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=310&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/436258/original/file-20211208-25-idgl6u.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=310&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Annual seasonally adjusted growth in total hourly rates of pay excluding bonuses.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/sep-2021">ABS</a></span>
</figcaption>
</figure>
<hr>
<p>Up until the year 2000, buying a home cost between two and three times household after tax-income. </p>
<p>Then, after the headline rate of capital gains tax was halved and investors dived into the market, prices climbed to between three and four times income.</p>
<p>Six years ago they jumped again to between four and five times income, and in 2021 they climbed once again to more than <a href="https://theconversation.com/paying-off-a-home-loan-used-to-be-easier-than-it-looked-its-now-harder-heres-why-161873">six times</a> disposable income.</p>
<hr>
<p><strong>Home prices as proportion of household disposable income</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=240&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=240&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=240&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=302&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=302&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394394/original/file-20210411-15-8ofvv7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=302&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Household disposable income after tax, before the deduction of interest payments, including income of unincorporated enterprises.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/chart-pack/pdf/chart-pack.pdf">Core Logic, ABS, RBA</a></span>
</figcaption>
</figure>
<hr>
<p>While low wage growth should make it harder to pay off a loan than it used to be, just at the moment ultra-low interest rates are making it <a href="https://theconversation.com/as-home-prices-soar-beyond-reach-we-have-a-government-inquiry-almost-designed-not-to-tell-us-why-168959">easier to service</a> mortgages than it has been in decades.</p>
<p>But what the Reserve Bank calls <a href="https://theconversation.com/as-home-prices-soar-beyond-reach-we-have-a-government-inquiry-almost-designed-not-to-tell-us-why-168959">housing accessibility</a> (to distinguish it from housing affordability) is much worse.</p>
<p>Astounding price growth and a decade of weak wages growth have pushed up the cost of an average first home deposit from 70% of income to more than 80%.</p>
<hr>
<p><strong>Average first home buyer deposit</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=238&fit=crop&dpr=1 600w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=238&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=238&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=299&fit=crop&dpr=1 754w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=299&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/425847/original/file-20211012-26-1kbvg9c.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=299&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Owner-occupier; estimated as a share of average annual household disposable income using average first home buyer commitment size and assuming 20 per cent deposit. Seasonally adjusted and break-adjusted.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/publications/submissions/housing-and-housing-finance/inquiry-into-housing-affordability-and-supply-in-australia/pdf/inquiry-into-housing-affordability-and-supply-in-australia.pdf">RBA, ABS</a></span>
</figcaption>
</figure>
<hr>
<h2>Other graphs surprise</h2>
<p>If we start building more houses, it stands to reason that we will get more houses.</p>
<p>That’ll doubtless be the case eventually, but if you are expecting it to happen any time soon, you will be disappointed.</p>
<p>In the space of a year, the number of Australian houses (not apartments) under construction has jumped from 56,060 to 88,445 — the most ever. </p>
<p>But bizarrely, as has been the case for half a century, the number of houses completed each quarter has <a href="https://theconversation.com/building-more-houses-quickly-is-harder-than-it-looks-australia-hasnt-done-it-in-decades-170223">barely moved</a>. </p>
<p>It’s as if homebuilding can’t scale up. </p>
<hr>
<p><strong>Houses under construction, houses completed, quarterly</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/439030/original/file-20211227-117041-xttokw.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/439030/original/file-20211227-117041-xttokw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/439030/original/file-20211227-117041-xttokw.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=321&fit=crop&dpr=1 600w, https://images.theconversation.com/files/439030/original/file-20211227-117041-xttokw.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=321&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/439030/original/file-20211227-117041-xttokw.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=321&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/439030/original/file-20211227-117041-xttokw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=404&fit=crop&dpr=1 754w, https://images.theconversation.com/files/439030/original/file-20211227-117041-xttokw.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=404&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/439030/original/file-20211227-117041-xttokw.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=404&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/industry/building-and-construction/building-activity-australia/latest-release#data-download">Australian Bureau of Statistics</a></span>
</figcaption>
</figure>
<hr>
<p>Another surprising graph shows the disconnect between crime and our desire to lock people up.</p>
<p>Nonviolent crime has plummeted. Between 2000 and 2020, armed robberies fell from 9,480 to 4,746, unarmed robberies fell from 13,850 to 4,666, and motor vehicle vehicle theft fell from 138,915 to 48,056.</p>
<p>Violent crime is falling too. The Productivity Commission believes homicide gives the best read on crime because almost all homicides are reported. </p>
<p>It found that while homicide has plummeted, imprisonment has <a href="https://theconversation.com/more-prison-time-for-less-crime-our-swelling-prisons-are-costing-us-dearly-170792">doubled</a>. </p>
<hr>
<p><strong>Homicides and imprisonment per 100,000 Australians</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/428992/original/file-20211028-27-1u1evql.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/428992/original/file-20211028-27-1u1evql.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/428992/original/file-20211028-27-1u1evql.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=314&fit=crop&dpr=1 600w, https://images.theconversation.com/files/428992/original/file-20211028-27-1u1evql.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=314&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/428992/original/file-20211028-27-1u1evql.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=314&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/428992/original/file-20211028-27-1u1evql.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=395&fit=crop&dpr=1 754w, https://images.theconversation.com/files/428992/original/file-20211028-27-1u1evql.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=395&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/428992/original/file-20211028-27-1u1evql.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=395&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Number of prisoners per 100,000 population aged 18 years and over, number of homicides per 100,000 persons.</span>
<span class="attribution"><a class="source" href="https://www.pc.gov.au/research/completed/prison-dilemma">Productivity Commission</a></span>
</figcaption>
</figure>
<hr>
<p>Another surprise is that the “<a href="https://theconversation.com/australias-great-resignation-is-a-myth-we-are-changing-jobs-less-than-ever-before-170784">great resignation</a>” – the jump in the proportion of workers quitting their jobs in the United States – hasn’t been seen here.</p>
<p>It seems to be a real phenomenon in the US, where low vaccination rates have made public-facing jobs dangerous, but not here where resignations have been falling for decades.</p>
<p>Australians seem increasingly resigned to staying in the jobs they are in.</p>
<hr>
<p><strong>Proportion of Australians who changed jobs in the past year</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/435827/original/file-20211206-23-1h2uj0y.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/435827/original/file-20211206-23-1h2uj0y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/435827/original/file-20211206-23-1h2uj0y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=307&fit=crop&dpr=1 600w, https://images.theconversation.com/files/435827/original/file-20211206-23-1h2uj0y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=307&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/435827/original/file-20211206-23-1h2uj0y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=307&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/435827/original/file-20211206-23-1h2uj0y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=386&fit=crop&dpr=1 754w, https://images.theconversation.com/files/435827/original/file-20211206-23-1h2uj0y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=386&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/435827/original/file-20211206-23-1h2uj0y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=386&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/job-mobility/feb-2021">Australian Bureau of Statistics</a></span>
</figcaption>
</figure>
<hr>
<h2>The very best graphs tell an entire story</h2>
<p>When COVID took off in the first half of 2020 there was concern that many more people would die as a result of COVID than were recorded as COVID deaths.</p>
<p>Some of these “<a href="https://www.economist.com/graphic-detail/coronavirus-excess-deaths-tracker">excess deaths</a>” would be COVID deaths that were not classified as COVID; some would be extra deaths caused by measures such as lockdowns; and some would be caused by crowded medical facilities turning away patients. </p>
<p>Worldwide, there have been <a href="https://ourworldindata.org/excess-mortality-covid">millions</a> of excess deaths.</p>
<p>But not in Australia. In several months Australia’s excess deaths have been <a href="https://www.economist.com/graphic-detail/coronavirus-excess-deaths-tracker">negative</a>, with more deaths avoided than usual, in part because better health practices prevented deaths from the flu.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/you-cant-fix-it-if-you-cant-see-it-how-the-abs-became-our-secret-weapon-156637">You can't fix it if you can't see it: how the ABS became our secret weapon</a>
</strong>
</em>
</p>
<hr>
<p>To track excess deaths the Bureau of Statistics has <a href="https://www.abs.gov.au/statistics/health/causes-death/provisional-mortality-statistics/jan-2020-aug-2021">graphed</a> the number of doctor certified deaths actually recorded each week against the number that would be expected for that week given the average over the past five years.</p>
<hr>
<p><strong>Weekly deaths vs 2015-2019 average</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/439022/original/file-20211226-23072-1tsjblq.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/439022/original/file-20211226-23072-1tsjblq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/439022/original/file-20211226-23072-1tsjblq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=214&fit=crop&dpr=1 600w, https://images.theconversation.com/files/439022/original/file-20211226-23072-1tsjblq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=214&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/439022/original/file-20211226-23072-1tsjblq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=214&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/439022/original/file-20211226-23072-1tsjblq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=269&fit=crop&dpr=1 754w, https://images.theconversation.com/files/439022/original/file-20211226-23072-1tsjblq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=269&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/439022/original/file-20211226-23072-1tsjblq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=269&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Doctor certified deaths.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/health/causes-death/provisional-mortality-statistics/jan-2020-aug-2021">ABS Provisional Mortality Statistics</a></span>
</figcaption>
</figure>
<hr>
<p>What is apparent is that in most weeks Australian deaths have been little more than would be expected given five-year averages, and in many weeks less.</p>
<p>If COVID has been killing people in ways we can’t see, the effect has been offset by the measures we have taken to combat COVID – saving lives in other ways we can’t see.</p>
<p>It’s an important finding, not at all foreseeable, and illustrated beautifully.</p><img src="https://counter.theconversation.com/content/173245/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin 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>The Conversation’s best graphs have removed doubt, surprised, and told entire stories.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1685602021-09-23T20:03:41Z2021-09-23T20:03:41ZVital Signs: a simple way to cut carbon emissions — don’t let polluters hide<figure><img src="https://images.theconversation.com/files/422818/original/file-20210923-17-1c6y87h.jpg?ixlib=rb-1.1.0&rect=0%2C922%2C5760%2C2905&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>World leaders and about 30,000 others from assorted interest groups will converge on Glasgow in November for the United Nations’ 26th annual climate summit, COP26 (“Conference of the Parties”).</p>
<p>It will be five years (allowing for a one-year Tokyo 2020-style pandemic hiatus) since the <a href="https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement">Paris Agreement</a> adopted at COP21 in 2015. </p>
<p>There has been plenty of cynicism about that agreement, its structure and non-binding nature. Important emitters like China were effectively exempt from making meaningful carbon-reduction commitments. </p>
<p>Some OECD countries (<a href="https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas-emissions.html">such as Canada</a>) have paid lip service to the agreement but done little. Still others (such as Australia) have made some progress reducing emissions but have no long-term plan, relying instead on bumper-sticker slogans about “technology not taxes” and, until recently, hiding behind <a href="https://www.afr.com/opinion/command-and-control-no-substitute-for-a-carbon-market-20190226-h1bqpq">dodgy accounting tricks</a>.</p>
<p>That aside, it’s hard to see how the world solves what amounts to — as economists put it — a “coordination problem” without global agreements. </p>
<p>For roughly half a century economists have been unanimous about what those agreements must involve — a price on carbon. The 2018 economics Nobel prize <a href="https://www.nobelprize.org/prizes/economic-sciences/2018/nordhaus/facts/">awarded to William Nordhaus</a> was belated recognition of this fact.</p>
<p>A price on carbon — in the form of a carbon tax or emissions trading scheme — is a way to use the power of the market’s price mechanism to balance the good that comes from emitting carbon (economic development) with the bad (climate change). </p>
<p>Set the price of carbon at the true social cost of carbon (taking into account all the ills that come from climate change) and the invisible hand of the market will balance the pros and cons. Think of it as Friedrich von Hayek meets Greta Thunberg.</p>
<p>But there is another, less dramatic way to harness market forces to reduce carbon emissions: disclosure.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/vital-signs-a-global-carbon-price-could-soon-be-a-reality-australia-should-prepare-149919">Vital Signs: a global carbon price could soon be a reality – Australia should prepare</a>
</strong>
</em>
</p>
<hr>
<h2>Public disclosure works</h2>
<p>The idea starts with this: plenty of consumers want to reduce their carbon footprint and are willing to pay for it. That’s why people recycle, use green energy even when it’s more expensive, buy low-carbon clothing, and drive electric cars. A bunch of folks are willing to pay to be green.</p>
<p>The success of companies such as eco-friendly sneaker company Allbirds and electic vehicle maker Tesla exist is evidence of the market catering to these consumer preferences. But can we make it easier for consumers to express their environmental preferences? Can we turbocharge the market for greener products?</p>
<p>A working paper published this month by the <a href="https://www.nber.org/digest-202109/emissions-disclosure-requirements-lower-co2-output">National Bureau of Economic Research</a> suggests the answer is “yes”. </p>
<p>Authored by Carnegie Mellon University economists Lavender Yang, Nicholas Muller and Pierre Jinghong Liang, the paper looks at the US Environmental Protectino Agency’s <a href="https://www.epa.gov/ghgreporting">Greenhouse Gas Reporting Program</a>. In effect from 2010, this has required big carbon emitters (including all power plants that produce more than 25,000 tonnes of carbon dioxide a year) to publicly disclose how much they emit.</p>
<p>The authors look at the effect of this disclosure program on the electric power industry, which accounts for 27% of all US emissions.</p>
<p>The results are striking. Plants subject to greater scrutiny reduced their carbon emissions by 7%. Plants owned by publicly listed companies reduced their emissions by 10%. Large public companies, such as those in the S&P500 stock index, cut emissions even more (11%).</p>
<hr>
<p><strong>Accountability increases environmental performance</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/422811/original/file-20210923-15-1mtc1e.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Change in estimated CO2 emissions for GHGRP plants and non-GHGRP plants by year using data from the US EPA's Emissions & Generation Resource Integrated Database (eGRID)." src="https://images.theconversation.com/files/422811/original/file-20210923-15-1mtc1e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/422811/original/file-20210923-15-1mtc1e.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=416&fit=crop&dpr=1 600w, https://images.theconversation.com/files/422811/original/file-20210923-15-1mtc1e.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=416&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/422811/original/file-20210923-15-1mtc1e.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=416&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/422811/original/file-20210923-15-1mtc1e.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=523&fit=crop&dpr=1 754w, https://images.theconversation.com/files/422811/original/file-20210923-15-1mtc1e.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=523&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/422811/original/file-20210923-15-1mtc1e.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=523&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Change in estimated CO2 emissions for GHGRP plants and non-GHGRP plants by year using data from the US EPA’s Emissions & Generation Resource Integrated Database (eGRID).</span>
<span class="attribution"><a class="source" href="https://www.nber.org/papers/w28984">NBER Working Paper 28984</a></span>
</figcaption>
</figure>
<hr>
<h2>Responding to investor concerns</h2>
<p>The reason appears to be responsiveness to investors wanting companies to be more environmentally responsible. This explains why emissions went down more for public companies, and even more for large public companies, whose shares are more likely to be held by funds with an ESG (Environment, Social and Governance) mandate.</p>
<p>Some of these investors have pro-social preferences and want to invest their money in more sustainable companies. Others might not care about the environment per se, but know that lots of folks do. Businesses that cater to these consumer preferences have an advantage.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/vital-signs-a-3-point-plan-to-reach-net-zero-emissions-by-2050-132436">Vital Signs: a 3-point plan to reach net-zero emissions by 2050</a>
</strong>
</em>
</p>
<hr>
<p>The dark side to this is that the decline in emissions by major plants was partially offset by an increase in emissions by plants under the 25,000-tonne threshold not subject to disclosure.</p>
<p>In other words, companies responded to the incentives provided by disclosure requirements. Those who could “hide” their emissions did not.</p>
<p>The lesson is that disclosure requirements work. They force companies to own up to their customers and investors, and face the reality of their emissions behaviour. But we need to apply it to all companies, not just big ones.</p><img src="https://counter.theconversation.com/content/168560/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden is President-elect of the Academy of the Social Sciences in Australia.</span></em></p>Disclosure requirements work, forcing companies to own up to their customers and investors.Richard Holden, Professor of Economics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1582182021-04-06T20:08:57Z2021-04-06T20:08:57ZOn the road again: here’s how the states can accelerate Australia’s sputtering electric vehicle transition<figure><img src="https://images.theconversation.com/files/393501/original/file-20210406-19-1twfcl5.jpg?ixlib=rb-1.1.0&rect=49%2C33%2C5483%2C3517&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Last month, Volkswagen Australia chief Michael Bartsch <a href="https://www.smh.com.au/business/consumer-affairs/vw-boss-says-embarrassing-rules-stop-cheap-electric-car-imports-20210322-p57d85.html">revealed</a> Australia’s clean technology laws were so weak, his German head office would not supply Australians with the company’s top selling mid-range electric vehicles.</p>
<p>Without a clear policy to signal the market for electric vehicles would grow, Bartsch said, Volkswagen would instead supply popular models, such as the ID.3 hatchback and the ID.4 SUV, to more welcoming markets such as North America and Europe.</p>
<p>Undoubtedly, the Morrison government remains in the slow lane on electric vehicle policy. Its Future Fuels Strategy <a href="https://www.industry.gov.au/news/future-fuels-strategy-discussion-paper-have-your-say">discussion paper</a> rules out subsidies for electric vehicles, and the government has failed to implement fuel efficiency standards to encourage the transition away from traditional cars.</p>
<p>But as history shows, in the absence of federal leadership, states and territories can work together and step into a policy breach. Now’s the time for them to band together on electric vehicles. Here’s how they can do it.</p>
<figure class="align-center ">
<img alt="cars driving across Sydney Harbour Bridge" src="https://images.theconversation.com/files/393504/original/file-20210406-17-68pcvr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393504/original/file-20210406-17-68pcvr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393504/original/file-20210406-17-68pcvr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393504/original/file-20210406-17-68pcvr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393504/original/file-20210406-17-68pcvr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393504/original/file-20210406-17-68pcvr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393504/original/file-20210406-17-68pcvr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The states can step into the federal policy breach to promote the uptake of electric vehicles.</span>
<span class="attribution"><span class="source">PLUG ME IN</span></span>
</figcaption>
</figure>
<h2>A history of collaboration</h2>
<p>Businesses largely want to act on climate change. But without strong, consistent, legally binding policy in place many businesses worry about damage to their investments, competitiveness and profits. </p>
<p>The situation right now is reminiscent of that in the early 2000s. Then, industry called on the Howard government to provide a clear signal on emissions reduction. The pressure culminated in 2006, when businesses – including BP, IAG and Origin Energy – <a href="https://www.aph.gov.au/%7E/media/wopapub/senate/committee/climate_ctte/submissions/sub764c_pdf.ashx">declared</a> climate change was a major business risk and “the longer we delay acting, the more expensive it becomes for business and for the wider Australian economy”.</p>
<p>In the years prior, Australian states and territories had already recognised the need to act. In a remarkable collaboration in 2004, they released a discussion paper on a possible National Emissions Trading Scheme (<a href="https://www.caf.gov.au/Documents/nett-discussion-paper.pdf">NETS</a>). It aimed to “provide a framework for emissions reduction that gives business and the community certainty and predictability”.</p>
<p>This collaboration, together with industry pressure, forced the federal government to respond. In December 2006, then prime minister John Howard <a href="https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id:%22media/pressrel/68QL6%22">established</a> a joint government-business group to advise on an emissions trading system.</p>
<p>As history shows, this policy didn’t eventuate. Howard <a href="https://www.theguardian.com/world/2007/nov/24/australia">lost</a> the 2007 election and, following disappointing global climate talks in Copenhagen, the Rudd government <a href="https://www.smh.com.au/national/i-was-wrong-to-ditch-emissions-trading-rudd-20110404-1cysk.html">abandoned</a> emission trading.</p>
<p>But it demonstrates the opportunity for states to lead by acting collectively – and electric vehicle policy presents another such chance. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/on-an-electric-car-road-trip-around-nsw-we-found-range-anxiety-and-the-need-for-more-chargers-is-real-154071">On an electric car road trip around NSW, we found range anxiety (and the need for more chargers) is real</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center ">
<img alt="John Howard in front of a Bentley" src="https://images.theconversation.com/files/393505/original/file-20210406-17-2d7in4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393505/original/file-20210406-17-2d7in4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393505/original/file-20210406-17-2d7in4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393505/original/file-20210406-17-2d7in4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393505/original/file-20210406-17-2d7in4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393505/original/file-20210406-17-2d7in4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393505/original/file-20210406-17-2d7in4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Industry concern prompted then prime minister John Howard to investigate an emissions trading scheme in 2006.</span>
<span class="attribution"><span class="source">Alan Porritt/AAP</span></span>
</figcaption>
</figure>
<h2>Power to the states</h2>
<p>Australian states and territories are already leading on climate policy. <a href="https://www.afr.com/chanticleer/australia-is-a-net-zero-embarrassment-20201124-p56hg6">All have</a> targets or aspirations to reach net-zero emissions by 2050, and <a href="https://www.energy.vic.gov.au/renewable-energy/victorias-renewable-energy-targets">some</a> <a href="https://www.epw.qld.gov.au/about/initiatives/renewable-energy-targets">have</a> ambitious renewable energy targets.</p>
<p>Some jurisdictions are also starting to decarbonise their transport sector. For example, the <a href="https://www.environment.act.gov.au/cc/zero-emissions-vehicles">ACT government</a> offers financial incentives, stamp duty exemptions and a bold fleet purchasing commitment.</p>
<p>Norway provides a stunning example of policies that can support electric vehicle uptake. In under a decade, electric vehicle purchases have increased from virtually nothing to more than <a href="https://www.reuters.com/article/us-autos-electric-norway-idUKKBN29A0ZT">half of all new car sales in 2020</a>. It has a national goal that all new cars sold by 2025 should be zero emissions.</p>
<p>In contrast, in Australia in 2020, electric vehicles <a href="https://www.caradvice.com.au/914746/exclusive-tesla-sales-in-australia-revealed-up-16-per-cent-in-2020/">comprised</a> just 0.6% of new vehicle sales.</p>
<p>Electric vehicle incentives <a href="https://elbil.no/english/norwegian-ev-policy/">deployed in Norway</a> include:</p>
<ul>
<li>exemption on 25% consumption tax normally applied to new vehicles</li>
<li>road tax exemptions</li>
<li>lower registration fees</li>
<li>parking fee and tolls discounts</li>
<li>no import tax</li>
<li>permission to drive in bus lanes</li>
<li>reduced company car tax.</li>
</ul>
<figure class="align-center ">
<img alt="EVs in snow in Norway" src="https://images.theconversation.com/files/393513/original/file-20210406-21-1kexo54.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393513/original/file-20210406-21-1kexo54.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393513/original/file-20210406-21-1kexo54.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393513/original/file-20210406-21-1kexo54.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393513/original/file-20210406-21-1kexo54.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393513/original/file-20210406-21-1kexo54.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393513/original/file-20210406-21-1kexo54.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Norway’s electric vehicle policies offer a model for Australian states to follow.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>Many of these policies are within the remit of Australia’s states. But the efforts must be coordinated, or unintended consequences may result. For example, a large rebate offered in one state might mean consumers flock to purchase their electric vehicles outside their home state. That outcome would not be fair to taxpayers in the state offering the rebate.</p>
<p>Coordinated fleet purchasing is another way states could encourage electric vehicle uptake in Australia. At the moment, electric vehicle prices are out of reach for many consumers. Few low-cost options exist and the range of mid-range models – those priced about A$50,000 or $60,000 – is limited.</p>
<p>But <a href="https://www.climateworksaustralia.org/resource/electric-vehicle-ready-local-government-fleets-increasing-uptake-and-ambition/">our analysis shows</a> some electric vehicles are already cost-competitive for government fleets. So if states banded together to buy a large number of a particular model of electric vehicles, this could be the incentive needed for manufacturers to offer the model for general purchase in Australia. Some manufacturers may even consider local assembly or manufacture if sales volumes were high enough.</p>
<p>And due to the relatively high turnover in government fleet cars, the second-hand market would soon see an influx of electric vehicles. This would quicken the transition across the economy.</p>
<p>It should be noted, the Morrison government <a href="https://consult.industry.gov.au/climate-change/future-fuels-strategy/">plans</a> to encourage business fleets to transition to electric vehicles. It is also <a href="https://thedriven.io/2021/02/17/federal-mps-to-ride-in-tesla-model-3-and-hyundai-electric-cars-in-comcar-trial/">trialling</a> the Tesla Model 3 and Hyundai Ioniq EVas in its Comcar fleet.</p>
<p>States could also use their collective clout to have more electric vehicle charging infrastructure built. If all states act together to expand the charging network, it could be done more cheaply and efficiently.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-us-jumps-on-board-the-electric-vehicle-revolution-leaving-australia-in-the-dust-154566">The US jumps on board the electric vehicle revolution, leaving Australia in the dust</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center ">
<img alt="row of new cars" src="https://images.theconversation.com/files/393506/original/file-20210406-19-4vtkg0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393506/original/file-20210406-19-4vtkg0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393506/original/file-20210406-19-4vtkg0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393506/original/file-20210406-19-4vtkg0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393506/original/file-20210406-19-4vtkg0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393506/original/file-20210406-19-4vtkg0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393506/original/file-20210406-19-4vtkg0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Government fleet cars offer an opportunity to increase electric vehicle uptake.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>On the road again</h2>
<p>Working together, the states could send the signal manufacturers require before they commit to selling a wider range of electric vehicles in Australia.</p>
<p>Our research <a href="https://www.climateworksaustralia.org/resource/decarbonisation-futures-solutions-actions-and-benchmarks-for-a-net-zero-emissions-australia/">has shown</a> 50-76% of new car sales in Australia must be electric by 2030 to ensure we reach net-zero emissions by 2050. </p>
<p>We don’t have much time. The states can jumpstart this transition – and with any luck, the Commonwealth might get on board.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/morrison-has-embraced-net-zero-emissions-its-time-to-walk-the-talk-154478">Morrison has embraced net-zero emissions – it's time to walk the talk</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/158218/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rupert Posner is part of ClimateWorks Australia, which works within the Monash Sustainable Development Institute. ClimateWorks Australia receives its core funding from philanthropic foundations and also undertakes projects which attract funding from industry and government departments and agencies. Rupert owns shares in Uniti, a Swedish automotive startup. </span></em></p>History shows how the states and territories can step into a policy breach when the federal government fails. It’s time they band together on electric vehicles.Rupert Posner, Systems Lead - Sustainable Economies, Climateworks CentreLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1540412021-01-28T14:39:07Z2021-01-28T14:39:07ZWhy the EU’s proposed carbon border levy is an important test for global action on climate change<figure><img src="https://images.theconversation.com/files/381121/original/file-20210128-21-e17c6z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">m.mphoto / shutterstock</span></span></figcaption></figure><p>In the more than two decades since the <a href="https://unfccc.int/kyoto_protocol">Kyoto Protocol</a> was adopted, national policies on climate change have had dangerously and disappointingly little effect on global emissions.</p>
<p>Within the current economic system, perhaps the most ambitious attempt to reduce emissions has been the EU’s <a href="https://ec.europa.eu/clima/policies/ets_en">emissions trading system</a> (or ETS). In operation since 2005, the ETS covers more than 11,000 heavy-energy-using power stations, factories and airlines, representing around 40% of the EU’s greenhouse gas emissions. The scheme operates via a cap-and-trade principle where an EU-wide cap on emissions means that firms must buy allowances, essentially paying for their polluting activities. </p>
<p>Yet although the ETS has had some success in reducing emissions, finance professor Panayiotis Andreou and I recently showed that the scheme is <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-8551.12356">under-penalising those who pollute the most</a> – primarily because the price of allowances has typically been too low.</p>
<p>The current price of an allowance to emit greenhouse gases is around €33 per tonne, a price already much higher than the average over the life of the ETS. However, to meet EU climate change targets, this price will need to be more like €40 by 2030 and <a href="https://afep.com/wp-content/uploads/2021/01/Trade-and-Climate-Change-Quantitative-Assessment-of-the-Best-Policy-Tools.pdf">close to €250 in 2050</a>. Given the substantial costs this will impose on EU firms, either to pay for allowances or to invest in low carbon technologies, companies based outside the EU will have a hefty competitive advantage unless they face similar regulatory controls in their own countries. </p>
<p>This is why the European Commission, the EU’s executive branch, plans to present its carbon border levy in June 2021 as part of its <a href="https://theconversation.com/green-deal-seeks-to-make-europe-the-first-climate-neutral-continent-by-2050-128887">Green Deal</a> planning. Frans Timmermans, the first vice-president of the European Commission, <a href="https://www.reuters.com/article/uk-climate-change-eu-carbon/eu-sees-carbon-border-levy-as-matter-of-survival-for-industry-idUKKBN29N1O0">recently stressed that</a>:</p>
<blockquote>
<p>It’s a matter of survival of our industry. So, if others will not move in the same direction, we will have to protect the European Union against distortion of competition and against the risk of carbon leakage.</p>
</blockquote>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/381135/original/file-20210128-19-1o66v2d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Three workers loading large steel rods" src="https://images.theconversation.com/files/381135/original/file-20210128-19-1o66v2d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/381135/original/file-20210128-19-1o66v2d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/381135/original/file-20210128-19-1o66v2d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/381135/original/file-20210128-19-1o66v2d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/381135/original/file-20210128-19-1o66v2d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/381135/original/file-20210128-19-1o66v2d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/381135/original/file-20210128-19-1o66v2d.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 carbon border levy for steel could be around €57 per tonne.</span>
<span class="attribution"><span class="source">Mr. Amarin Jitnathum / shutterstock</span></span>
</figcaption>
</figure>
<p>Although its details are still undecided, the carbon border levy is expected to charge imports into the EU at an amount related to the emissions trading system price. As commission official Benjamin Angel notes, this could mean setting a carbon amount per product and <a href="https://www.euractiv.com/section/energy-environment/news/eu-carbon-border-levy-shaping-up-as-notional-ets/">multiplying it by the ETS price</a>. For example, given production of each tonne of steel typically generates around <a href="https://www.worldsteel.org/en/dam/jcr:c3acc5fd-e3c2-458c-a2cc-8c4880b9334c/Steel%2527s+contribution+to+a+low+carbon+future.pdf">1.9 tonnes of CO₂ emissions</a>, if we assume an ETS price of €30 then a firm would pay €57 extra to import it.</p>
<p>Having such a levy in place would send a strong signal to EU firms that potentially expensive investments in environmentally beneficial technologies would not result in undercutting, either by non-EU rivals that enjoy looser regulations, or by firms relocating to outside the EU – the so called “carbon leakage” that Frans Timmermans mentions.</p>
<p>Combining the EU ETS with a border levy is a sensible and workable strategy, providing a long-term context for firms that encourages the reduction of emissions by pricing in the pollution they produce. The benefits of a border levy may also spill over to outside the EU in at least one of two ways. First, and most obviously, non-EU firms that wish to export into Europe will be encouraged to reduce emissions to limit their charge. Secondly, other governments and regulatory authorities will be watching closely to see if the approach is workable and this could see the spread of cap-and-trade agreements more globally. </p>
<p>Of course, less optimistically, the levy could result in protectionist moves by other trading blocs and this leads to a wider question. The world faces a number of issues which can only be solved by international co-operation, including climate change and protection of biodiversity but also encompassing issues such as the <a href="https://theconversation.com/france-us-skirmish-over-amazon-digital-tax-shows-why-the-century-old-international-tax-system-is-broken-130835">taxation of global technology firms</a>. Can we work together to answer global challenges, or will national agendas stop this happening? The success or otherwise of the EU’s carbon border levy will provide some answers.</p><img src="https://counter.theconversation.com/content/154041/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Neil Kellard 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>Can we work together to answer global challenges, or will national agendas get in the way?Neil Kellard, Dean, Professor in Finance, Essex Business School, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1420342020-07-13T20:04:43Z2020-07-13T20:04:43ZCarbon pricing works: the largest-ever study puts it beyond doubt<figure><img src="https://images.theconversation.com/files/346648/original/file-20200709-62-1kefbky.jpg?ixlib=rb-1.1.0&rect=383%2C479%2C3491%2C1814&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock/ANU</span></span></figcaption></figure><p>Putting a price on carbon should reduce emissions, because it makes dirty production processes more expensive than clean ones, right? </p>
<p>That’s the economic theory. Stated baldly, it’s obvious, but there is perhaps a tiny chance that what happens in practice might be something else.</p>
<p>In a <a href="https://link.springer.com/article/10.1007/s10640-020-00436-x">newly-published paper</a>, we set out the results of the largest-ever study of what happens to emissions from fuel combustion when they attract a charge.</p>
<p>We analysed data for 142 countries over more than two decades, 43 of which had a carbon price of some form by the end of the study period. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/explainer-australias-carbon-price-mechanism-in-six-dot-points-4230">Explainer: Australia’s carbon price mechanism in six dot points</a>
</strong>
</em>
</p>
<hr>
<p>The results show that countries with carbon prices on average have annual carbon dioxide emissions growth rates that are about two percentage points lower than countries without a carbon price, after taking many other factors into account. </p>
<p>By way of context, the average annual emissions growth rate for the 142 countries was about 2% per year.</p>
<p>This size of effect adds up to very large differences over time. It is often enough to make the difference between a country having a rising or a declining emissions trajectory.</p>
<h2>Emissions tend to fall in countries with carbon prices</h2>
<p>A quick look at the data gives a first clue. </p>
<p>The figure below shows countries that had a carbon price in 2007 as a black triangle, and countries that did not as a green circle. </p>
<p>On average, carbon dioxide emissions fell by 2% per year over 2007–2017 in countries with a carbon price in 2007 and increased by 3% per year in the others.</p>
<hr>
<p><strong>Carbon dioxide emissions growth in countries with and without a carbon price in 2007</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/346590/original/file-20200709-87076-1mwg82r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/346590/original/file-20200709-87076-1mwg82r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/346590/original/file-20200709-87076-1mwg82r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=414&fit=crop&dpr=1 600w, https://images.theconversation.com/files/346590/original/file-20200709-87076-1mwg82r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=414&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/346590/original/file-20200709-87076-1mwg82r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=414&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/346590/original/file-20200709-87076-1mwg82r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=521&fit=crop&dpr=1 754w, https://images.theconversation.com/files/346590/original/file-20200709-87076-1mwg82r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=521&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/346590/original/file-20200709-87076-1mwg82r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=521&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Emissions are from fuel combustion and include road-sector emissions.</span>
<span class="attribution"><a class="source" href="https://ccep.crawford.anu.edu.au/publication/ccep-working-paper/16742/carbon-pricing-efficacy-cross-country-evidence">Best, Burke, Jotzo 2020</a></span>
</figcaption>
</figure>
<hr>
<p>The difference between an increase of 3% per year and a decrease of 2% per year is five percentage points. Our study finds that about two percentage points of that are due to the carbon price, with the remainder due to other factors.</p>
<p>The challenge was pinning down the extent to which the change was due to the implementation of a carbon price and the extent to which it was due to a raft of other things happening at the same time, including improving technologies, population and economic growth, economic shocks, measures to support renewables and differences in fuel tax rates.</p>
<p>We controlled for a long list of other factors, including the use of other policy instruments.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/346643/original/file-20200709-26-1ur0xt3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/346643/original/file-20200709-26-1ur0xt3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/346643/original/file-20200709-26-1ur0xt3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/346643/original/file-20200709-26-1ur0xt3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/346643/original/file-20200709-26-1ur0xt3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/346643/original/file-20200709-26-1ur0xt3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/346643/original/file-20200709-26-1ur0xt3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/346643/original/file-20200709-26-1ur0xt3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&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 higher the price, the larger the emissions reductions.</span>
</figcaption>
</figure>
<p>It would be reasonable to expect a higher carbon price to have bigger effects, and this is indeed what we found. </p>
<p>On average an extra euro per tonne of carbon dioxide price is associated with a lowering in the annual emissions growth rate in the sectors it covers of about 0.3 percentage points.</p>
<h2>Lessons for Australia</h2>
<p>The message to governments is that carbon pricing almost certainly works, and typically to great effect. </p>
<p>While a well-designed approach to reducing emissions would include other <a href="https://onlinelibrary.wiley.com/doi/full/10.1002/wcc.462">complementary policies</a> such as regulations in some sectors and support for low-carbon research and development, carbon pricing should ideally be the centrepiece of the effort.</p>
<p>Unfortunately, the politics of carbon pricing have been highly poisoned in Australia, despite it being popular in a number of countries with conservative governments including Britain and Germany. Even Australia’s Labor opposition seems to have <a href="https://www.theguardian.com/commentisfree/2020/jun/24/labors-climate-wars-truce-is-cause-for-hope-as-long-as-it-doesnt-lead-to-bipartisan-inaction">given up</a>. </p>
<p>Nevertheless, it should be remembered that Australia’s two-year experiment with carbon pricing <a href="https://theconversation.com/despite-its-imminent-demise-the-carbon-price-has-cut-emissions-29199">delivered</a> emissions reductions as the economy grew. It was working as designed.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/one-year-on-from-the-carbon-price-experiment-the-rebound-in-emissions-is-clear-44782">One year on from the carbon price experiment, the rebound in emissions is clear</a>
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<p>Groups such as the Business Council of Australia that <a href="https://www.bca.com.au/business-groups-welcome-carbon-tax-repeal">welcomed</a> the abolition of the carbon price back in 2014 are now <a href="https://www.bca.com.au/energy_and_climate">calling for</a> an effective climate policy with a price signal at its heart. </p>
<h2>Carbon pricing elsewhere</h2>
<p>The results of our study are highly relevant to many governments, especially those in industrialising and developing countries, that are weighing up their options.</p>
<p>The world’s top economics organisations including the International Monetary Fund, the World Bank and the Organisation for Economic Co-operation and Development continue to call for expanded use of carbon pricing.</p>
<p>If countries are keen on a low-carbon development model, the evidence suggests that putting an appropriate price on carbon is a very effective way of achieving it.</p>
<hr>
<p><em>An open-access version of this research is available <a href="https://ccep.crawford.anu.edu.au/publication/ccep-working-paper/16742/carbon-pricing-efficacy-cross-country-evidence">here</a>.</em></p><img src="https://counter.theconversation.com/content/142034/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Burke has received funding from the Australian Research Council (DE160100750).</span></em></p><p class="fine-print"><em><span>Frank Jotzo leads research projects supported respectively by the Australian government and the 2050 Pathways Platform, and occasionally consults to organisations, governments and businesses. No conflicts exist in relation to this article or the underlying paper.</span></em></p><p class="fine-print"><em><span>Rohan Best 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>Having a carbon price is linked to lower emissions growth. A larger price cuts emissions by more.Paul Burke, Associate Professor, Crawford School of Public Policy, Australian National UniversityFrank Jotzo, Director, Centre for Climate and Energy Policy, Australian National UniversityRohan Best, Lecturer in Economics, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1282392019-12-05T04:19:11Z2019-12-05T04:19:11ZIt’s the 10-year anniversary of our climate policy abyss. But don’t blame the Greens<figure><img src="https://images.theconversation.com/files/305287/original/file-20191205-70144-bdm2ne.jpg?ixlib=rb-1.1.0&rect=58%2C8%2C5501%2C3692&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">In 2009, a Bob Brown-led Greens party voted against an emissions trading scheme – but they can't be blamed for what came after.</span> <span class="attribution"><span class="source">Mick Tsikas/AAP</span></span></figcaption></figure><p>Federal Labor this week commemorated a <a href="https://www.afr.com/politics/federal/ten-years-on-labor-blames-greens-for-failed-carbon-price-scheme-20191201-p53fpv">dubious anniversary</a> – a decade of climate policy failure. And it pointed the finger of blame squarely at the Greens.</p>
<p>Labor <a href="https://www.theguardian.com/australia-news/2019/dec/02/labor-says-emissions-would-be-200m-tonnes-lower-if-greens-had-supported-cprs">claimed</a> that had the Greens not voted against its Carbon Pollution Reduction Scheme (CPRS) in 2009, Australia’s carbon emissions would be more than 200 million tonnes lower and electricity would be more affordable.</p>
<p>Labor MP Pat Conroy said the Coalition and the Greens “bear a heavy responsibility for the fact that, a decade later, Australia still does not have an effective policy to tackle climate change by reducing emissions”.</p>
<p>But one moment in 2009 is not the root cause of ongoing parliamentary disagreement over climate action. And the Greens cannot be blamed for what came afterwards.</p>
<p>The main lesson from that time is that cynical parliamentary strategies and weak reforms from the major parties are at the heart of <a href="https://www.routledge.com/Pricing-Carbon-in-Australia-Contestation-the-State-and-Market-Failure/Pearse/p/book/9781138230583">climate policy failure</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/305289/original/file-20191205-70167-4d7b2z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/305289/original/file-20191205-70167-4d7b2z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/305289/original/file-20191205-70167-4d7b2z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/305289/original/file-20191205-70167-4d7b2z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/305289/original/file-20191205-70167-4d7b2z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/305289/original/file-20191205-70167-4d7b2z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/305289/original/file-20191205-70167-4d7b2z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Greens believed industries such as coal-fired power got off too lightly under the CPRS.</span>
<span class="attribution"><span class="source">DAVID CROSLING/AAP</span></span>
</figcaption>
</figure>
<h2>A brief recap</h2>
<p>To understand what played out in Parliament in 2009, it is useful to briefly refresh our memories on the couple of years that led up to it.</p>
<p>Labor’s proposed CPRS followed then Prime Minister Kevin Rudd’s famous call to act on the “<a href="https://www.youtube.com/watch?v=CqZvpRjGtGM">great moral challenge</a>” of climate change. The policy was a “cap and trade” emissions trading scheme (ETS) which in theory would have limited greenhouse gas pollution from industry. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/climate-explained-how-emissions-trading-schemes-work-and-they-can-help-us-shift-to-a-zero-carbon-future-122325">Climate explained: how emissions trading schemes work and they can help us shift to a zero carbon future</a>
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</em>
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<p>Public concern about climate change at the time had peaked and Labor won the 2007 election partly on the strength of its climate policies.</p>
<p>The CPRS legislation followed the <a href="https://webarchive.nla.gov.au/awa/20190509030954/http://www.garnautreview.org.au/2008-review.html">Garnaut Climate Change Review</a>. Ross Garnaut, a prominent economist, proposed emissions targets that environmentalists considered inadequate. Meanwhile industry, which would have incurred costs under the scheme, was unhappy with the limited compensation proposed.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/305290/original/file-20191205-70122-1chjskk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/305290/original/file-20191205-70122-1chjskk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/305290/original/file-20191205-70122-1chjskk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/305290/original/file-20191205-70122-1chjskk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/305290/original/file-20191205-70122-1chjskk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/305290/original/file-20191205-70122-1chjskk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/305290/original/file-20191205-70122-1chjskk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Kevin Rudd and then-climate change minister Penny Wong outlining the CPRS.</span>
<span class="attribution"><span class="source">Alan Porritt/AAP</span></span>
</figcaption>
</figure>
<p>During the Rudd Government’s first two years, Garnaut’s vision was <a href="https://heinonline.org/HOL/LandingPage?handle=hein.journals/apjel17&div=7&id=&page=">severely weakened</a> – not least due to proposed industry exemptions and compensation, and unlimited industry access to <a href="https://www.nature.com/articles/484007a">carbon offsetting</a>. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-latest-turn-in-the-twisty-history-of-labors-climate-policies-44764">The latest turn in the twisty history of Labor's climate policies</a>
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<p>It seemed likely the scheme would have created corporate windfalls at <a href="https://www.smh.com.au/politics/federal/the-ets-is-a-huge-cost-for-almost-no-benefit-20091209-kjpm.html">considerable public expense</a>, without achieving much emissions reduction. It was <a href="https://www.youtube.com/watch?v=w5EfEZfQXEE">opposed</a> by the Greens, led by Bob Brown, along with many economists and most environmental groups.</p>
<p>The CPRS bill was <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1516/Climate2015">twice rejected</a> in the Senate, partly because the Greens voted against it both times. </p>
<p>Rather than call a double-dissolution election, Rudd announced in April 2010 the proposal would be shelved.</p>
<h2>Cynical politics</h2>
<p>The political failure of the CPRS reflects the deeper malaise in parliamentary responses to the climate crisis. In 2009, federal politicians were as they are now – extremely unwilling to develop reforms commensurate with the severity of the climate crisis.</p>
<p>As 2009 wore on, fissures opened in the Coalition over the CPRS as then Opposition Leader Malcolm Turnbull clashed with Tony Abbott and the Nationals over the policy.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/305311/original/file-20191205-16506-gsxgv1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/305311/original/file-20191205-16506-gsxgv1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/305311/original/file-20191205-16506-gsxgv1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/305311/original/file-20191205-16506-gsxgv1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/305311/original/file-20191205-16506-gsxgv1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/305311/original/file-20191205-16506-gsxgv1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/305311/original/file-20191205-16506-gsxgv1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Coalition’s Malcolm Turnbull clashed with Tony Abbott over whether to support Labor’s emissions policy.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<p>Labor <a href="https://www.blackincbooks.com.au/books/power-failure">sought to leverage</a> the CPRS for short-term political gain. It strung out the parliamentary dispute and frequently reminded the Coalition of its internal tensions, rather than genuinely try to broker agreement for emissions reduction.</p>
<p>Labor was also said to be <a href="https://twitter.com/timhollo/status/1201287549391536129">unwilling to cooperate</a> with the Greens by engaging with their proposed amendments.</p>
<h2>But does Labor have a point?</h2>
<p>Labor’s view that we would be better off now if the CPRS had been instituted in 2009 seems reasonable on the surface.</p>
<p>It’s possible that an Abbott <a href="https://www.smh.com.au/national/abbotts-blood-oath-to-repeal-carbon-tax-20111012-1ll80.html">campaign</a> to repeal the CPRS may not have taken off as it did later against the Gillard government’s carbon price. However it’s too much of a leap to assume better-timed legislation for one weak policy alone could have built consensus for real emissions reduction. </p>
<p>Had the CPRS been voted in, the Coalition would still have railed against it, likely preventing the future reform needed to achieve meaningful emissions reduction. The European Union experience shows that <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/anti.12237">cap-and-trade schemes</a>, once implemented, don’t neatly resolve the competing political demands of the fossil fuel industry and public concern about climate change.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/global-emissions-to-hit-36-8-billion-tonnes-beating-last-years-record-high-128113">Global emissions to hit 36.8 billion tonnes, beating last year's record high</a>
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<hr>
<p>By design, the <a href="https://grattan.edu.au/report/restructuring-the-australian-economy-to-emit-less-carbon/">CPRS</a> had negligible impact on fossil fuel extraction, partly due to overly generous compensation arrangements for miners. So the CPRS would not have prevented the damaging internal debate in Labor over support for new coal and gas mines, which has curbed the ambition of its emissions reduction policies.</p>
<p><a href="https://www.abc.net.au/news/2018-07-18/electricity-price-rises-chart-of-the-day/9985300">Rising electricity prices</a> could not have been attenuated by a stable carbon price alone. And the effective Renewable Energy Target <a href="https://theconversation.com/renewable-energy-tariffs-subsidies-targets-are-such-policies-needed-under-a-carbon-price-3110">might not</a> have been preserved had the CPRS endured.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/305312/original/file-20191205-16520-1h0fo8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/305312/original/file-20191205-16520-1h0fo8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/305312/original/file-20191205-16520-1h0fo8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/305312/original/file-20191205-16520-1h0fo8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/305312/original/file-20191205-16520-1h0fo8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/305312/original/file-20191205-16520-1h0fo8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/305312/original/file-20191205-16520-1h0fo8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Greens were concerned that the CPRS gave too many concessions to coal.</span>
<span class="attribution"><span class="source">AAP</span></span>
</figcaption>
</figure>
<h2>A new decade of ambition</h2>
<p>Australia’s major parties have never proposed a climate and energy reform package that transforms how we work, live and relate to non-human nature.</p>
<p>Internationally, there is growing appetite for such policies. In the US for example, momentum is growing for a Green New Deal focused on industry policy and social reforms such as job guarantees and basic incomes.</p>
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<a href="https://theconversation.com/labors-reset-on-climate-and-jobs-is-a-political-mirage-126013">Labor's reset on climate and jobs is a political mirage</a>
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<p>Both Labor and the Greens are moving in this direction. Labor leader Anthony Albanese has emphasised opportunities to rebuild manufacturing through a <a href="https://www.theguardian.com/australia-news/2019/oct/29/anthony-albanese-recasts-labors-climate-policy-to-make-it-all-about-jobs">green industrial revolution</a>. The Greens are calling for the <a href="https://www.smh.com.au/politics/federal/we-need-a-green-new-deal-di-natale-calls-on-party-to-develop-new-plan-for-climate-and-jobs-20191115-p53auj.html">same kind of plan</a>. They want a <a href="https://www.theguardian.com/australia-news/2019/mar/28/greens-set-2030-cut-off-for-coal-exports-and-coal-fired-power-stations">2030 cut-off point</a> for thermal coal exports and coal-fired power too. </p>
<p>Now, more than ever, we need bold, effective and fair climate policy that people can get behind. The Coalition continues with the opposite. </p>
<p>Labor and Greens have a responsibility shelve the CPRS blame game, and work together on something better.</p>
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<p><em>Update: the author’s disclosure statement has been updated to include details of her previous role with Friends of the Earth.</em></p><img src="https://counter.theconversation.com/content/128239/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Pearse was a member of Friends of the Earth between 2007 and 2014, spanning Labor's time in office. During this time she was a volunteer organiser with its national climate justice campaign (2010-2013), and a member of its management committee (2013-2014). Dr Pearse is part of two research teams that hold current Australian Research Council grants.
</span></em></p>Labor continues to be hung up on a decade-old Greens’ decision to oppose an emissions trading scheme in 2009. But responsibility for Australia’s climate policy void lies elsewhere.Rebecca Pearse, Lecturer, Department of Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1029842018-09-18T04:57:15Z2018-09-18T04:57:15ZWhy NZ’s emissions trading scheme should have an auction reserve price<figure><img src="https://images.theconversation.com/files/236636/original/file-20180917-158234-iupz1b.jpg?ixlib=rb-1.1.0&rect=764%2C109%2C4440%2C2754&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">New Zealand's emission reduction target for 2030 is to bring emissions to 30% below 2005 levels, and to be carbon neutral by 2050.</span> <span class="attribution"><span class="source">from www.shutterstock.com</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>While people’s eyes often glaze over when they hear the words “emissions trading”, we all respond to the price of carbon. </p>
<p>Back in 2010, when the carbon price was around NZ$20 per tonne, <a href="https://motu.nz/our-work/environment-and-resources/emission-mitigation/emissions-trading/including-forestry-in-an-emissions-trading-scheme-lessons-from-new-zealand/">forest nurseries in New Zealand boosted production</a>. But when <a href="https://www.odt.co.nz/business/farming/pine-seedlings-destroyed-ets-price-plummets">prices plunged</a> thereafter, hundreds of thousands of tree seedlings <a href="https://www.stuff.co.nz/business/farming/agribusiness/71818147/foresters-bailing-out-of-failed-ets-scheme">were destroyed rather than planted</a>, wiping out both upfront investment and new forest growth.</p>
<p>Emission prices have since recovered but no one knows if this will last. With consultation underway on improving the <a href="http://www.mfe.govt.nz/publications/climate-change/improvements-new-zealand-emissions-trading-scheme">New Zealand Emissions Trading Scheme</a> (NZ ETS), the government should seriously consider a “price floor” to rebuild confidence in low-emission investment. </p>
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<a href="https://theconversation.com/a-new-approach-to-emissions-trading-in-a-post-paris-climate-78746">A new approach to emissions trading in a post-Paris climate</a>
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<h2>How a price floor works</h2>
<p>If we want to make a smart transition to <a href="https://www.productivity.govt.nz/inquiry-content/3254?stage=4">a low-emission economy</a>, we need to change how we value emissions so people make the investments that deliver on our targets. Implementing a reserve price at auction – or a “price floor” – is a powerful tool for managing the risk that emission prices could fall for the wrong reasons and undermine much needed low-emission investments. </p>
<p>In <a href="https://www.mfe.govt.nz/ets">New Zealand’s ETS</a>, participants are required to give tradable emission units (i.e. permits) to the government to cover the emissions for which they are liable. A limit on unit supply relative to demand reduces total emissions and enables the market to set the unit price. </p>
<p>In the future, the government will be auctioning emission units into the market. A reserve price at auction, which is simple to implement, can help avoid very low prices. If private actors are not willing to pay at least the reserve price, the government would stop selling units and the supply to the market would automatically contract. </p>
<p>The government’s current <a href="http://www.mfe.govt.nz/publications/climate-change/improvements-new-zealand-emissions-trading-scheme">ETS consultation document</a> suggests that no price floor will be needed in the future because a limit on international purchasing will be sufficient to prevent the kind of price collapse we experienced in the past. However, that assessment neglects other drivers of this risk. </p>
<h2>When low ETS prices are a pitfall</h2>
<p>Ideally, ETS prices would respond to signals of the long-term cost of meeting New Zealand’s decarbonisation goals and achieving global climate stabilisation. With today’s information, we generally expect ETS prices to rise over time. For example, modelling prepared for the <a href="https://www.productivity.govt.nz/">New Zealand Productivity Commission</a> suggests <a href="https://www.productivity.govt.nz/sites/default/files/At%20a%20glance_Low-emissions%20economy_0.pdf">emission prices could rise</a> to at least NZ$75 per tonne, possibly over NZ$200 per tonne, over the next three decades. </p>
<p>However, ETS prices could also fall because of sudden technology breakthroughs or economic downturn. Even though some low-emission investors would lose the returns they had hoped for, this could be an efficient outcome because low ETS prices would reflect true decarbonisation costs. Technological and economic uncertainty imposes a genuine risk on low-emission investments that society cannot avoid. </p>
<p>But there is another scenario in which ETS prices fall while decarbonisation costs remained high. This could arise because of political risk. For example, if a major emissions-intensive industrial producer was to exit the market unexpectedly and it was unclear how the government would respond, or if a political crisis was perceived to threaten the future of the ETS, then emission prices could collapse and efficient low-emission investments could be derailed. </p>
<p>Even when remedies are on the way, it can take time to correct perceptions of weak climate policy intentions. The New Zealand government’s <a href="https://motu.nz/our-work/environment-and-resources/emission-mitigation/emissions-trading/evolution-of-the-new-zealand-emissions-trading-scheme-linking/">slow response to the impact of low-quality international units</a> in the ETS from 2011 to mid-2015 is a vivid example of this. </p>
<h2>A simple and effective solution</h2>
<p>With a price floor, an ETS auction will respond quickly and predictably to unpredictable events that lower prices. A price floor signals the direction of travel for minimum emission prices and builds confidence for low-emission investors and innovators. It also provides greater assurance to government about the minimum level of auction revenue to expect. </p>
<p>It is important to note that ETS participants can still trade units amongst each other at prices below the price floor. The price floor simply stops the flow of further auctioned units from the government into the market until demand recovers again and prices rise. </p>
<p>We have three good case studies overseas for the value of a price floor. </p>
<ol>
<li><p>The European Union ETS did not have a price floor for correcting unexpected oversupply and prices dropped because of the global financial crisis, other energy policies and overly generous free allocation. It now has a complex <a href="https://ec.europa.eu/clima/policies/ets/reform_en">market stability reserve</a> for this purpose, although that operates with less ease and transparency than a reserve price at auction.</p></li>
<li><p>To counteract low EU ETS prices, the UK created its own <a href="https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN05927">price floor</a> as a “top up” to the EU ETS. Although this did not add to global mitigation beyond the EU ETS cap, it did <a href="http://energypost.eu/emissions-reductions-from-carbon-pricing-can-be-big-quick-and-cheap/">drive down coal-fired generation</a> in the UK. </p></li>
<li><p><a href="https://www.c2es.org/content/california-cap-and-trade/">California’s ETS</a> was designed in conjunction with a large suite of emission reduction measures with complex interactions. Its reserve price at auction has ensured that a <a href="https://cleantechnica.com/2018/03/08/californias-success-reserve-prices-auctions-emission-allowances-encourage-adoption-eu/">minimum and rising emission price</a> has been maintained, despite uncertainties about the impact of other measures. </p></li>
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<h2>Keeping NZ on track for decarbonisation</h2>
<p>In New Zealand, the Productivity Commission supports the concept of an auction reserve price in its <a href="https://www.productivity.govt.nz/inquiry-content/3254?stage=4">final report on a transition to a low-emissions economy</a>. </p>
<p>The only potential downside of a price floor is the political courage needed to set its level. It could be set at the minimum level that any credible <a href="https://static1.squarespace.com/static/54ff9c5ce4b0a53decccfb4c/t/59244eed17bffc0ac256cf16/1495551740633/CarbonPricing_Final_May29.pdf">global</a> or <a href="https://www.productivity.govt.nz/sites/default/files/Modelling%20the%20transition%20to%20a%20lower%20net%20emissions%20New%20Zealand_Interim%20Results_Concept%2C%20Motu%2C%20Vivid.pdf">local</a> modelling suggests is consistent with New Zealand and global goals. The Climate Change Commission could provide independent advice on preferred modelling and an appropriate level. The merits of a price floor warrant cross-party support. </p>
<p>If the market operates in line with expectations, then the price floor has no impact on emission prices. But the price floor usefully guards against price collapse when the market does not go to plan. </p>
<p>The government, ETS participants and investors need to understand that international purchasing is not the only driver of downside price risk in the NZ ETS. A price floor would strengthen the incentives for major long-term investments in low-emission technologies, infrastructure and land uses in the face of uncertainty. </p>
<p>To reach New Zealand’s <a href="https://www.mfe.govt.nz/climate-change/what-government-doing/emissions-reduction-targets/about-our-emissions-reduction">ambitious emission reduction targets</a> for 2030 (a 30% reduction below 2005 levels) and beyond, bargain-basement emission prices need to stay a thing of the past. </p>
<p><em>This article was co-authored with Catherine Leining, a policy fellow at <a href="https://motu.nz/">Motu Economic and Public Policy Research</a>.</em></p><img src="https://counter.theconversation.com/content/102984/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Suzi Kerr is a fellow at Motu. This research was supported by the Aotearoa Foundation.</span></em></p>With consultation underway to improve the New Zealand emissions trading scheme, experts argue that a reserve price on emissions units could help rebuild confidence in low-emission investment.Suzi Kerr, Adjunct Professor, School of Government, Te Herenga Waka — Victoria University of WellingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1018122018-08-20T06:26:29Z2018-08-20T06:26:29ZThe too hard basket: a short history of Australia’s aborted climate policies<p>Less than three years ago, after Malcolm Turnbull had wrested the prime ministership from Tony Abbott, I wrote an article entitled “<a href="https://theconversation.com/carbon-coups-from-hawke-to-abbott-climate-policy-is-never-far-away-when-leaders-come-a-cropper-47542">Carbon coups: from Hawke to Abbott, climate policy is never far away when leaders come a cropper</a>”.</p>
<p>Less than two weeks ago I <a href="https://theconversation.com/emissions-policy-is-under-attack-from-all-sides-weve-been-here-before-and-it-rarely-ends-well-101103">wrote again</a> about climate policy’s unique knack of causing leaders to falter, with terminal results for the policies and, often, the leaders themselves.</p>
<p>Now Turnbull has added a new chapter to this saga. He has <a href="https://theconversation.com/malcolm-turnbull-shelves-emissions-reduction-target-as-leadership-speculation-mounts-101811">abandoned the emissions component</a> of his beleaguered <a href="https://theconversation.com/infographic-the-national-energy-guarantee-at-a-glance-85832">National Energy Guarantee</a>, in what has been characterised as a capitulation to a vocal group of backbench colleagues. The climbdown may still not be enough to save his leadership.</p>
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Read more:
<a href="https://theconversation.com/emissions-policy-is-under-attack-from-all-sides-weve-been-here-before-and-it-rarely-ends-well-101103">Emissions policy is under attack from all sides. We've been here before, and it rarely ends well</a>
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<p>A workable, credible climate policy has been the impossible object that has brought down every prime minister we’ve had for a more than a decade – all the way back to (and including) John Howard.</p>
<h2>Howard’s way</h2>
<p>Howard had spent the first ten years of his prime ministership denying either the existence of climate change or the need to do anything about it. In 2003, virtually all of his cabinet supported an emissions trading scheme. But, after meeting with industry leaders, he <a href="https://www.theage.com.au/national/howard-blows-hot-and-cold-on-emissions-20061115-ge3kkq.html">dumped the idea</a>.</p>
<p>The following year Howard <a href="http://www.abc.net.au/pm/content/2004/s1194166.htm">called a meeting of large fossil fuel companies, seeking their help in destroying the renewable energy target</a> that he had been forced to accept in the runup to the 1997 Kyoto climate summit.</p>
<p>However, in 2006, the political pressure to act on climate became too great. The <a href="https://theconversation.com/au/topics/millennium-drought-22237">Millennium Drought</a> seemed endless, the European Union had launched its own emissions trading scheme, and Al Gore’s documentary <a href="https://theconversation.com/ten-years-on-how-al-gores-an-inconvenient-truth-made-its-mark-59387">An Inconvenient Truth</a> cut through with the Australian public. Late in the year, Treasury came back for another bite at an emissions trading cherry. </p>
<p>In his book <a href="https://www.mup.com.au/books/triumph-and-demise-paperback-softback">Triumph and Demise</a>, journalist Paul Kelly describes how Treasury secretary Ken Henry convinced Howard to adopt an emissions trading policy, telling him: </p>
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<p>Prime Minister, I’m taking as my starting point that during your prime ministership you will want to commit us to a cap on national emissions. If my view on that is wrong, there is really nothing more I can say… If you want a cap on emissions then it stands to reason that you want the most cost-effective way of doing that. That brings us to emissions trading, unless you want a tax on carbon.</p>
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<h2>The moral challenge</h2>
<p>Howard’s problem was that voters were not convinced by his backflip. In November 2007, Kevin Rudd – who had proclaimed climate change “the great moral challenge of our generation” – became prime minister. A tortuous policy-making process ensued, with ever greater concessions to big polluters. </p>
<p>In late 2009, according to <a href="https://books.google.com.au/books?id=Ij9bBAAAQBAJ&pg=PT169&lpg=PT169&dq=turnbull+chris+kenny+kevin+rudd+cprs&source=bl&ots=YYMvDihfrR&sig=w7cmgULKBCRLE26MWrB3mlz0Gqw&hl=en&sa=X&ved=2ahUKEwjl7rzg7frcAhUKjLwKHci9DDUQ6AEwB3oECAIQAQ#v=onepage&q=turnbull%20chris%20kenny%20kevin%20rudd%20cprs&f=false">Kelly’s account</a>, Rudd refused to meet with the then opposition leader Malcolm Turnbull to resolve the outstanding issues around Rudd’s Carbon Pollution Reduction Scheme. Then, in December of that year, Turnbull was toppled by Abbott and the legislation was doomed. </p>
<p>Meanwhile, the Copenhagen climate conference ended in disaster, and although advised to go for a double-dissolution election, Rudd baulked. In April 2010, he <a href="https://www.smh.com.au/environment/climate-change/rudds-ets-flipflop-sparks-climate-chaos-20100428-tsgu.html">kicked emissions trading into the long grass</a> for at least three years, and his approval ratings plummeted.</p>
<p>In July 2010 Julia Gillard toppled Rudd, and the prime ministership has never been safe from internal dissent since. Not since 2004 has a federal leader won a general election from which they would survive to contest the next. </p>
<p>In the final days of the 2010 election campaign, Gillard made the fateful statement that “there will be no carbon tax under a government I lead”.</p>
<p>That election resulted in a hung parliament, and after meeting climate policy advocates Ross Garnaut and Nick Stern, two crucial independents – Tony Windsor and Rob Oakeshott – made a carbon price their price for supporting Gillard.</p>
<h2>The carbon tax war</h2>
<p>Gillard steered the legislation through parliament in the face of ferocious opposition from Abbott, who declared a “<a href="https://theconversation.com/abbott-has-pledged-to-repeal-the-carbon-tax-but-could-it-be-done-7986">blood oath</a>” that he would repeal her legislation. After winning the 2013 election, he <a href="https://theconversation.com/obituary-australias-carbon-price-29217">delivered on his pledge</a> in July 2014. Gillard, for her part, said she <a href="https://www.theguardian.com/world/2013/sep/13/julia-gillard-labor-purpose-future">regretted</a> not taking issue with Abbott’s characterisation of her carbon pricing scheme as a tax.</p>
<p>Abbott also <a href="https://theconversation.com/planned-cut-to-renewable-energy-target-a-free-kick-for-fossil-fuels-33317">reduced the Renewable Energy Target</a>, and tried but failed to rid himself of the Australian Renewable Energy Authority and the Clean Energy Finance Corporation. </p>
<p>Abbott’s demise as prime minister was not as directly tied to climate policy as Howard’s, Rudd’s or Gillard’s. Far more instrumental were gaffes such as giving the Duke of Edinburgh a knighthood.</p>
<p>But as Abbott’s government was descending into chaos, Turnbull seemed to many middle-of-the-road voters like the perfect solution: Liberal economic policy but with added climate concern. On today’s evidence, he seems to have been willing to trade that concern away to stay in the top job.</p>
<h2>The future?</h2>
<p>As of the time of writing – Monday 20 August (it pays to be specific when the situation is in such flux) – it is clear that the NEG is dead, at least in its original incarnation as a means of tackling the climate issue. No legislation or regulation will aim to reduce greenhouse emissions, with the policy now addressing itself solely at power prices. </p>
<p>It is not clear how long Turnbull will remain in office, and one could make a case that he is no longer truly in power. Thoughts now inevitably also turn to what a Shorten Labor government would do in this area if the opposition claims victory at the next election.</p>
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Read more:
<a href="https://theconversation.com/its-ten-years-since-rudds-great-moral-challenge-and-we-have-failed-it-75534">It's ten years since Rudd's 'great moral challenge', and we have failed it</a>
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<p>The first question in that regard is whether Mark Butler – an able opposition spokesman on climate change – would become the minister for a single portfolio covering energy and environment. The next is the degree of opposition that Labor would face – both from members of the union movement looking out for the interests of coal workers, and from business and industry. If Australia’s environment groups win the battle over Adani’s planned Carmichael coalmine, will they have the heart to win the wider climate policy struggle?</p>
<p>As ever, it will come down to stamina and stomach. Would Shorten and Butler have the wherewithal to face down the various competing interests and push through a credible, lasting policy, in an area where all their predecessors have ultimately failed? </p>
<p>Will the Coalition government formulate a new emissions policy – one that can withstand the feet-to-the-fire approach that has killed off every other similar effort so far?</p><img src="https://counter.theconversation.com/content/101812/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marc Hudson 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>Prime Minister Malcolm Turnbull has abandoned the emissions-reduction component of his signature energy policy, in the latest chapter of a brutal decade-long saga for Australian climate policy.Marc Hudson, PhD Candidate, Sustainable Consumption Institute, University of ManchesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/923482018-02-27T19:13:23Z2018-02-27T19:13:23ZThe Nationals have changed their leader but kept the same climate story<p>After Barnaby Joyce’s <a href="https://www.theguardian.com/australia-news/2018/feb/23/what-joyce-said-when-he-resigned-as-deputy-pm-full-transcript">demise as Deputy Prime Minister and Nationals leader</a>, and his <a href="https://theconversation.com/mccormack-wins-nationals-leadership-after-token-challenge-by-christensen-92415">replacement by Michael McCormack</a>, we might wonder what the junior Coalition partner’s leadership change means for Australia’s climate policy. </p>
<p>Perhaps the answer is “not a great deal”, given the apparent similarity between the two men’s outlooks. But then again, confident predictions about the future of Australian climate policy are a mug’s game.</p>
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<a href="https://theconversation.com/shattered-nationals-meet-to-chart-their-post-barnaby-course-92409">Shattered Nationals meet to chart their post-Barnaby course</a>
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<p>Joyce joined the Senate back in July 2005, as part of the tranche that gave the Liberal and National Coalition absolute control. At the time, another new senator, the Greens’ Christine Milne, was ready to talk with the likes of Joyce, arguing that both of their parties should share common concerns about climate change, drought, salinity, loss of native vegetation, and more.</p>
<p>Joyce evidently didn’t see it that way. When federal Liberals Brendan Nelson and Alexander Downer tried to get a debate going about the purported climate benefits of nuclear power, Joyce joined with Queensland’s Labor Premier Peter Beattie in arguing that nuclear power should not be on the agenda while Australia’s coal resources remained plentiful (although he opted against echoing Beattie’s “clean coal” push).</p>
<p>A year later, however, Joyce was more attuned to Milne’s concerns. In the context of the seemingly never-ending <a href="https://theconversation.com/au/topics/millennium-drought-22237">Millennium drought</a>, and with Nationals leader Mark Vaile urging his cabinet colleagues to spend at least another A$750 million on drought relief, Joyce fearfully noted that:</p>
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<p>The drought really has to be seen to be believed. It’s a case of creeks that haven’t run for months, sometimes years, (and) bores that are going dry. There is a real concern amongst a lot that maybe there is a final change in the climate. That’s really starting to worry people.</p>
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<p>Six months later, with the “<a href="http://www.tandfonline.com/doi/abs/10.1080/09644010802065815">first climate change election</a>” looming, Joyce used some leaping logic to describe proposed rail spending as a climate measure: </p>
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<p>We can go up to every mother and father and ask them if they can drive their tree to work and see how they go… I think that rail is greenhouse friendly. It is going to be taking all prime-movers off the road.</p>
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<h2>Roast boast</h2>
<p>Of course, this support for rural industry didn’t mean that Joyce supported any form of emissions trading put forward by either Liberal or Labor. He instead <a href="https://www.propertyrightsaustralia.org.au/joyce-wants-property-rights-inquiry/">voiced fears</a> that Australia “could soon resemble communism” unless farmers are paid properly for the carbon stored in their land. </p>
<p>In <a href="https://theyvoteforyou.org.au/people/representatives/new_england/barnaby_joyce/policies/33">2011 Joyce voted against </a> Julia Gillard’s voluntary <a href="http://www.environment.gov.au/climate-change/government/emissions-reduction-fund/cfi/about">Carbon Farming Initiative</a>, which in 2014 was <a href="http://www.cleanenergyregulator.gov.au/Infohub/CFI/Carbon-Farming-Initiative">absorbed into Tony Abbott’s Direct Action program</a>. A <a href="http://www.abc.net.au/news/rural/2017-04-09/carbon-farming-no-solution-to-reducing-australias-emissions/8409900">2017 report</a> argues that it is now helping farmers, but not reducing emissions.</p>
<p>Perhaps his most (in)famous claim came in 2009, as Kevin Rudd’s Carbon Pollution Reduction Scheme staggered towards its demise, bleeding credibility and support at every lobbyist-inspired softening. Joyce predicted that with the advent of carbon trading, the <a href="http://www.news.com.au/news/barnaby-joyce-warns-of-the-150-beef-roast/news-story/d18c1f82c39bc61dbfb3856a69989aee">Sunday roast would cost A$150</a> (a figure that was later downgraded to a far more measured and believable 100 bucks). </p>
<p>The same year, Joyce told political journalist Laurie Oakes:</p>
<blockquote>
<p>Everywhere there is a power point in your house, there is access to a new tax for the Labor Government – a new tax on ironing, a new tax on watching television, a new tax on vacuuming.</p>
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<p>In November 2009, the Nationals told the Liberals that support for carbon pricing could lead to a split in the Coalition. The then Liberal leader Malcolm Turnbull was challenged by Joe Hockey and Tony Abbott, the latter winning by a single vote. The rest is history.</p>
<p>Joyce joined in the ultimately fatal attack on Gillard’s carbon pricing scheme by upping the ante on his Sunday roast claims. Using some impressively creative reasoning, he argued that the A$23-a-tonne carbon price could lead abattoirs to end up <a href="http://www.smh.com.au/federal-politics/political-news/joyces-100-roast-prediction-rubbished-20121118-29kln.html">being slugged A$575,000 for slaughtering a single cow</a>.</p>
<h2>A party of one mind</h2>
<p>Of course, Joyce is far from alone among Nationals for baiting the greenies. Fellow backbencher George Christensen’s <a href="https://www.theguardian.com/australia-news/2018/feb/18/george-christensen-reported-to-police-over-gun-photo-aimed-at-greenie-rivals">dangerous and lamentable Facebook post</a> is just the latest in a long line of provocations.</p>
<p>Back in 1997 <a href="https://en.wikipedia.org/wiki/Tim_Fischer">Tim Fischer</a>, then Deputy Prime Minister, <a href="http://trademinister.gov.au/speeches/1997/climate_19aug.html">spoke</a> at a conference in Canberra organised by climate denialists called Countdown to Kyoto. Years later, at about the same time that Joyce first entered the Senate, his party colleague Julian McGauran reportedly flipped the bird at Greens leader Bob Brown after the Coalition voted down a Senate motion criticising the government on climate change.</p>
<p>More recently still, the Nationals have joined in <a href="https://theconversation.com/who-tilts-at-windmills-explaining-hostility-to-renewables-77762">many Liberals’ hatred of renewable energy</a>, despite the fact that it would make a lot of money for farmers.</p>
<h2>Will anything change except the climate?</h2>
<p>Joyce is gone, but the Nationals don’t exactly have hordes of tree-huggers waiting in the wings. The efforts of <a href="http://www.farmersforclimateaction.org.au/">Farmers for Climate Action</a> to influence the Nationals’ leadership succession seems to have amounted to nothing. </p>
<p>Michael McCormack (who was <a href="https://theconversation.com/politics-podcast-michael-mccormack-the-nationals-member-for-riverina-46406">interviewed by Michelle Grattan for the Conversation</a>) is already under <a href="https://twitter.com/Tim_Beshara/status/967838899287375872">Twitter scrutiny</a> over his maiden speech in 2010, when he said:</p>
<blockquote>
<p>When it does not rain for years on end, it does not mean it will not rain again. It does not mean we all need to listen to a government grant-seeking academic sprouting doom and gloom about climate changing irreversibly.</p>
</blockquote>
<p>The journalist Paddy Manning has <a href="https://www.themonthly.com.au/today/paddy-manning/2018/26/2018/1519620354/meet-our-new-deputy-pm">given an overview of his positions since then</a>. It seems that the more things change, the more they stay the same (unlike the climate).</p>
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<a href="https://theconversation.com/under-mccormack-the-nationals-need-to-accept-they-are-a-minority-and-preserve-their-independence-92355">Under McCormack, the Nationals need to accept they are a minority and preserve their independence</a>
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<p>It is impossible to predict how and when the Nationals’ policies might change, especially in places where One Nation is waiting with open arms for any wavering voters.</p>
<p>But as ever, it is the voters who hold the key. If enough of Barnaby’s “weatherboard and iron” rural base decide that climate change is a serious, vote-deciding issue, that will be the day when the Nationals finally give up their cast-iron opposition to climate action.</p><img src="https://counter.theconversation.com/content/92348/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marc Hudson 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>Barnaby Joyce had a long history of opposing climate action. His successor Michael McCormack seems to think the same way, despite climate being a growing threat to the Nationals’ rural voters.Marc Hudson, PhD Candidate, Sustainable Consumption Institute, University of ManchesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/922832018-02-25T19:19:33Z2018-02-25T19:19:33ZAustralia’s Emissions Reduction Fund is almost empty. It shouldn’t be refilled<p>Australia’s flagship climate policy, the <a href="http://www.environment.gov.au/climate-change/government/emissions-reduction-fund">Emissions Reduction Fund</a> (ERF), has come in for <a href="https://www.theguardian.com/australia-news/2018/feb/19/emissions-increases-approved-by-regulator-may-wipe-out-260m-of-direct-action-cuts">fresh questions</a> over whether the emissions allowances offered to big businesses will wipe out much of the progress made elsewhere.</p>
<p>This voluntary scheme – the central plank of Australia’s efforts to reduce greenhouse gas emissions by 26-28% below 2005 levels by 2030 – allows interested parties to reduce pollution in exchange for a proportion of the A$2.55 billion fund. </p>
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<a href="https://theconversation.com/the-government-is-miscounting-greenhouse-emissions-reductions-88950">The government is miscounting greenhouse emissions reductions</a>
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<p>So far, through successive rounds of “<a href="https://theconversation.com/explainer-how-does-todays-direct-action-reverse-auction-work-40152">reverse auctions</a>”, the scheme has <a href="http://www.environment.gov.au/climate-change/publications/emissions-reduction-fund-update">secured</a> 191.7 million tonnes of emission reductions, at a price tag of A$2.28 billion.</p>
<p>As the budget for this scheme is nearly exhausted, it is important to ask whether it has been a success, or whether Australia’s carbon policy needs a radical rethink. Overall, the answer seems to be the latter.</p>
<h2>Safeguards not so safe</h2>
<p>Much of the problem stems from the ERF’s <a href="http://www.environment.gov.au/climate-change/government/emissions-reduction-fund/publications/factsheet-erf-safeguard-mechanism">safeguard mechanism</a>, which puts limits on the greenhouse emissions from around 140 large polluting businesses. Under the mechanism, these firms are not allowed to pollute more than an agreed “baseline”, calculated on the basis of their existing operations.</p>
<p>The mechanism is described as a safeguard because it aims to stop big businesses wiping out the emissions reductions delivered by projects funded by the ERF. But it doesn’t appear to be working.</p>
<p>The government has already <a href="http://www.cleanenergyregulator.gov.au/NGER/National%20greenhouse%20and%20energy%20reporting%20data/Safeguard-baselines-table">increased the emission baselines</a> for many of these businesses, for arguably specious reasons. Some firms have been given extra leeway to pollute simply because their business has grown, or even just because they blew their original baseline.</p>
<p>Worryingly, on February 21, 2018 the federal government released a <a href="http://www.environment.gov.au/climate-change/government/emissions-reduction-fund/consultation/safeguard-mechanism">consultation document</a> which favours “updating baselines to bring them in line with current circumstances” and suggests that “to help prevent baselines becoming out-of-date in the future, they could be updated for production more often, for example, each year”.</p>
<p>It doesn’t take a genius to realise that if baselines are continually increased over time, the fixed benefits of the ERF will inevitably be wiped out.</p>
<p>This underlines the importance of having a climate policy that operates throughout the economy, rather than only in certain parts of it. If heavily polluting businesses can so readily be allowed to undo the work of others, this is a recipe for disaster.</p>
<h2>Contract problems</h2>
<p>Even within the ERF process itself, many emissions reduction contracts have already been <a href="http://www.cleanenergyregulator.gov.au/ERF/project-and-contracts-registers/project-register">revoked</a>. This is worrying but also avoidable if the contracts are <a href="https://doi.org/10.1093/oep/gpr057">written correctly</a>.</p>
<p>It is important to note that these contracts run for around seven years, and thus it is possible that the planned carbon reductions never eventuate. Currently only about 16% of the announced 191.7 million tonnes of emissions reduction have actually been <a href="http://www.cleanenergyregulator.gov.au/ERF/Auctions-results/December-2017">delivered</a>.</p>
<p>For the ERF to work effectively, the government needs to know the “counterfactual” emissions – that is, firms’ emissions if they decided not to participate in the ERF. Yet this is completely unknown.</p>
<p>This means that projects that successfully bid for ERF funding (typically the cheapest ones) <a href="https://openresearch-repository.anu.edu.au/bitstream/1885/108879/3/01_Burke_Undermined_by_Adverse_Selection_2016.pdf">may not be “additional”</a>. In other words, they may have established these emissions reduction projects anyway, with or without funding from the taxpayer.</p>
<p>Another problem with the ERF is that it is skewed towards projects from lower-polluting sectors of the economy, whereas heavily polluting industries are underrepresented. The <a href="http://www.cleanenergyregulator.gov.au/Infohub/Media-Centre/Pages/Resources/ERF%20media%20resources/Emissions-Position-as-at-January-2018.aspx">largest proportion</a> of signed contracts have involved planting trees or reducing emissions from savannah burning.</p>
<p>Meanwhile, the firms covered by the safeguard mechanism are largely absent from the ERF itself, despite these firms accounting for <a href="http://www.environment.gov.au/climate-change/government/emissions-reduction-fund/about/safeguard-mechanism">around 50%</a> of Australia’s greenhouse emissions.</p>
<p>The bare fact is that Australia’s flagship climate policy doesn’t target the prominent polluters.</p>
<h2>A different way</h2>
<p>Australia’s climate policy has had a <a href="https://theconversation.com/carbon-tax-repealed-experts-respond-29154">colourful past</a>. Yet the economics of pollution mitigation remain the same.</p>
<p>If we want to reduce pollution in a cost-effective way that actually works, then we must (re-)establish a carbon price.</p>
<p>This would provide the much-needed certainty about the cost of genuine pollution reduction. This in turn would allow all major polluters to make strategic, long-term investments that will progressively reduce emissions.</p>
<p>Instead of spending A$2.55 billion to pay for modest emissions reductions that might be cancelled out elsewhere, creating a carbon price will allow for the generation of tax revenue that can be used for a host of purposes.</p>
<p>For example, distortionary tax rates (such as income and corporation tax) could be lowered, or the revenue could be used to fund better schools and hospitals.</p>
<p>A clear example of such a success can be taken from the northeastern states of the US. The <a href="https://rggi.org/">Regional Greenhouse Gas Initiative</a> is a cap-and-trade market that sells tradeable pollution permits to electricity companies. Estimates have shown that US$2.3 billion of lifetime <a href="https://www.rggi.org/investments/proceeds-investments">energy bill savings</a> will occur due to investments made in 2015.</p>
<h2>To tax or cap?</h2>
<p>If the ERF is to be replaced, what type of carbon price do we want? Do we want a carbon tax or a cap-and-trade market?</p>
<p>While advantages exist for both, most <a href="https://doi.org/10.1016/j.reseneeco.2012.05.004">evidence</a> shows that carbon taxes are more efficient at driving down emissions. Moreover, taxation avoids the potential problems of <a href="https://doi.org/10.1016/j.jeem.2017.04.009">market power</a>, which may exist with a small number of large polluters.</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>A carbon price would also remove much of the <a href="http://dx.doi.org/10.1007/s11127-017-0401-8">political rent-seeking</a> that is encouraged by Australia’s current policy settings. A simple, economy-wide carbon tax would be more transparent than the safeguard mechanism, under which individual firms can plead for leniency. </p>
<p>With the ERF fund almost empty, the federal government should ask itself a tough question. Should it spend another A$2.55 billion of taxpayers’ money while letting major polluters increase their emissions? Or should it embrace a new source of tax revenue that incentivises cleaner technologies in a transparent, cost-effective way?</p><img src="https://counter.theconversation.com/content/92283/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ian A. MacKenzie 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>Australia’s flagship climate policy, has spent more than $2 billion on emissions reductions, yet big businesses could wipe all this out. Time to resurrect the idea of a simple carbon tax.Ian A. MacKenzie, Senior Lecturer in Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/872452017-11-28T19:07:57Z2017-11-28T19:07:57ZA fresh start for climate change mitigation in New Zealand<p>The election of the sixth Labour-led government heralds a new direction for climate change policy in New Zealand. </p>
<p>As part of the new government’s 100-day priority plan, it pledged to set a <a href="http://www.labour.org.nz/100days">target of carbon neutrality by 2050</a> and to establish the mechanisms to phase out fossil fuels. In doing so, New Zealand will join a small group of countries that have established this goal since last year: France, Germany, Sweden (by 2045) and Norway (by 2030).</p>
<h2>From commitment to action</h2>
<p>The government plans to set up an independent climate commission, likely <a href="https://www.productivity.govt.nz/sites/default/files/Examining%20the%20UK%20Climate%20Change%20Act%202008.pdf">based on the one established in the UK</a> with nearly unanimous parliamentary support in 2008. UK emissions are down not just to 1990 levels, but to <a href="https://www.carbonbrief.org/analysis-uk-cuts-carbon-record-coal-drop">1900 levels</a>. </p>
<p>The <a href="https://www.beehive.govt.nz/speech/speech-throne-2017">climate commission’s tasks</a> will include providing advice on effective pricing mechanisms for climate pollution, on the transition to 100% renewable electricity by 2035, and on bringing agriculture into the NZ <a href="http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme">Emissions Trading Scheme</a>. </p>
<p>All parties to the <a href="http://unfccc.int/paris_agreement/items/9485.php">Paris Agreement</a> have already agreed to become carbon-neutral in the second half of this century. The snag is turning that commitment into action.</p>
<h2>A story of good intentions</h2>
<p>It is now 20 years since New Zealand first signed the <a href="http://unfccc.int/kyoto_protocol/items/2830.php">Kyoto Protocol</a> – two decades of fine words and twists and turns in policy while emissions <a href="http://www.stats.govt.nz/browse_for_stats/environment/environmental-reporting-series/environmental-indicators/Home/Atmosphere-and-climate/nz-greenhouse-gas-emissions.aspx">continued to rise</a>. Surprisingly, while Australia has followed a twisty path of its own, perhaps with not so many fine words, the effect has been the same: gross greenhouse gas emissions have risen 24% in New Zealand since 1990, compared to a rise of 27% in Australia. </p>
<p>New Zealanders built a lot of gas-fuelled power stations in the 1990s and bought a <a href="http://www.transport.govt.nz/assets/Uploads/Research/Documents/Fleet-reports/The-NZ-Vehicle-Fleet-2016-web.pdf">lot of cars in the 2000s</a>. Astoundingly, we now have more cars per capita than <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/9309.0">Australia</a>. </p>
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<p>The frustrating story is told in the documentary <a href="https://www.youtube.com/watch?v=IGf4maDU7Ps">Hot Air</a>. New Zealand spent ten years getting a strategy in place, ending up with an <a href="http://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/new-zealand-emissions-trading-scheme">emissions trading scheme</a> (ETS). Another decade of tinkering later, the scheme involves a complex system of discounts, free allocations, exemptions and, crucially, unlimited access to international emissions units. </p>
<p>After 2012, New Zealand companies used this access to buy large numbers of <a href="http://morganfoundation.org.nz/wp-content/uploads/2016/04/ClimateCheat_Report8.pdf'">low-integrity units from the Ukraine</a>, enough to officially cover a quarter of all our emissions. The price of carbon, currently NZ$19, adds about 4c per litre to the price of petrol, and about 1c per kilowatt-hour to gas-powered electricity. So far, New Zealand’s ETS – like others worldwide – <a href="http://motu-www.motu.org.nz/wpapers/16_06.pdf">has not delivered</a>.</p>
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<p><em><strong>Read more:</strong> <a href="A%20new%20approach%20to%20emissions%20trading%20in%20a%20post-Paris%20climate">A new approach to emissions trading in a post-Paris climate</a></em></p>
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<p>New Zealand’s state-owned mining company, Solid Energy, was pushed into some risky deals and ultimately into <a href="https://www.reuters.com/article/newzealand-solidenergy/nz-state-owned-coal-miner-put-into-administration-idUSL3N10O1KP20150813">managed bankruptcy</a>. The remaining assets have been sold to Bathurst Resources. Chief executive Richard Tacon <a href="http://www.radionz.co.nz/news/business/338497/solid-energy-sells-off-last-of-its-significant-assets">said recently</a>:</p>
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<p>… there is no viable alternative to coal. I mean we realise it’s a transition fuel, but there’s a lot of business, dairy … that rely on coal to be a reliable, storable source of energy. </p>
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<p>Has even an Australian coal baron ever called coal a “transition fuel”? But then again perhaps Tacon has a point: the dairy company Fonterra burns more than half of all New Zealand’s coal, and the dairy industry as a whole emits <a href="http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/statistics/documents-image-library/coal.xlsx">2.2 million tonnes of carbon dioxide per year burning coal to dry milk</a>.</p>
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<h2>Civil society perseveres</h2>
<p>Against this background, climate activists have had a hard row to hoe. Law student Sarah Thomson took the <a href="https://thespinoff.co.nz/society/04-11-2017/i-took-the-climate-change-minister-to-court-and-won-kind-of-now-im-looking-at-you-james-shaw/">government to court</a> in July 2017 over its inaction on climate change. In a <a href="https://www.beehive.govt.nz/release/high-court-decision-climate-change-response-welcomed">victory for both sides</a>, the judge ruled that the government should have reviewed its 2050 target, but declined to order a judicial review because the government had since changed. </p>
<p>The youth climate group Generation Zero campaigned for a <a href="https://zerocarbonact.nz/">Zero Carbon Act</a>. The former parliamentary commissioner for the environment, Jan Wright, called for a <a href="http://www.pce.parliament.nz/media/1724/stepping-stones-web-oct-2017.pdf">UK-style Climate Change Act</a>. Thirty-nine mayors pressed the government to <a href="http://img.scoop.co.nz/media/pdfs/1707/Climate_Change_Declaration_Final.pdf">take stronger action</a>. </p>
<p>Data from a <a href="https://www.psych.auckland.ac.nz/en/about/our-research/research-groups/new-zealand-attitudes-and-values-study.html">20-year longitudinal study of social attitudes</a> in New Zealand show <a href="http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0174246">increasing agreement with climate change</a>. </p>
<p>A third review of the ETS removed a <a href="http://www.mfe.govt.nz/nzets/2015-16-review-outcomes">50% discount, with further strengthening scheduled</a>. The Environment Ministry was asked to advise <a href="http://www.mfe.govt.nz/climate-change/what-government-doing/new-zealands-climate-change-programme">specifically on domestic emissions reductions</a>. The Productivity Commission, a government think tank, was asked to <a href="https://www.productivity.govt.nz/inquiry-content/3254?stage=2">report on a low-emission economy</a>. </p>
<p>However, during the election campaign, climate change was not a major issue, and official projections showed a continued rise in emissions. <a href="https://motu.nz/assets/Documents/our-work/environment-and-resources/emission-mitigation/shaping-new-zealands-low-emissions-future/Motu-Note-16.pdf">Under current policy settings, net emissions will rise a further 58% by 2030</a>. </p>
<h2>Aiming for carbon neutrality</h2>
<p>That brings the story to New Zealand First’s decision to choose a Labour-led government, with the Green Party in a confidence and supply arrangement. The Greens now have five ministers, including co-leader James Shaw as minister for climate change. Labour, having first introduced the ETS in 2008, will now amend it to try to make it work. </p>
<p>Already, since the election, Fonterra has <a href="https://www.fonterra.com/nz/en/our-stories/media/fonterra_partners_with_government_on_roadmap_to_low_emissions_future.html">announced</a> a commitment to cut processing emissions (mostly due to coal, but also natural gas and transport) by 30% by 2030, matching the national target, and 100% by 2050.</p>
<p>Carbon neutrality calls for, among other things, a complete stop to burning fossil fuels and to buying products that burn them, such as petrol cars. The year 2050 is not that far away. </p>
<p>In truth, by 2050 anything might happen: organic solar cells might become as cheap as newsprint, unleashing economic growth and making “sunlight-to-liquid fuels” economic – or not. Positive carbon feedbacks from the oceans, forests and Arctic methane might overwhelm our mitigation efforts. Climate sensitivity might surprise us on the high or low side. </p>
<p>We can’t say what parts of the natural world will survive climate change and the attempted sustainability transition. But New Zealand is taking a step in the right direction.</p><img src="https://counter.theconversation.com/content/87245/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert McLachlan 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>As part of its 100-day priority plan, New Zealand’s new government has pledged to set a target of carbon neutrality by 2050, which means phasing out fossil fuels and products that burn them.Robert McLachlan, Professor in Applied Mathematics, Massey UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/859782017-10-20T04:59:06Z2017-10-20T04:59:06ZWill the National Energy Guarantee hit pause on renewables?<p>The federal government’s new National Energy Guarantee (NEG) proposal looks likely to put the brakes on renewable energy investment in Australia. And based on the sparse detail so far available, there are serious questions about whether the plan really can deliver on its aims of reliability, emissions reductions and lower prices. </p>
<p>The broad mechanism design could be made to work, but to be effective in driving the transition of the energy sector it would need adequate ambition on carbon emissions and very careful thought about the reliability requirements of the future electricity grid.</p>
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<a href="https://theconversation.com/infographic-the-national-energy-guarantee-at-a-glance-85832">Infographic: the National Energy Guarantee at a glance</a>
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<p>The policy may well be used to force investment into the fossil fuel power fleet through regulatory intervention, and perhaps for the power sector to buy emissions offsets. This would risk locking in a carbon-intensive power system.</p>
<h2>The NEG: top or flop?</h2>
<p>Having rejected several options – including an <a href="https://theconversation.com/emissions-trading-for-electricity-is-the-sensible-way-forward-70137">emissions intensity scheme</a>, the <a href="https://theconversation.com/as-the-clean-energy-target-fizzles-what-might-replace-it-85598">Clean Energy Target</a> put forward by the <a href="https://theconversation.com/the-finkel-review-at-a-glance-79177">Finkel Review</a>, and any continuation of the <a href="https://theconversation.com/au/topics/renewable-energy-target-8912">Renewable Energy Target</a> – the government has finally managed to get a <a href="https://theconversation.com/infographic-the-national-energy-guarantee-at-a-glance-85832">policy proposal</a> through the party room, formulated in advice by its newly established <a href="http://www.coagenergycouncil.gov.au/publications/energy-security-board-update">Energy Security Board</a>.</p>
<p>Analysts’ initial reactions have ranged from <a href="http://www.afr.com/opinion/columnists/energy-security-board-offers-the-government-a-circuitbreaker-for-energy-crisis-20171017-gz2k7t">unbridled enthusiasm</a> to <a href="http://www.afr.com/opinion/columnists/shambolic-energy-guarantee-policy-snatches-defeat-from-the-jaws-of-victory-20171018-gz3c18?utm_source=News+Wrap&utm_campaign=bf34a5b73b-EMAIL_CAMPAIGN_2017_03_30&utm_medium=email&utm_term=0_4d9b03d80b-bf34a5b73b-296301185&mc_cid=bf34a5b73b&mc_eid=9412a2e2f6">derisive rejection</a>. It depends on political judgments, expectations about how the scheme might operate in practice, and how high one’s expectations are for efficiency and environmental effectiveness. </p>
<p>The politics of this are <a href="https://www.theguardian.com/australia-news/2017/oct/20/turnbull-predicts-states-will-sign-up-to-national-energy-guarantee">complicated</a>, but there are hopes that the Labor opposition will agree to the scheme in principle. But the decision is ultimately with the Australian states, which would need to pass legislation to implement it.</p>
<h2>Reliability guarantee: supporting fossil fuels?</h2>
<p>The first element of the NEG is the “reliability guarantee”. This would require electricity retailers to buy some share of their electricity from “<a href="https://theconversation.com/baffled-by-baseload-dumbfounded-by-dispatchables-heres-a-glossary-of-the-energy-debate-84212">dispatchable</a>” sources that can be readily switched on. The NEG list includes coal and gas, as well as hydro and energy storage – essentially, anything except wind and solar.</p>
<p>The NEG proposal might be informed by a political imperative to support coal. As <a href="https://theconversation.com/the-governments-energy-policy-hinges-on-some-tricky-wordplay-about-coals-role-85843">John Quiggin</a> has pointed out, defining coal-fired plants as dispatchable is questionable at best: they have long ramp-up times and are sometimes unavailable. </p>
<p>The <a href="https://www.aemo.com.au/">Australian Energy Market Operator (AEMO)</a> would prescribe the share of the “dispatchable” power sources and perhaps also the mix of technologies in retailers’ portfolios, separately in each state. This would be a remarkably interventionist approach.</p>
<p>Demand from retailers for the power sources they are told to use could trigger investment in new gas generators, refurbishment of existing coal plants, and some investment in energy storage. It is difficult to see how it would force the building of new coal plants, given their very large upfront cost and long-term emissions liabilities.</p>
<p>Would electricity prices be lower, as the Energy Security Board’s advice <a href="http://www.coagenergycouncil.gov.au/sites/prod.energycouncil/files/publications/documents/Energy%20Security%20Board%20ADVICE....pdf">claims</a>? Investment in new power generation will tend to reduce prices, cutting into profit margins. But the resulting investments will come at higher economic cost than market solutions, because they are determined by regulators’ orders made with a view to the short-term energy mix, not long-term cost-effectiveness. And there would be risk premiums on project finance, reflecting uncertainty about future policy settings.</p>
<h2>Emissions guarantee: flexible but weak?</h2>
<p>The NEG’s second pillar is the “emissions guarantee”. This would require retailers to keep their portfolio below some level of emissions intensity (carbon dioxide per unit of electricity).</p>
<p>This increases the demand for electricity from lower-emissions technologies, allowing them to command higher market prices and therefore encouraging investment in them. This price signal would benefit renewables and also favour gas over coal, as well as discriminating against the most polluting coal plants. </p>
<p>The <a href="http://www.coagenergycouncil.gov.au/sites/prod.energycouncil/files/publications/documents/Energy%20Security%20Board%20ADVICE....pdf">Energy Security Board’s advice</a> suggests that retailers would have flexibility in complying with that obligation, by buying and selling emissions components of their contracts, and potentially also using emissions offsets from outside the scheme to make up for any exceeding of emissions limits.</p>
<p>The reliability and emissions elements of the NEG interact with each other, and the net effect depends on the detailed implementation as well as the relative importance of the two components. </p>
<p>Given the politics within government, the weight could be on support for coal and gas generation. The reliability guarantee could therefore end up putting a tight lid on the amount of new wind and solar that can enter the system. </p>
<h2>Renewables, gas or credits?</h2>
<p>The Energy Security Board makes <a href="http://www.coagenergycouncil.gov.au/sites/prod.energycouncil/files/publications/documents/Energy%20Security%20Board%20ADVICE....pdf">explicit reference</a> to Australia’s <a href="https://theconversation.com/australias-2030-climate-target-puts-us-in-the-race-but-at-the-back-45931">Paris target</a> of a 26-28% reduction in emissions, relative to 2005 levels, by 2030. Prime Minister Malcolm Turnbull has <a href="http://www.smh.com.au/environment/climate-change/paris-target-fades-from-view-as-turnbull-government-stumbles-for-an-energy-fix-20171016-gz2a8q.html">said</a> the NEG will be expected to cut electricity emissions by a <a href="http://www.abc.net.au/news/2017-10-19/national-energy-guarantee-trifecta-missing-detail/9063500">similar percentage</a>, as a “pro rata” contribution to this goal.</p>
<p>But to meet the economy-wide target, the electricity sector would need to make deeper cuts, because emissions reductions are cheaper and easier here than elsewhere. </p>
<p>The Energy Security Board says it expects renewables to reach 28-36% by 2030. This is rather low, considering that the Finkel Review projected 42% under its proposed clean energy target, and 35% under business as usual. Other <a href="https://www.climateworksaustralia.org/project/national-projects/pathways-deep-decarbonisation-2050-how-australia-can-prosper-low-carbon">analyses</a> have shown that much higher levels of renewables are achievable. </p>
<p>So if the NEG is not geared to support renewables, how could significant emissions reductions be achieved?</p>
<p>One way would be to replace coal with gas-fired power, and brown coal with black coal. But the government has flagged that it is opposed to closing old coal plants. And a large-scale shift to gas would raise electricity prices further, unless gas prices were to tumble. </p>
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Read more:
<a href="https://theconversation.com/the-governments-energy-policy-hinges-on-some-tricky-wordplay-about-coals-role-85843">The government's energy policy hinges on some tricky wordplay about coal's role</a>
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<p>That leaves another option, mentioned in the Energy Security Board’s report: power retailers could buy emissions offset credits from elsewhere to make up for not meeting the emissions standard, specifically from projects under the government’s <a href="http://www.environment.gov.au/climate-change/government/emissions-reduction-fund">Emissions Reduction Fund (ERF)</a>. </p>
<p>This might be attractive for the government, as electricity retailers would then pay for ERF credits, rather than government as has been the case until now. It may also be attractive to the power industry, as it would reduce the cost of complying with the new obligations. Retailers would pass on the costs to their customers, so electricity consumers would end up paying for ERF projects. </p>
<p>Even assuming that all of the ERF’s emissions reductions are real (and some of them <a href="https://theconversation.com/direct-action-not-giving-us-bang-for-our-buck-on-climate-change-59308">may not be</a>), all this does is shift the adjustment burden from electricity to other sectors such as agriculture.</p>
<p>The NEG has the potential to reduce emissions effectively if the parameters are adjusted accordingly. But what seems more likely is that it will put the brakes on investment in renewables, solidify the status quo and delay the energy transition.</p><img src="https://counter.theconversation.com/content/85978/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Frank Jotzo manages research grants including from the Commonwealth government. He is a member of the ACT Climate Change Council. </span></em></p><p class="fine-print"><em><span>Salim Mazouz is director of the economic consulting firm EcoPerspectives. There are no current projects that would be affected by the material discussed in this article.</span></em></p>The National Energy Guarantee proposal seems geared towards locking in the status quo rather than driving the much-needed energy transition.Frank Jotzo, Director, Centre for Climate Economics and Policy, Australian National UniversitySalim Mazouz, Research Associate, Centre for Climate Economics and Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/855382017-10-13T04:18:32Z2017-10-13T04:18:32ZResearch suggests Tony Abbott’s climate views are welcome in the Hunter Valley<figure><img src="https://images.theconversation.com/files/189932/original/file-20171012-9821-lmo0kz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Former Prime Minister Tony Abbott this week drew renewed attention to himself with a <a href="http://tonyabbott.com.au/2017/10/transcript-hon-tony-abbott-mp-address-global-warming-policy-foundation-westminster-london">speech</a> to the Global Warming Policy Foundation, a London-based climate sceptic group, in which he voiced a range of doubts about climate science and policy, and claimed that climate change is “<a href="https://www.theguardian.com/australia-news/2017/oct/10/tony-abbott-says-climate-change-is-probably-doing-good">probably doing good</a>”. </p>
<p>The comments might come as <a href="https://theconversation.com/tony-abbott-once-the-climate-weathervane-has-long-since-rusted-stuck-84969">no surprise</a> to those familiar with his views. But what’s arguably more surprising is the prevalence of similar opinions among some Australian business leaders.</p>
<p>My research, <a href="http://www.tandfonline.com/doi/full/10.1080/23251042.2017.1382032">published this week in the journal Environmental Sociology</a>, features interviews with business leaders in the Hunter Valley of New South Wales – a major coal-producing hub. </p>
<p>It reveals that Abbott’s doubts about the veracity of climate science and its forecast impacts, and his scathing dismissal of those concerned about climate change, have a long history of support among the Hunter Valley’s business leaders.</p>
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<p><em><strong>Read more</strong>: <a href="https://theconversation.com/a-brief-history-of-fossil-fuelled-climate-denial-61273">A brief history of fossil-fuelled climate denial</a></em></p>
<p>Carried out in the lead-up to the implementation of the Gillard Labor government’s price on carbon in 2011, my research sought to understand business leaders’ attitudes to government policies and to climate change more broadly. </p>
<p>I approached 50 chief executives of organisations operating in the Hunter Region, of whom 31 agreed to participate (or had a senior staff member take up the opportunity). </p>
<p>They were asked questions about their views on climate change, how and whether their organisation was responding to the issue, and what they thought about the various political parties’ policies in response to it. </p>
<p>Perhaps not surprisingly, participants’ overwhelming concern was that the economy might decline as a result of climate policies such as pricing carbon. </p>
<p>While some were concerned about climate change, there was almost unanimous opposition to carbon pricing. Given the politics of the time, this too is unremarkable, particularly in light of the success Abbott enjoyed at the 2013 election after pledging to scrap the policy.</p>
<p>What was surprising, however, was the pervasive scepticism among participants about the science of climate change. This is especially the case given that many people now view the debate over whether climate change is happening – and whether it is caused by human activity – as being over. </p>
<p>Moreover, many participants believed that climate scientists were motivated by financial rewards in arguing that climate change is a serious concern. </p>
<p>These beliefs were voiced not only by those in industries like coal, aluminium, and shipping - but echoed by participants from other industries, revealing a deep scepticism of both the discipline and the science of climate change itself. </p>
<p>It is noteworthy that the research was focused on the Hunter Valley and Newcastle, home to the world’s <a href="http://www.portofnewcastle.com.au/">biggest coal port</a>.</p>
<p>Participants also held intensely antagonistic views in relation to the environment movement and the Australian Greens, believing their views were <a href="http://www.tandfonline.com/doi/abs/10.1080/09644016.2010.518676">quasi-religious</a> and that they too were <a href="http://journals.sagepub.com/doi/abs/10.1177/1440783313518245">self-interested</a> and unrealistic in wanting to tackle climate change. </p>
<h2>Striking views</h2>
<p>In some ways the extremity of these comments was striking. Although prominent in writings by <a href="http://www.heraldsun.com.au/news/opinion/andrew-bolt/andrew-bolt-were-paying-for-scientists-climate-of-fear/news-story/8809eec515b883bf30aae83700e69073">conservative columnists</a> at the time, the broader debate was much more focused on <a href="http://onlinelibrary.wiley.com/doi/10.1111/ajph.12021/full">jobs and the economy</a>.</p>
<p>A small minority of participants did support some type of mechanism to limit greenhouse emissions, and were concerned about the environment. </p>
<p>But more broadly, my research showed that the Hunter Region’s business leaders – whether or not they were directly involved in coal – had taken on board many of the <a href="https://theconversation.com/hashtags-v-bashtags-a-brief-history-of-mining-advertisements-and-their-backlashes-47359">arguments</a> promulgated by the industry in its ultimately successful campaign against carbon pricing in Australia. </p>
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Read more:
<a href="https://theconversation.com/hashtags-v-bashtags-a-brief-history-of-mining-advertisements-and-their-backlashes-47359">Hashtags v bashtags: a brief history of mining advertisements (and their backlashes)</a>
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<p>These dynamics may have changed a little in recent times, with companies such as <a href="https://www.agl.com.au/">AGL</a> and <a href="http://www.bhp.com">BHP</a> shifting away from coal.</p>
<p>The overall dynamics of the climate politics, however – as revealed in the current <a href="https://theconversation.com/can-two-clean-energy-targets-break-the-deadlock-of-energy-and-climate-policy-84373">stalemate</a> over responding to the <a href="https://theconversation.com/the-finkel-review-finally-a-sensible-and-solid-footing-for-the-electricity-sector-79118">Finkel Review</a> – remains out of step with what the climate science is telling us. As, of course, do Abbott’s comments. </p>
<p>Abbott’s London speech was interpreted as incendiary, and earned him a <a href="https://www.theguardian.com/australia-news/2017/oct/12/tony-abbott-needs-to-explain-u-turn-on-climate-change-julie-bishop-says">sharp rebuke from government colleagues</a>. But when we look at the places where his message might be received more favourably, it becomes apparent there are still pockets of the country where he might expect to find a plentiful and powerful audience.</p><img src="https://counter.theconversation.com/content/85538/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vanessa Bowden 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>While Tony Abbott’s London climate speech has been widely criticised, research suggests his views have long had a sympathetic ear in Australia’s coal heartland.Vanessa Bowden, Associate Lecture in Social Enquiry, University of NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/787462017-07-06T20:17:59Z2017-07-06T20:17:59ZA new approach to emissions trading in a post-Paris climate<figure><img src="https://images.theconversation.com/files/176678/original/file-20170704-32566-q9aylv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Climate teams: if countries pooled resources, they could support a low-emission transformation.</span> <span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>Despite the US withdrawal from the <a href="http://unfccc.int/paris_agreement/items/9485.php">2015 Paris Agreement on climate change</a>, other countries, including New Zealand, remain committed to cutting their greenhouse gas emissions. </p>
<p>In our <a href="http://motu.nz/our-work/environment-and-resources/emission-mitigation/emissions-trading/an-effective-nz-ets-clear-price-signals-to-guide-low-emission-investment/">report</a>, we explore how New Zealand, a trailblazer for emissions trading, might drive a low-emission transformation, both at home and overseas. </p>
<h2>Turning off the tap</h2>
<p>Emitting greenhouse gases is a lot like overflowing a bathtub. Even a slow trickle will eventually flood the room. </p>
<p>The Paris Agreement gives all countries a common destination: net zero emissions during the second half of the century. It is also an acknowledgement that the world has only a <a href="https://www.nature.com/news/three-years-to-safeguard-our-climate-1.22201">short time to turn the tide</a> on emissions and limit global temperature rise to below two degrees. The sooner we turn down the tap, the more time we have for developing solutions.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/176846/original/file-20170705-29276-v01gxc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/176846/original/file-20170705-29276-v01gxc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/176846/original/file-20170705-29276-v01gxc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/176846/original/file-20170705-29276-v01gxc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/176846/original/file-20170705-29276-v01gxc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/176846/original/file-20170705-29276-v01gxc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/176846/original/file-20170705-29276-v01gxc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Time is running out on meeting the goal of keeping global temperature rise below two degrees.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/">from Unsplash</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p><a href="https://www.mfe.govt.nz/climate-change/reducing-greenhouse-gas-emissions/New-Zealand%E2%80%99s-post-2020-climate-change-target">New Zealand’s 2030 commitment</a> is to reduce emissions 30% below 2005 levels (11% below 1990). In 2015, our <a href="http://www.mfe.govt.nz/publications/climate-change/new-zealands-greenhouse-gas-inventory-1990%E2%80%932015-snapshot">emissions</a> (excluding forestry) were 24% above 1990 levels. The government projects a gap of 235 million tonnes between what has been pledged and what New Zealand will actually emit in the period from 2021 to 2030. </p>
<p>Reducing emissions rapidly enough within New Zealand to achieve our Paris commitment could be extremely expensive, and even at a cost of NZ$300 per tonne, the target could not be met through domestic action alone. </p>
<p>International emission reductions help bridge the gap. New Zealand could turn off its own greenhouse gas tap while supporting other countries to do the same. </p>
<h2>Joining forces across borders</h2>
<p>In the past, New Zealand relied heavily on the global <a href="http://unfccc.int/kyoto_protocol/mechanisms/emissions_trading/items/2731.php">Kyoto carbon market</a> and purchased international emission reductions using the <a href="http://motu.nz/our-work/environment-and-resources/emission-mitigation/emissions-trading/lessons-learned-from-the-new-zealand-emissions-trading-scheme/">New Zealand Emissions Trading Scheme (ETS)</a>. Some ETS firms bought low-cost overseas Kyoto units of questionable integrity while domestic emissions continued to rise. </p>
<p>In 2015, New Zealand pulled out of the Kyoto carbon market and its ETS is now a domestic-only system. </p>
<p>Under the Paris Agreement, carbon markets have changed in three important ways: </p>
<ul>
<li><p>Currently, international emission reductions can be traded only from government to government. It is no longer possible for NZ ETS participants to buy international units directly from the market.</p></li>
<li><p>International emission reductions sold as offsets to other countries will have to be additional to the seller’s own Paris target. </p></li>
<li><p>Countries have flexibility to trade international emission reductions through arrangements outside of the central UN mechanism which is at an early stage of development. </p></li>
</ul>
<h2>A new approach to reducing emissions</h2>
<p>What does this mean for New Zealand? First, we cannot and must not rely on international markets to set our future domestic emission price. </p>
<p>Second, as both taxpayers and responsible global citizens, we need to decide where to fund emission reductions. Most mitigation opportunities are in developing countries. The benefits of investing in lower-cost reductions overseas need to be weighed against the costs of deferring strategic investment in New Zealand’s own low-emission transformation. </p>
<p>Third, we need an effective mechanism to direct New Zealand’s contribution to mitigation overseas. </p>
<p>In collaboration with others, <a href="https://motu.nz/">Motu</a> researchers are prototyping a new approach: a results-based agreement between buyer and seller governments within a climate team. </p>
<p>For example, New Zealand could partner with other buyers – such as Australia, South Korea or Norway – to pool funding at a scale that provides incentives for a country with a developing or emerging economy – such as Colombia or Chile – to invest in low-emission transformation beyond its Paris target. These countries could then create a more favourable environment for low-emission investment – including by New Zealand companies. </p>
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<img alt="" src="https://images.theconversation.com/files/176844/original/file-20170705-5302-qnxk6m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/176844/original/file-20170705-5302-qnxk6m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/176844/original/file-20170705-5302-qnxk6m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/176844/original/file-20170705-5302-qnxk6m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/176844/original/file-20170705-5302-qnxk6m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/176844/original/file-20170705-5302-qnxk6m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/176844/original/file-20170705-5302-qnxk6m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Emissions trading could play an important role in New Zealand’s transition to a low-emissions economy.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/">from Unsplash</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<h2>Retooling the ETS for domestic decarbonisation</h2>
<p>So far, New Zealand has been moving at speed but in the wrong direction, relying heavily on international emission reductions to meet its targets from 2008 through 2020 while domestic emissions continued to rise. Gross emissions (excluding forestry) are <a href="http://www.mfe.govt.nz/publications/climate-change/nz-second-biennial-report-under-unfccc">projected to climb</a> 29% above 1990 gross emission levels by 2030 under current measures. This is a far cry from our 2030 Paris target of net emissions of 30% below 2005 gross emission levels (11% below 1990). </p>
<p>New Zealand’s ETS has an important role to play in achieving a successful low-emission domestic economy, but it needs to be properly equipped. </p>
<p>Unlike other financial markets, the purpose of an ETS market is more than price discovery, resource allocation and liquidity. It is designed to create a change in behaviour to reduce emissions. Prices are driven not just by the interplay of demand and supply, but by current policy decisions, emission reduction opportunities, and expectations about future decisions and opportunities.</p>
<p>Since de-linking from the Kyoto market in mid-2015, NZ ETS participants have had no certainty on how to invest. They need clear near-term signals for unit supply and cost and predictable processes for longer-term decision making. </p>
<h2>Five changes to make the emissions trading work</h2>
<ol>
<li><p>Introducing a cap (fixed limit) on NZ ETS units sold or freely allocated by the government will define supply and enable the market to set an efficient price. In the past, the NZ ETS borrowed the global Kyoto cap, which essentially allowed unlimited domestic supply. The Kyoto cap is no longer available and we have committed to reducing domestic emissions. </p></li>
<li><p>Establishing a price band will provide a minimum and maximum emission price limit, set by government. A price floor will guarantee a minimum return on low-emission investment and a price ceiling will safeguard against upside price shocks. When the floor and ceiling are far apart, the market has latitude when setting the price. The closer they are, the more the government manages the price. The price band will be implemented at auction and replace the current fixed-price option set at NZ$25 per tonne.</p></li>
<li><p>Fixing both the cap and the price band for five years and extending them by one year each year will provide short-term certainty. The government will also need to set indicative trajectories for caps and price bands for a further 10 years in alignment with its decarbonisation objectives. This will enable long-term decision-making. </p></li>
<li><p>Given the technical complexity of the ETS, we recommend that an independent body be tasked with advising government on ETS supply and price settings. Ultimately however, decisions on caps and price bands are political and therefore should be taken by government, with transparency and public accountability. </p></li>
<li><p>The era of top-down carbon markets, unlimited unit supply and rising domestic emissions has ended. Right now, only governments can purchase international emissions reductions. In the longer term, ETS participants may also be able to do so. However, the quantity must be limited and displace other supply under the cap to avoid devaluing domestic investment and disrupting New Zealand’s progress toward decarbonisation. All international emission reductions applied toward New Zealand’s targets must be quality assured to manage risks with environmental integrity. </p></li>
</ol>
<p>These adjustments can be achieved through practical legislative amendments and regulation. There is merit in implementing these changes as soon as possible so that low-emission investors and emitters can get on the road.</p>
<p>Setting the ambition of domestic ETS caps and price bands can be politically challenging. That is why New Zealand skipped this step the first time around and borrowed the Kyoto ones instead. Under the Paris Agreement, New Zealand needs to establish a resilient policy architecture with cross-party support that offers predictable processes to guide future political decision making. It’s time for us to forge our own pathway to a successful low-emission economy. </p>
<p><em>This article was prepared by Suzi Kerr, Catherine Leining and Ceridwyn Roberts at Motu Economic and Public Policy Research. The supporting paper was funded by the Aotearoa Foundation and informed by participants in Motu’s ETS Dialogue. The content does not necessarily represent the views of or endorsement by ETS Dialogue participants, their organisation or the funder.</em></p><img src="https://counter.theconversation.com/content/78746/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Suzi Kerr is a Senior Fellow at Motu Economic and Public Policy Research Trust, a not-for-profit research organisation in New Zealand, and an adjunct professor at Victoria University of Wellington. Motu’s work through the ETS Dialogue on reforming the NZ Emissions Trading Scheme has been funded by the Aotearoa Foundation. </span></em></p>New Zealand is a trailblazer for emissions trading, which could help drive a low-emission transformation, both domestically and overseas, in a post-Paris world.Suzi Kerr, Adjunct Professor, School of Government, Te Herenga Waka — Victoria University of WellingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/731982017-02-20T19:23:36Z2017-02-20T19:23:36ZLabor’s climate policy could remove the need for renewable energy targets<p>The federal Labor Party has sought to <a href="http://www.smh.com.au/environment/climate-change/rubbish-mark-butler-denies-labor-has-ditched-2030-renewable-energy-goal-20170216-gueh8q.html">simplify its climate change policy</a>. Any suggestion of expanding the <a href="https://theconversation.com/au/topics/renewable-energy-target-8912">Renewable Energy Target</a> has been dropped. But there is <a href="http://www.smh.com.au/federal-politics/political-news/its-a-goal-its-a-target-no-its----labors-energy-policy-20170215-gue38x.html">debate over whether the new policy is actually any more straightforward</a> as a result.</p>
<p>One thing Labor did confirm is its support for an <a href="https://theconversation.com/emissions-trading-for-electricity-is-the-sensible-way-forward-70137">emissions intensity scheme</a> (EIS) as its central climate change policy for the electricity sector. This adds clarity to the position the party took to the <a href="https://theconversation.com/policycheck-labors-phased-emissions-trading-scheme-58496">2016 election</a> and could conceivably remove the need for a prescribed renewable energy target anyway.</p>
<p>An EIS effectively gives electricity generators a limit on how much carbon dioxide they can emit for each unit of electricity they produce. Power stations that exceed the baseline have to buy permits for the extra CO₂ they emit. Power stations with emissions intensities below the baseline create permits that they can sell.</p>
<p>An EIS increases the cost of producing electricity from emissions-intensive sources such as coal generation, while reducing the relative cost of less polluting energy sources such as renewables. The theory is that this cost differential will help to drive a switch from high-emission to low-emission sources of electricity.</p>
<p>The pros and cons of an EIS, compared with other forms of carbon pricing, have been debated for years. But two things are clear. </p>
<p>First, an EIS with bipartisan support would provide the stable carbon policy that the electricity sector needs. The sector would be able to invest with more confidence, thus contributing to security of supply into the future. </p>
<p>Second, an EIS would limit the upward pressure on electricity prices, for the time being at least. </p>
<p>These reasons explain why there was a brief groundswell of bipartisan support for an EIS in 2016, until <a href="https://theconversation.com/turnbull-government-rules-out-an-emissions-intensity-scheme-70039">the Turnbull government explicitly ruled it out in December</a>.</p>
<h2>Moving targets</h2>
<p>Another consideration is whether, with the right policy, there will be any need for firm renewable energy targets. This may help to explain Labor’s decision to rule out enlarging the existing scheme or extending it beyond 2020.</p>
<p>If we had a clear policy to reduce emissions at lowest cost, whether in the form of an EIS or some other scheme, renewable energy would naturally increase to whatever level is most economically efficient under those policy settings. Whether this reaches 50% or any other level would be determined by the overall emissions-reduction target and the relative costs of various green energy technologies. </p>
<p>In this scenario, a separately mandated renewable energy target would be simply unnecessary and would probably just add costs with no extra environmental benefit. Note that this reasoning would apply to state-based renewable energy policies, which have become a <a href="https://www.theguardian.com/environment/2017/feb/13/energy-policy-no-room-for-partisan-politics-18-groups-tell-government">political football</a> amid South Australia’s recent tribulations over energy security.</p>
<p>An EIS is also “technology agnostic”: power companies would be free to pursue whatever technology makes the most economic sense to them. Prime Minister Malcolm Turnbull <a href="http://www.abc.net.au/news/2017-02-01/national-press-club:-malcolm-turnbull/8230538">explicitly endorsed this idea earlier this month</a>.</p>
<p>Finally, an EIS would integrate well with the <a href="https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM">National Electricity Market</a>, a priority endorsed by the <a href="http://www.coagenergycouncil.gov.au/">COAG Energy Council</a> of federal, state and territory energy ministers. State and territory governments may find this an attractive, nationally consistent alternative that they could support. </p>
<h2>Strengths and weaknesses</h2>
<p>A <a href="https://grattan.edu.au/report/climate-phoenix-%20a-sustainable-%20australian-climate-policy/">2016 Grattan Institute report</a> found that an EIS could be a practical step on a pathway from the current policy mess towards a credible energy policy. Yet an EIS has its weaknesses, and some of Labor’s reported claims for such a scheme will be tested.</p>
<p>In the short term, electricity prices would indeed rise, although not as much as under a cap-and-trade carbon scheme. It is naive to expect that any emissions-reduction target (either the Coalition’s 26-28% or Labor’s 45%) can be met without higher electricity costs.</p>
<p>Another difficulty Labor will have to confront is that setting the initial emission intensity baseline and future reductions would be tricky. The verdict of the <a href="http://www.environment.gov.au/energy/national-electricity-market-review">Finkel Review</a>, which is assessing the security of the national electricity market under climate change policies, will also be crucial.</p>
<p>Despite media reports to the contrary, Chief Scientist Alan Finkel and his panel have not recommended an EIS. Their <a href="http://www.environment.gov.au/energy/publications/energy-market-preliminary-report">preliminary report</a> drew on earlier reports noting the <a href="http://www.aemc.gov.au/Markets-Reviews-Advice/Integration-of-energy-and-emissions-reduction-poli/Final/AEMC-documents/Final-Report.aspx">advantages</a> of an EIS over an extended renewable energy target or regulated closure of fossil-fuelled power stations, but also the fact that <a href="http://climatechangeauthority.gov.au/sites/prod.climatechangeauthority.gov.au/files/files/SR%20Electricity%20research%20report/Electricity%20research%20report%20-%20for%20publication.pdf">cap-and-trade would be cheaper to implement</a>.</p>
<p>Labor has this week moved towards a credible climate change policy, although it still has work to do and its 45% emissions-reduction target will still be criticised as too ambitious. Meanwhile, we’re unlikely to know the Coalition government’s full policy until after it completes the <a href="http://www.environment.gov.au/minister/frydenberg/media-releases/pubs/mr20161205.pdf">2017 Climate Change Policy Review</a> and receives the Finkel Review’s final report.</p>
<p>Australians can only hope that we are starting to see the beginnings of the common policy ground that investors and electricity consumers alike so urgently need.</p><img src="https://counter.theconversation.com/content/73198/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tony Wood holds shares in energy and resources companies through his superannuation fund. </span></em></p>Labor has been criticised for vacillating about about its 50% renewable energy ambition. But its proposed emissions intensity scheme could boost green energy without any hard target at all.Tony Wood, Program Director, Energy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/706562016-12-26T21:54:43Z2016-12-26T21:54:43Z2016, the year that was: Environment + Energy<p>If 2015 ended on a note of hope, with the successful conclusion of the <a href="https://theconversation.com/the-paris-climate-agreement-at-a-glance-50465">Paris climate talks</a>, the overriding impression of 2016 is that last year’s optimism has been answered with a large reality check.</p>
<p>The Paris Agreement was meant to herald a year in which politicians would finally cut through the stalemate and start saving the planet. Instead we watched aghast as <a href="https://theconversation.com/great-barrier-reef-bleaching-would-be-almost-impossible-without-climate-change-58408">swathes of the Great Barrier Reef were killed by climate change</a>, while the political uncertainty only grew. Donald Trump completed his improbable climb to the US political summit, and Australian climate politics stayed mired in the trenches.</p>
<p>Nowhere was that more evident than in the unseemly <a href="https://theconversation.com/we-dont-know-why-south-australias-wind-farms-stopped-working-so-hold-off-on-the-blame-game-66631">blame game</a> over the <a href="https://theconversation.com/what-caused-south-australias-state-wide-blackout-66268">statewide blackout</a> that plunged South Australia into darkness on a stormy night in September.</p>
<p>With fingers being pointed at the state’s reliance on wind power, Prime Minister Malcolm Turnbull used the incident to call for an <a href="https://theconversation.com/turnbull-uses-south-australian-blackout-to-push-for-uniformity-on-renewables-66275">end to Labor states setting their own agendas on renewable energy</a>. That was despite analysis showing that the blackout was due to <a href="https://theconversation.com/we-must-keep-the-lights-on-how-a-cyclone-was-used-to-attack-renewables-66371">22 transmission towers being knocked over</a>.</p>
<p>The <a href="https://theconversation.com/closing-victorias-hazelwood-power-station-is-no-threat-to-electricity-supply-66024">planned closure of Victoria’s Hazelwood power station</a> prompted more argument over <a href="https://theconversation.com/hazelwoods-closure-wont-affect-power-prices-as-much-as-you-might-think-67773">cheap brown coal versus expensive electricity</a>. The debate culminated in the Turnbull government’s <a href="https://theconversation.com/turnbull-government-rules-out-an-emissions-intensity-scheme-70039">24-hour dalliance</a> with the idea of an <a href="https://theconversation.com/emissions-trading-for-electricity-is-the-sensible-way-forward-70137">emissions intensity scheme</a> for power stations (a policy that Labor <a href="https://theconversation.com/policycheck-labors-phased-emissions-trading-scheme-58496">took to July’s federal election</a>).</p>
<p>The episode was seen as a slapdown for minister Josh Frydenberg, who in July had been handed the <a href="https://theconversation.com/the-environment-energy-superportfolio-can-deliver-real-action-heres-how-62771">“superportfolio” of energy and environment</a> in an overdue acknowledgement that these issues are now one and the same.</p>
<p>One of Frydenberg’s biggest tasks for 2017 will be handling the planned review of climate policy. Figures <a href="https://www.theguardian.com/environment/2016/dec/22/australias-greenhouse-gas-emissions-are-rising-official-figures-show">released quietly before Christmas</a> underline the fact that Australia is <a href="https://theconversation.com/direct-action-not-giving-us-bang-for-our-buck-on-climate-change-59308">on course to miss the government’s 2030 emissions target</a> of 26-28% below 2005 levels. This year’s events proved that the electricity sector, the biggest source of emissions, is in <a href="https://theconversation.com/australias-energy-sector-is-in-critical-need-of-reform-61802">serious need of reform</a>.</p>
<p>In the states, Queensland continued to navigate a legal course for the controversial <a href="https://theconversation.com/carmichael-mine-jumps-another-legal-hurdle-but-litigants-are-making-headway-69423">Carmichael coal mine</a>, while SA Premier Jay Weatherill <a href="https://theconversation.com/sa-doesnt-need-a-nuclear-plebiscite-weatherill-just-needs-to-make-a-decision-68819">suggested a plebiscite</a> to decide whether the state should build an international nuclear waste dump.</p>
<p>In fact, one of the year’s quietest periods for environmental policy was during the federal election campaign itself – neither <a href="https://theconversation.com/the-sound-of-silence-why-has-the-environment-vanished-from-election-politics-59658">climate</a> nor <a href="https://theconversation.com/nature-is-neglected-in-this-election-campaign-at-its-and-our-own-peril-56445">conservation</a> rated more than the briefest of mentions.</p>
<h2>Death comes to the reef</h2>
<p>The year’s biggest single environmental story was the <a href="https://theconversation.com/in-pictures-a-close-up-look-at-the-great-barrier-reefs-bleaching-57495">unprecedented coral bleaching that hit the Great Barrier Reef</a> in March and April. The bleaching affected <a href="https://theconversation.com/coral-bleaching-taskforce-more-than-1-000-km-of-the-great-barrier-reef-has-bleached-57282">more than 1,000km of the reef</a> and prompted a storm of media reports – some <a href="https://theconversation.com/great-barrier-reef-bleaching-stats-are-bad-enough-without-media-misreporting-58283">more accurate than others</a>. </p>
<p>Months later, the damage is clear: <a href="https://theconversation.com/how-much-coral-has-died-in-the-great-barrier-reefs-worst-bleaching-event-69494">two-thirds of corals on the reef’s northern stretches are dead</a>. Researchers are <a href="https://theconversation.com/will-the-great-barrier-reef-recover-from-its-worst-ever-bleaching-67063">watching anxiously to see how much will bounce back</a>.</p>
<p>Elsewhere on the high seas, there was better news for environmentalists. Oil giant BP <a href="http://www.abc.net.au/news/2016-10-11/bp-withdraws-from-great-australian-bight-drilling/7921956">cancelled plans to drill in the Great Australian Bight</a>, and Australia’s Macquarie Island research station <a href="https://theconversation.com/disruption-over-macquarie-island-calls-for-some-clever-antarctic-thinking-65558">earned a reprieve</a> after being slated for closure by the government.</p>
<p>In October, nations signed off on creating the <a href="https://theconversation.com/how-china-came-in-from-the-cold-to-help-set-up-antarcticas-vast-new-marine-park-67911">world’s biggest marine park</a> in the Southern Ocean around Antarctica. Meanwhile, Australia had a win (of sorts) in its battle with Japan’s whaling program, successfully <a href="https://theconversation.com/the-new-international-whaling-resolution-will-do-little-to-stop-japan-killing-whales-67854">sponsoring a resolution</a> to provide greater oversight of “scientific” whaling. </p>
<p>In reality, however, the voluntary measure will have little effect on Japan’s activities. Perhaps it’s time to <a href="https://theconversation.com/with-a-less-confrontational-approach-to-whaling-more-whales-could-be-saved-68064">admit that whaling cannot be stopped altogether</a>, and maybe even try some “<a href="https://theconversation.com/could-whale-poo-diplomacy-help-bring-an-end-to-whaling-69154">whale poo diplomacy</a>” instead.</p>
<h2>Talking Trump</h2>
<p>Speaking of diplomacy, when delegates <a href="https://theconversation.com/global-climate-talks-move-to-marrakesh-heres-what-they-need-to-achieve-67487">arrived at November’s UN climate summit in Marrakech</a>, they were expecting to begin putting flesh on the bones of the previous year’s Paris Agreement. This <a href="https://theconversation.com/paris-climate-agreement-enters-into-force-international-experts-respond-68124">came into force</a> with record speed just 11 months after it was signed.</p>
<p>But on its third day the summit was hit by a “<a href="https://theconversation.com/the-view-from-marrakech-climate-talks-are-battling-through-a-trump-tsunami-68597">Trump tsunami</a>” as the surprise US election result dawned. Perhaps understandably, the conference morphed into a <a href="https://theconversation.com/marrakech-climate-talks-produced-defiance-towards-trump-but-little-else-69056">show of defiance</a> towards the new president-elect.</p>
<p>It is still <a href="https://www.theguardian.com/us-news/2016/nov/22/donald-trump-paris-climate-deal-change-open-mind">unclear</a> whether Trump will follow through on his threat to withdraw from the Paris deal. For those keen to see global climate action continue, perhaps the most optimistic view is that Trump will be <a href="https://theconversation.com/no-politician-can-singlehandedly-bring-back-coal-not-even-donald-trump-69424">unable to revive the coal economy singlehanded</a>, and that if the United States does relinquish the climate leadership it has belatedly shown under President Barack Obama, China will be <a href="https://theconversation.com/why-china-and-europe-should-form-the-worlds-most-powerful-climate-bloc-69211">more than willing to step up</a>.</p>
<h2>Heat and ice</h2>
<p>While the political hot air flowed, the climate records kept tumbling. 2016 is set to be confirmed as the <a href="https://theconversation.com/world-set-for-hottest-year-on-record-world-meteorological-organization-68567">hottest year ever recorded</a>, although September did bring an end to the <a href="https://theconversation.com/september-brought-the-worlds-record-breaking-hot-streak-to-an-end-but-dont-chill-out-67381">streak of 16 consecutive record-setting months</a>.</p>
<p>In May, the southern hemisphere joined the north in <a href="https://theconversation.com/southern-hemisphere-joins-north-in-breaching-carbon-dioxide-milestone-59260">passing the symbolic milestone</a> of 400 parts per million of carbon dioxide in the atmosphere. But the good news is that global emissions seem, at long last, to have <a href="https://theconversation.com/fossil-fuel-emissions-have-stalled-global-carbon-budget-2016-68568">plateaued</a> – although the picture is less rosy when it comes to <a href="https://theconversation.com/methane-from-food-production-might-be-the-next-wildcard-in-climate-change-69894">methane emissions</a>.</p>
<p>The <a href="https://theconversation.com/el-nino-is-over-but-has-left-its-mark-across-the-world-59823">El Niño came to an end</a>, after helping to push Australia’s summer sea temperatures to <a href="https://theconversation.com/this-summers-sea-temperatures-were-the-hottest-on-record-for-australia-heres-why-56906">record levels</a>. We learned that rising seas have <a href="https://theconversation.com/sea-level-rise-has-claimed-five-whole-islands-in-the-pacific-first-scientific-evidence-58511">claimed five entire Pacific islands</a>, while the Arctic ice is at record low levels, driven by a <a href="https://theconversation.com/yes-the-arctics-freakishly-warm-winter-is-due-to-humans-climate-influence-70648">freak bout of human-induced warm weather</a>.</p>
<p>Meanwhile, Earth’s last remaining wild places are being <a href="https://theconversation.com/the-global-road-building-explosion-is-shattering-nature-70489">crisscrossed by roads</a>, although there was some rare good news in the only place on Earth where tigers, rhinos, orangutans and elephants all live together – a treasured Indonesian forest now <a href="https://theconversation.com/good-news-for-the-only-place-on-earth-where-tigers-rhinos-orangutans-and-elephants-live-together-58777">saved from logging</a>.</p>
<p>If all that wasn’t enough, we were told that we are <a href="https://theconversation.com/an-official-welcome-to-the-anthropocene-epoch-but-who-gets-to-decide-its-here-57113">officially living in the Anthropocene Epoch</a>, courtesy of nuclear weapons testing – which came to Australia <a href="https://theconversation.com/sixty-years-on-the-maralinga-bomb-tests-remind-us-not-to-put-security-over-safety-62441">60 years ago this year</a>.</p>
<h2>A more nature-loving 2017?</h2>
<p>Having polished off your <a href="https://theconversation.com/how-to-pick-an-ethically-raised-ham-this-christmas-69640">ethically raised Christmas ham</a>, perhaps now is the time to resolve to engage a bit more with the natural world in 2017. </p>
<p>While you might not be able to <a href="https://theconversation.com/why-im-spending-three-months-sailing-right-around-antarctica-for-science-67782">sail a scientific voyage around Antarctica</a>, <a href="https://theconversation.com/there-are-14-wild-orange-bellied-parrots-left-this-summer-is-our-last-chance-to-save-them-69274">climb trees to save orange-bellied parrots</a>, or <a href="https://theconversation.com/how-i-discovered-one-of-the-greatest-wildlife-gatherings-on-earth-in-far-north-queensland-66904">discover previously unknown wild gatherings of animals</a>, there are things you can do at home.</p>
<p>You might decide to join in a <a href="https://theconversation.com/the-rise-of-citizen-science-is-great-news-for-our-native-wildlife-63866">citizen science program</a>, <a href="https://theconversation.com/au/topics/gardening-series-31530">tend your garden</a>, or get to know some of the <a href="https://theconversation.com/au/topics/hidden-housemates-24843">fascinating critters who share your home</a>.</p>
<p>You could even get closer to nature while doing the most 2016 thing possible: <a href="https://theconversation.com/pokecology-people-will-never-put-down-their-phones-but-games-can-get-them-focused-on-nature-63105">playing Pokémon GO</a>.</p>
<p>So if the past year in environmental news has left you feeling despondent, look on the bright side – at least you don’t have <a href="https://theconversation.com/hidden-housemates-australias-huge-and-hairy-huntsman-spiders-55017">a ball of 150 huntsman spiders</a> living in your house … or do you?</p><img src="https://counter.theconversation.com/content/70656/count.gif" alt="The Conversation" width="1" height="1" />
In a year of coral bleaching, power blackouts, electricity arguments and Donald Trump, 2016 made the previous year’s climate of environmental optimism rather difficult to maintain.Michael Hopkin, Deputy Chief of Staff, The ConversationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/699802016-12-16T01:37:40Z2016-12-16T01:37:40ZFactCheck: Are Australians paying twice as much for electricity as Americans?<blockquote>
<p>Business here and households here, already we’re paying twice the cost of the US for electricity. <strong>– Craig Kelly MP, chair of the backbench environment and energy committee, <a href="http://www.abc.net.au/radionational/programs/breakfast/kelly/8095266">ABC Radio National Breakfast interview</a>, December 6, 2016.</strong> (Listen from 7.38)</p>
</blockquote>
<p>Environment and energy minister Josh Frydenberg recently <a href="http://www.abc.net.au/news/2016-12-05/government-to-consider-carbon-price-for-power-generators/8091912">left open</a> <a href="https://www.theguardian.com/australia-news/2016/dec/05/direct-action-review-coalition-leaves-carbon-trading-option-open">the possibility</a> of some form of carbon trading in the <a href="http://www.environment.gov.au/climate-change/review-climate-change-policies">electricity sector</a>. He later <a href="https://theconversation.com/turnbull-government-rules-out-an-emissions-intensity-scheme-70039">ruled out that option</a>, saying he wanted to keep electricity prices down.</p>
<p>Following Frydenberg’s initial comments, Liberal MP Craig Kelly said businesses and households in Australia are already paying twice as much as Americans for their electricity.</p>
<p>Is that true?</p>
<h2>Checking the source</h2>
<p>When asked for sources to support his statement, Craig Kelly referred The Conversation to a <a href="http://theconversation.com/full-response-from-craig-kelly-70215">range of sources</a>, saying that:</p>
<blockquote>
<p>… a report titled <a href="http://www.aemc.gov.au/getattachment/02490709-1a3d-445d-89cd-4d405b246860/2015-Residential-Electricity-Price-Trends-report.aspx">2015 Residential Electricity Price Trends</a> lists [on page 212] the average Australian price at 28.72 cents per kilowatt hour for 2014/2015. </p>
<p>In comparison, the <a href="http://www.eia.gov/electricity/state/">US Energy Information Administration</a> lists the average price for residential electricity [in the US] at 10.44 cents for 2014.</p>
<p>Converting 10.44 US cents at A$1/US$0.74 – is the equivalent of 14.11 cents Australia.</p>
<p>So using these sources (in Australian cents) we have 14.11 cents in the USA and 28.72 cents in Australia. Therefore I think to say that “we’re paying twice the cost of the US for electricity” (on average) is pretty much right on the money.</p>
</blockquote>
<p>You can read Craig Kelly’s full response <a href="http://theconversation.com/full-response-from-craig-kelly-70215">here</a>. </p>
<h2>Do Australians pay more?</h2>
<p>It’s definitely true that Australians pay much more for their electricity than US citizens do (and Australian prices are <a href="http://www.aemc.gov.au/Markets-Reviews-Advice/2016-Residential-Electricity-Price-Trends/Final/AEMC-Documents/2016-Electricity-Price-Trends-Report">set to rise even further</a>, according to the Australian Energy Market Commission. </p>
<p>Using OECD data, there’s one measure that says it is twice as much – or at least it was twice as much as recently as 2014. Another measure – a better measure, in my view – shows Australians pay about 50% more than US citizens do for their electricity. </p>
<p>As Craig Kelly notes in his <a href="http://theconversation.com/full-response-from-craig-kelly-70215">full response</a>, there is significant variation in electricity prices across states and territories in Australia and in the United States, so comparing the two is not a simple matter. The Australian Energy Market Commission’s annual <a href="http://www.aemc.gov.au/Markets-Reviews-Advice/2016-Residential-Electricity-Price-Trends/Final/AEMC-Documents/2016-Electricity-Price-Trends-Report">Electricity Price Trends</a> report shows that retail prices in Australia vary from 18.44 c/kWh in the Australian Capital Territory to 29.75 c/KWh in South Australia.</p>
<p>But we can use Organisation for Economic Co-operation and Development (<a href="http://www.oecd.org/">OECD</a>) data on <a href="http://www.oecd-ilibrary.org/energy/data/end-use-prices/wholesale-and-retail-indices-of-energy-prices_data-00445-en">wholesale and retail indices energy prices</a> to check Craig Kelly’s statement. </p>
<p>The wholesale price is the cost of generating the energy that is sent to the grid. Retail prices are what householders are more used to talking about. Retail prices factor in extra costs like transmission and distribution (“poles and wires”), retailer margins and other levies (such as Feed-in Tariff and Renewable Energy Target costs). In other words, it’s what we’re paying on our power bill. </p>
<p>Let’s examine the data. </p>
<h2>A tale of two measures</h2>
<p>The two measures I have used to compare prices in the US and Australia are called “market exchange rates” and “purchasing power parities”. Craig Kelly’s calculations rely on market exchange rates, so we will start with that one. </p>
<p>Market exchange rates simply means converting the price in one country’s currency to that of another country’s currency, as Kelly <a href="http://theconversation.com/full-response-from-craig-kelly-70215">did</a>. This measure of comparison is <a href="http://www.imf.org/external/pubs/ft/fandd/2007/03/basics.htm">more volatile</a> than purchasing power parity exchange rates.</p>
<p>Using market exchange rates, OECD <a href="http://www.oecd-ilibrary.org/energy/data/end-use-prices/energy-prices-in-us-dollars_data-00442-en">data</a> show that Australian electricity prices have, in recent years, been approximately twice as high as electricity prices in the US. Recently, the gap has narrowed. In 2015, using market exchange rates, electricity prices in Australia were about 70.3% higher than in the US. </p>
<p>The Australian Energy Market Commission projects that Australian prices will <a href="http://www.aemc.gov.au/Mark%E2%80%8Bhttp://www.aemc.gov.au/Markets-Reviews-Advice/2016-Residential-Electricity-Price-Trends/Final/AEMC-Documents/2016-Electricity-Price-Trends-Reportets-Reviews-Advice/2016-Residential-Electricity-Price-Trends/Final/AEMC-Documents/2016-Electricity-Price-Trends-Report">rise even further</a> in coming years.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/149380/original/image-20161209-31391-1fhqr9n.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/149380/original/image-20161209-31391-1fhqr9n.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/149380/original/image-20161209-31391-1fhqr9n.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/149380/original/image-20161209-31391-1fhqr9n.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/149380/original/image-20161209-31391-1fhqr9n.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/149380/original/image-20161209-31391-1fhqr9n.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/149380/original/image-20161209-31391-1fhqr9n.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/149380/original/image-20161209-31391-1fhqr9n.png?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">By converting Australian electricity prices into US dollars (market exchange rates), we can see Australian electricity prices have been an average of twice as high as in the US over the past four years – though the gap narrowed in 2015, down to a 70% difference.</span>
<span class="attribution"><a class="source" href="http://www.oecd-ilibrary.org/energy/data/end-use-prices/wholesale-and-retail-indices-of-energy-prices_data-00445-en">Chart provided by author, using data from the OECD.</a></span>
</figcaption>
</figure>
<p>That broadly supports what Kelly said. But if we use purchasing power parity exchange rates, the data show that Australia’s prices are approximately 50% higher than the US. </p>
<p><a href="https://www.oecd.org/std/prices-ppp/purchasingpowerparitiespppsdata.htm">Purchasing power parity exchange rates</a>, or PPP, factor in inflation and the cost of living in a particular country, and eliminate differences in price levels between countries. This measure allows a cleaner, less volatile comparison between the US and Australia.</p>
<p>The chart below compares the retail prices of electricity in Australia and the United States when adjusted for cost of living differences using purchasing power parity.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/149379/original/image-20161209-31352-16tb5w7.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/149379/original/image-20161209-31352-16tb5w7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/149379/original/image-20161209-31352-16tb5w7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/149379/original/image-20161209-31352-16tb5w7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/149379/original/image-20161209-31352-16tb5w7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/149379/original/image-20161209-31352-16tb5w7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/149379/original/image-20161209-31352-16tb5w7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/149379/original/image-20161209-31352-16tb5w7.png?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">Using purchasing power parity exchange rates, OECD data shows household prices of electricity are approximately 50% higher in Australia than in the US.</span>
<span class="attribution"><a class="source" href="http://www.oecd-ilibrary.org/energy/data/end-use-prices/wholesale-and-retail-indices-of-energy-prices_data-00445-en">Chart by author, using data from the OECD.</a></span>
</figcaption>
</figure>
<p>As the above chart of the OECD <a href="http://www.oecd-ilibrary.org/energy/data/end-use-prices/energy-prices-in-us-dollars_data-00442-en">data</a> shows, household prices of electricity are about 50% higher in Australia than in the US when you use purchasing power parity data. </p>
<h2>Why are the prices so different?</h2>
<p>As this chart shows, data from OECD indicate there has been a substantial divergence between Australian and American electricity prices since about 2008.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/149381/original/image-20161209-31396-11kpet0.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/149381/original/image-20161209-31396-11kpet0.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/149381/original/image-20161209-31396-11kpet0.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=375&fit=crop&dpr=1 600w, https://images.theconversation.com/files/149381/original/image-20161209-31396-11kpet0.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=375&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/149381/original/image-20161209-31396-11kpet0.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=375&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/149381/original/image-20161209-31396-11kpet0.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=471&fit=crop&dpr=1 754w, https://images.theconversation.com/files/149381/original/image-20161209-31396-11kpet0.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=471&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/149381/original/image-20161209-31396-11kpet0.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=471&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Retail price index: average power prices for householders in the US and Australia. The year 2000 is indexed to 100 (that is, 2000 = 100)</span>
<span class="attribution"><a class="source" href="http://www.oecd-ilibrary.org/energy/data/end-use-prices/wholesale-and-retail-indices-of-energy-prices_data-00445-en">Author provided, using data from the OECD</a></span>
</figcaption>
</figure>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/149382/original/image-20161209-31352-1jhlhwt.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/149382/original/image-20161209-31352-1jhlhwt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/149382/original/image-20161209-31352-1jhlhwt.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=375&fit=crop&dpr=1 600w, https://images.theconversation.com/files/149382/original/image-20161209-31352-1jhlhwt.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=375&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/149382/original/image-20161209-31352-1jhlhwt.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=375&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/149382/original/image-20161209-31352-1jhlhwt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=471&fit=crop&dpr=1 754w, https://images.theconversation.com/files/149382/original/image-20161209-31352-1jhlhwt.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=471&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/149382/original/image-20161209-31352-1jhlhwt.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=471&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Wholesale price index: the average price the generators charge to the retailers (or distributors) for the power they put into the grid. The year 2000 is indexed to 100 (that is, 2000 = 100)</span>
<span class="attribution"><a class="source" href="http://www.oecd-ilibrary.org/energy/data/end-use-prices/wholesale-and-retail-indices-of-energy-prices_data-00445-en">Author provided, using data from the OECD.</a></span>
</figcaption>
</figure>
<p>As noted in the <a href="http://www.environment.gov.au/energy/publications/energy-market-preliminary-report">preliminary report</a> of the Australian chief scientist Alan Finkel’s <a href="http://www.environment.gov.au/energy/national-electricity-market-review">review</a> of the National Electricity Market, household energy bills in Australia increased 61% on average between 2008 and 2014. </p>
<p>The main reason for this is the cost of maintaining the electricity network – essentially, the poles and wires that deliver the power. Network costs represent between 45% and 55% of a typical electricity bill. This has been the largest contributor to Australia’s increasing prices over the past six years. </p>
<p>Some observers have said that the “<a href="https://theconversation.com/bringing-an-end-to-electricity-network-gold-plating-40830">gold-plating</a>” of the network came about because of a regulatory regime that encouraged <a href="http://www.brisbanetimes.com.au/federal-politics/editorial/power-to-the-people--at-the-lowest-price-20120808-23ugb.html">over-investment</a> in poles and wires. This was been partly driven by an effort to shore up electricity supply and an overestimation of demand.</p>
<p>The <a href="https://theconversation.com/low-oil-prices-are-here-to-stay-as-the-us-shale-oil-revolution-goes-global-48100">US shale gas revolution</a> has also helped keep energy more affordable there than in Australia. </p>
<p>The <a href="http://www.pc.gov.au/projects/inquiry/electricity/report">Productivity Commission</a> reported that, in New South Wales, network costs accounted for 80% of price rises in 2010-11 and 50% of price rises in 2011-12.</p>
<h2>Is it really that simple?</h2>
<p>Not really. Energy economics is far more complicated than can come across in Kelly’s quick quote or this short FactCheck.</p>
<p>While the Australian <em>price</em> is higher, this doesn’t necessarily mean the <em>cost</em> is higher: Australians use much less energy than Americans. This is because as prices increase, energy productivity and energy efficiency also tend to increase. In total, most countries actually spend a similar proportion of GDP on energy costs. </p>
<p>This holds surprisingly consistent across a range of countries. For example, Japan has high energy prices, but also has high energy efficiency and productivity. Consequently, it spends practically the same amount of GDP on energy cost as the US. </p>
<p>So <em>prices</em> may be higher for individuals, but that doesn’t mean the economy-wide costs are higher. All that said, Kelly was talking about the prices for individuals and business, so that’s what this FactCheck is focused on.</p>
<h2>Verdict</h2>
<p>If we compare Australian and American electricity prices using market exchange rates, Craig Kelly’s comment is correct: Australia’s electricity prices were essentially double those of the United States as recently as 2014. In 2015, using market exchange rates, Australian prices were about 70.3% higher. </p>
<p>If we compare the prices using purchasing parity power exchange rates – which I’d argue is the more accurate reflection of the costs of living in each of the countries – Australia’s prices are about 50% higher than the US. </p>
<p>Overall, Craig Kelly’s broader point is correct: Australians pay a much higher price for their electricity than Americans do. <strong>– Dylan McConnell.</strong></p>
<hr>
<h2>Review</h2>
<p>I agree with the author’s position that purchasing power parity comparisons are less volatile and more representative of the relativity based on actual living costs. It is true Australian households pay a much higher electricity price than Americans.</p>
<p>There’s one important point I’d add. There is a baseline cost of having a house or business connected to electrical supply, regardless of how much electricity is used. This is called the fixed supply cost. The more electricity a household or business uses, the more the fixed supply cost is diluted in the overall electricity bill. This brings down the cost per kilowatt-hours (kWh).</p>
<p>American households use about twice as much electricity as Australian households. <a href="http://www.eia.gov/tools/faqs/faq.cfm?id=97&t=3">According to the US EIA</a>, average US household electricity consumption in 2015 was 10,812 kWh. <a href="http://www.energyrating.gov.au/document/report-residential-baseline-study-technical-appendix">2014 data for Australia</a> shows average Australian household electricity consumption was 5,772 kWh (down from 6,819 kWh in 2008. At 25 cents/kWh that is a saving of $307 for Australians for using less electricity over time). </p>
<p>So we would expect Australian household electricity prices to be higher, because an average Australian household uses less electricity and the large fixed supply costs must be spread across a smaller amount of consumption. This raises the cost per kWh. But because Australians use less, their annual bill may be lower. </p>
<p>Further, in recent years, Australian energy retailers have been raising their fixed supply (or baseline) charges. So small users pay much more overall per unit of electricity they use.</p>
<p>Lastly, it’s worth noting that larger businesses often negotiate much better deals on their electricity prices than householders can. <strong>– Alan Pears.</strong></p>
<hr>
<blockquote>
<p>This article was corrected on February 9 to replace the line “In 2015, using market exchange rates, the US prices were about 70.3% higher” with “In 2015, using market exchange rates, Australian prices were about 70.3% higher”. The Conversation apologises for the error, which was introduced in the editing process.</p>
</blockquote>
<hr>
<p><div class="callout"> Have you ever seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.</div></p><img src="https://counter.theconversation.com/content/69980/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dylan McConnell has received funding from the AEMC's Consumer Advocacy Panel and Energy Consumers Australia.
</span></em></p><p class="fine-print"><em><span>Alan Pears has worked for government, business, industry associations public interest groups and at universities on energy efficiency, climate response and sustainability issues since the late 1970s. He is now an honorary Senior Industry Fellow at RMIT University and a consultant, as well as an adviser to a range of industry associations and public interest groups. His investments in managed funds include firms that benefit from growth in clean energy.</span></em></p>Liberal MP Craig Kelly said businesses and households in Australia are paying twice as much as Americans for their electricity. Is that true?Dylan McConnell, Researcher at the Australian German Climate and Energy College, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/701372016-12-09T00:52:21Z2016-12-09T00:52:21ZEmissions trading for electricity is the sensible way forward<figure><img src="https://images.theconversation.com/files/149351/original/image-20161209-31352-l9m6f7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">An emissions intensity trading scheme increases the cost of coal power compared to other electricity sources. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/indigoskies/14717766993/in/photolist-oqypnk-e82sDT-4RVR82-4RNCtc-4S12iw-nf7Edq-64ExUQ-e5aAru-e5aA8E-mbeQhF-mbfS4T-pS1PUt-dajEyP-mbf6Jn-mbfPHk-mbfz9v-oXEHut-oXE6vC-6z6a2R-pfdPfp-KuLLBw-cngqxE-cngx6L-cngqUf-cngpJu-cngorw-cngxzh-cngvDm-cngxYu-cngpiq-cngsRJ-cngtZY-cngrhy-cngtCq-cngq8W-cngoPu-cngv7U-cngujs-cngs6h-7Z3oLQ-cngsrN-cngwpS-cnguGL-cngw1m-cngtcq-cngo3w-8HHKJ5-79WYYu-79WZ5S-7Z3oqj">Indigo Skies Photography/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>The preliminary report from the Finkel Review of electricity market security will be presented to COAG today. <a href="http://www.abc.net.au/news/2016-12-09/australias-energy-policy-cant-meet-current-targets/8105386">Leaked versions</a> indicate that the report notes the urgent need for long-term policy certainty on climate change and that some policies (such as carbon pricing) reduce emissions at lower cost than others (renewable energy targets or regulation).</p>
<p>These are hardly inflammatory observations. Yet they link directly with this week’s <a href="https://theconversation.com/turnbull-government-rules-out-an-emissions-intensity-scheme-70039">furious debate within the Coalition government</a> over the inclusion of a particular form of carbon pricing, an emissions intensity scheme, and whether it, and all of its relatives, should be excluded from next year’s climate policy review. </p>
<h2>How does it work?</h2>
<p>An emissions intensity scheme sets an intensity baseline – effectively a limit on how much carbon dioxide the generators can emit for each unit of electricity they produce.</p>
<p>Power stations can produce electricity above the baseline, but they would have to buy permits for the extra CO₂. Power stations that have lower emissions intensity create permits, which they can then sell.</p>
<p>For example, the intensity baseline might be set at one tonne of CO₂ for every megawatt hour (MWh) of electricity. A brown coal generator produces electricity at 1.3 tonnes CO₂ per MWh. </p>
<p>For every MWh the generator produces, it therefore has to purchase 0.3 permits. Alternatively, a wind farm that emits no CO₂ will create 1 permit for every MWh of electricity generated. </p>
<p>An emissions intensity scheme increases the cost of producing electricity from high-emitting generation, while reducing the relative cost of low-emitting generation. It thus drives emissions down in the electricity sector, because the cost difference favours a switch from high- to low-emitting generators.</p>
<h2>Why this type of scheme?</h2>
<p><a href="https://theconversation.com/no-climate-policy-is-perfect-heres-how-to-choose-the-best-one-52431">Other forms of carbon pricing</a>, such as a cap-and-trade emissions trading scheme, also increase the costs of high-emitting generation relative to low-emitting generation. But there are differences between the two schemes. </p>
<p>The main one is the short-term impact on prices. A cap-and-trade scheme places a price on each tonne of CO₂ emitted, which is paid to the government. Under an emissions intensity scheme, a price is imposed only on the carbon emitted above the intensity baseline. </p>
<p>Under a cap-and-trade scheme, our brown coal generator would have to purchase 1.3 permits for each MWh it produced, as opposed to the 0.3 it purchases under the intensity scheme. </p>
<p>As a result, electricity prices do not increase as much under an emissions intensity scheme as under a cap-and-trade scheme, at least in the short term. But there are drawbacks. </p>
<p>An emissions intensity scheme does not raise any revenue, as permits are purchased from other generators rather than the government. No revenue means no compensation to those impacted by decarbonisation. </p>
<p>Smaller price increases also mean that consumers are less likely to cut back on their own electricity use. This means that overall emissions will not be reduced as much as under a cap-and-trade scheme. </p>
<p>On the plus side, the lower price increase also means that there is less effect on overall economic activity. This can be mitigated under a cap-and-trade scheme, however, if the government uses the revenue wisely. </p>
<h2>Bipartisan support at last?</h2>
<p>Consulting firm Frontier Economics assisted the New South Wales government with the design of its <a href="https://www.ipart.nsw.gov.au/Home/Industries/Energy/Energy-Savings-Scheme/Greenhouse-Gas-Reduction-Scheme">greenhouse gas abatement scheme</a>, an emissions intensity scheme that ran in that state from 2003 until 2012, with some success. </p>
<p>In 2009, Senator Nick Xenophon championed the emissions intensity approach as a better alternative to then prime minister Kevin Rudd’s proposed Carbon Pollution Reduction Scheme (CPRS). Malcolm Turnbull joined with Xenophon to attempt to persuade Rudd to adopt the scheme as an alternative to the CPRS; that attempt failed. </p>
<p>In the past couple of years, an emissions intensity scheme has again been advocated as a potential circuit-breaker to the climate policy impasse that has been the norm in Australia for the past decade. The electricity market rule-maker, <a href="http://www.afr.com/news/climate-backflip-ignores-expert-advice-20161207-gt5o7g">the Australian Energy Market Commission</a>, the <a href="http://climatechangeauthority.gov.au/reviews/special-review/towards-climate-policy-toolkit-special-review-australias-climate-goals-and">Climate Change Authority</a> and <a href="https://grattan.edu.au/report/climate-phoenix-a-sustainable-australian-climate-policy/">we at the Grattan Institute</a> have all advocated for an emissions intensity scheme in the electricity sector. </p>
<p>This position was also reflected in the Labor Party manifesto at the last general election. While ambivalent about what form it takes, the <a href="https://www.energycouncil.com.au/news/australian-energy-council-and-energy-networks-australia-communique/">major generation companies and business groups</a> have all been arguing for a form of carbon pricing.</p>
<p>The Coalition government could get to an emissions intensity scheme in the electricity sector from its existing policies. An absolute limit on total emissions for the sector has already been set under the safeguards mechanism. Arithmetic and legislation are required to change the absolute limit to an emissions-intensity limit. </p>
<p>The advantages and disadvantages of an emissions intensity scheme against other forms of carbon pricing have been debated by academics, economists and policy wonks ever since Australia first committed to tackling climate change. But two things are clear. </p>
<p>First, an emissions intensity scheme would provide the stable carbon policy that the electricity sector needs to have investment confidence and contribute to electricity security. </p>
<p>Second, an emissions intensity scheme would, for some time, limit the impact on electricity prices. Apparently, these are matters of importance to both sides of politics.</p><img src="https://counter.theconversation.com/content/70137/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tony Wood owns shares in Origin energy and other energy and resources companies through his superannuation fund. </span></em></p><p class="fine-print"><em><span>David Blowers 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>Why is everyone talking about ‘emissions intensity’ schemes this week?Tony Wood, Program Director, Energy, Grattan InstituteDavid Blowers, Energy Fellow, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/701442016-12-08T11:56:06Z2016-12-08T11:56:06ZGrattan on Friday: Has Turnbull’s credibility deficit reached a point of no return?<p>Despite briefly being able to dine out on the legislation passed before parliament wound up last week, Malcolm Turnbull is headed to a not-very-happy Christmas. This week has surely been one of the worst of his prime ministership.</p>
<p>News of a quarter of negative economic growth – only the fourth since 1991 – came hard on the heels of Turnbull’s surrender to the noisy right when, ahead of the long-scheduled review of climate policy, the government kiboshed any possibility of contemplating an emissions intensity scheme (EIS).</p>
<p>Experts believe economic growth will come back to a positive number in the December quarter. But observers must doubt whether Turnbull can turn his personal credibility deficit around.</p>
<p>Turnbull prides himself on being a pragmatist. There is a significant if fine line between pragmatism and buckling.</p>
<p>It was sensible pragmatism to compromise in order to secure the Australian Building and Construction Commission (ABCC). The price Turnbull paid to the crossbench was a weaker body, but the alternative was no ABCC at all – and, anyway, some of the changes, notably in relation to individuals’ rights, were for the better.</p>
<p>But to refuse even to consider an EIS for the electricity sector – which is a long way from a broad emissions trading scheme, or a carbon tax – is abject surrender, and a major failure of Turnbull’s nerve and leadership.</p>
<p>It also puts the government embarrassingly at odds with its own chief scientist, Alan Finkel, <a href="https://www.theguardian.com/environment/2016/dec/08/finkel-review-criticises-climate-policy-chaos-and-points-to-need-for-emissions-trading">whose report</a> before Friday’s Council of Australian Governments (COAG) gives a positive nod in the direction of an EIS.</p>
<p>At the most basic level, a good policy process is one that examines everything, especially an option which has wide support including in the relevant sector.</p>
<p>As Environment Minister Josh Frydenberg noted on Monday, when saying an EIS would be looked at in the review to be led by his department: “We know there’s been a large number of bodies that have recommended an emissions intensity scheme, which is effectively a baseline and credit scheme”. Under such a scheme, a baseline would be set for what could be emitted per unit of power generated; producers with emissions under the base would get credits, which they would sell to higher emitters.</p>
<p>If an EIS has the drawbacks Turnbull would now have us believe (not that it is likely he really believes them himself), then presumably the review would elucidate them.</p>
<p>If on the other hand, the review gave such a scheme a positive rap – well, why not let the public hear the case and have the issue fought out with all the facts on the table?</p>
<p>And how does the review now deal with the suddenly taboo issue of an EIS, which presumably will be supported in some submissions to it? If it declines to think about it, won’t its findings be relatively valueless? </p>
<p>If it is not permitted to look at it, shouldn’t its terms of reference – which include examining “the opportunities and challenges of reducing emissions on a sector-by-sector basis” – be rewritten to specify the exclusion?</p>
<p>The bottom line is that the government’s decree is absurd – a product of ideology (on the right), expediency (hey, let’s score against Labor, which supports an EIS) and fear (Turnbull feeling the bounds of the not-so-gilded cage to which his party has consigned him).</p>
<p>Turnbull’s tension was obvious this week in a couple of tetchy performances. Pressed on whether Frydenberg had been initially sent out to say the EIS was on the table, he said: “If you want to ask questions about what another minister said, you should address them to him”.</p>
<p>Sources deny Frydenberg was despatched to float an EIS, and there’s no reason to disbelieve this. They maintain the usually careful minister just went further than he should have when elaborating on the review’s terms of reference, which had been approved by cabinet. Certainly Frydenberg has accepted full responsibility.</p>
<p>The question remains why, given the Frydenberg statements were made early Monday, it took until late Tuesday, after cabinet, to have him kill the EIS option in his humiliating backdown. Perhaps it was thought, just for a while, that common sense could prevail.</p>
<p>Turnbull is letting the right inside and outside the Coalition progressively tighten their grip on him. He’s become, or maybe always was, a whatever-it-takes man, and it’s taking more and more to deal with situations as the power of the right strengthens, post Brexit, post Trump and in the age of Hansonism.</p>
<p>With a note of condescension, Tony Abbott <a href="http://www.theaustralian.com.au/national-affairs/tony-abbott-praises-malcolm-turnbull-as-orthodox-centreright-pm/news-story/7bdf4e932fa46d5452479388127cbc33">recently described Turnbull</a> as “growing into the role of prime minister”, saying he was “now governing as an entirely orthodox centre-right” prime minister. It was the sort of compliment that wasn’t one, if you were Turnbull.</p>
<p>Yet whatever he throws to the wolves will never be enough to satisfy them. Liberal senator Cory Bernardi has won the day on the EIS but now wants Australia to pull out of the Paris climate agreement. Columnist Andrew Bolt endorses Kevin Rudd’s assessment that Turnbull is the most ineffective conservative prime minister since Billy McMahon.</p>
<p>The future is always another land but it is hard to see how Turnbull can become anything like his own man in 2017. If he had secured a big rather than wafer-thin victory at the July election, he’d have some political capital – and that capital, like the financial kind, carries its own strength. As it is, he’s at the beck and call of those who hold the mortgage over him and, just now, they are not actually the voters.</p>
<iframe src="https://www.podbean.com/media/player/wrbxc-654dbb?from=yiiadmin" data-link="https://www.podbean.com/media/player/wrbxc-654dbb?from=yiiadmin" height="100" width="100%" frameborder="0" scrolling="no" data-name="pb-iframe-player"></iframe><img src="https://counter.theconversation.com/content/70144/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan 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>Despite briefly being able to dine out on the legislation passed before parliament wound up last week, Malcolm Turnbull is headed to a not-very-happy Christmas.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/696412016-12-07T18:34:49Z2016-12-07T18:34:49ZTen years of backflips over emissions trading leave climate policy in the lurch<figure><img src="https://images.theconversation.com/files/148066/original/image-20161130-17034-1htpqzf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Prime Minister Turnbull and Environment and Energy Minister Josh Frydenberg hold a press conference after ratifying the Paris Agreement in November 2016.</span> <span class="attribution"><a class="source" href="http://one.aap.com.au/#/search/malcolm%20turnbull%20paris%20agreement">AAP Image/Lukas Coch</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Ten years ago on Saturday (December 10) Prime Minister John Howard announced the Coalition government would investigate an emissions trading scheme to reduce greenhouse gas emissions. </p>
<p>It was a remarkable backflip after a decade of rejecting such a policy. But fast-forward ten years and we have seen a dizzying array of U-turns on climate, most of them bad news for the atmosphere. </p>
<p>In the latest turn of events, the <a href="http://www.3aw.com.au/news/greens-leader-slams-governments-astounding-hypocrisy-over-price-on-pollution-20161206-gt56ad.html">Coalition government has ruled out an emissions intensity scheme</a> (a form of carbon trading) ahead of a <a href="http://www.environment.gov.au/climate-change/review-climate-change-policies">national review of climate policy</a>.</p>
<p>So as Australia gears up to review both its electricity market, with an initial report to be released on Friday, and climate policies, what might the future hold? </p>
<h2>Howard’s slow warming</h2>
<p>Emissions trading and carbon taxes were considered as far back as the very <a href="https://theconversation.com/tax-or-trade-the-war-on-carbon-pricing-has-been-raging-for-decades-46008">early 1990s</a>. </p>
<p>In August 2000 an emissions trading proposal from the Australian Greenhouse Office fell in Cabinet, <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Environment_and_Communications/Completed_inquiries/1999-02/gobalwarm/report/c09">a result ascribed by journalists to then-Senator Nick Minchin</a>. A second proposal, in July 2003 from at least five ministers, was <a href="http://www.theage.com.au/news/national/howard-blows-hot-and-cold-on-emissions/2006/11/14/1163266550722.html">personally vetoed by John Howard</a>.</p>
<p>However, the pressure became overwhelming as the <a href="https://en.wikipedia.org/wiki/2000s_Australian_drought">Millennium Drought</a> wore on and states proposed to knit together a national scheme from below. Federal bureaucrats forced Howard’s hand. In <a href="https://www.mup.com.au/items/153662">Triumph and Demise</a>, journalist Paul Kelly describes the moment Howard realised he would need to consider emissions trading:</p>
<blockquote>
<p>[Department of Prime Minister and Cabinet secretary Peter] Shergold reached the bullet point advocating an ETS [Emissions Trading Scheme], Howard asked: “What’s that doing there?” It was the decisive moment; the next exchange was a classic in the advisory art. </p>
<p>[Treasury secretary Ken] Henry said: “Prime Minister, I’m taking as my starting point that during your prime ministership you will want to commit us to a cap on national emissions. If my view on that is wrong, there is really nothing more I can say.” It was a threshold moment. </p>
<p>“Yes, that’s right,” Howard said cautiously. Henry continued: “If you want a cap on emissions then it stands to reason that you want the most cost-effective way of doing that. That brings us to emissions trading, unless you want a tax on carbon.”</p>
</blockquote>
<p>Howard did not want a tax on carbon.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/148061/original/image-20161130-17056-fl61ia.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/148061/original/image-20161130-17056-fl61ia.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=403&fit=crop&dpr=1 600w, https://images.theconversation.com/files/148061/original/image-20161130-17056-fl61ia.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=403&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/148061/original/image-20161130-17056-fl61ia.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=403&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/148061/original/image-20161130-17056-fl61ia.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=506&fit=crop&dpr=1 754w, https://images.theconversation.com/files/148061/original/image-20161130-17056-fl61ia.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=506&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/148061/original/image-20161130-17056-fl61ia.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=506&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Howard after a speech outlining his ETS policy on the third day of the Liberal Party’s Federal Council in June 2007.</span>
<span class="attribution"><a class="source" href="http://one.aap.com.au/#/search/John%20Howard%20liberal%20party%20federal%20council%20climate%20change">AAP Image/Paul Miller</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Kelly goes on to describe the shift in the business community as a “tipping point”.</p>
<p>So, on December 10 2006, John Howard put out a press release declaring that Peter Shergold and a panel would investigate an ETS. <a href="http://pandora.nla.gov.au/pan/72614/20070601-0000/www.pmc.gov.au/publications/emissions/index.html#viewing">Shergold delivered his report</a> in May 2007, and both the Coalition and Labor went to the 2007 election with an ETS policy.</p>
<h2>Rudd’s great backflip</h2>
<p>Kevin Rudd began auspiciously, receiving a standing ovation for ratifying the Kyoto Protocol, and <a href="http://www.theaustralian.com.au/archive/news/rudds-address-to-the-un-conference/story-e6frg6no-1111115095965">famously declaring</a> that: </p>
<blockquote>
<p>climate change represents one of the greatest moral, economic and environmental challenges of our age. </p>
</blockquote>
<p>But then Rudd and his inner circle began the tortuous process of formulating their own Carbon Pollution Reduction Scheme. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/148059/original/image-20161130-17040-1d0p5oz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/148059/original/image-20161130-17040-1d0p5oz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=465&fit=crop&dpr=1 600w, https://images.theconversation.com/files/148059/original/image-20161130-17040-1d0p5oz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=465&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/148059/original/image-20161130-17040-1d0p5oz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=465&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/148059/original/image-20161130-17040-1d0p5oz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=584&fit=crop&dpr=1 754w, https://images.theconversation.com/files/148059/original/image-20161130-17040-1d0p5oz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=584&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/148059/original/image-20161130-17040-1d0p5oz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=584&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Rudd formally hands over the official document ratifying the Kyoto Protocol to UN Secretary-General Ban Ki-moon.</span>
<span class="attribution"><a class="source" href="http://one.aap.com.au/#/search/bali%20climate%20conference%20australia?q=%7B%22pageSize%22:25,%22pageNumber%22:1%7D">AAP Image/Ardiles Rante</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>It quickly became bogged down in concessions to the mining and electricity sectors. The first attempt at legislation, in May 2009, had a higher emissions reduction target of up to 25% if international action materialised, but failed. </p>
<p>The second effort created an even more generous cushion for the miners (<a href="http://www.abc.net.au/pm/content/2009/s2752236.htm">doubled to A$1.5 billion</a>)
, but also failed after the Liberals replaced Turnbull with Tony Abbott on December 1, and the Greens in the Senate refused to vote for the plan.</p>
<p>Fresh from the horror of the <a href="http://news.bbc.co.uk/2/hi/8426835.stm">Copenhagen climate conference</a>, Rudd could have triggered a double-dissolution election over the scheme, but didn’t. A Greens proposal for <a href="http://www.theage.com.au/business/one-climate-policy-and-it-only-comes-in-green-20100430-tzjz.html">an interim carbon tax was ignored</a>. Rudd toyed with a behaviour change package, but was overruled. </p>
<p>On April 27 2010, <a href="http://www.smh.com.au/federal-politics/political-opinion/ets-off-the-agenda-until-late-next-term-20100426-tnbc.html">Lenore Taylor broke the story that Rudd was kicking an ETS into the long grass for at least three years</a>. Rudd’s approval ratings plummeted. </p>
<h2>The toxic tax</h2>
<p>After Julia Gillard replaced Rudd in 2010, she negotiated a three-year fixed carbon price as part of an emissions trading scheme. It was quickly politicised as a <a href="http://www.theaustralian.com.au/news/tony-abbotts-next-policy-vow-anything-but-a-great-big-new-tax/story-e6frg6n6-1225805927737">“great big tax on everything”</a>, and lasted two years after coming into effect. </p>
<p>Abbott proposed a different way of reaching the same emissions reduction target – a Direct Action scheme, which critics said simply subsidised polluters. Turnbull famously called it “<a href="http://www.smh.com.au/federal-politics/political-opinion/abbotts-climate-change-policy-is-bullshit-20091206-kdmb.html">bullshit</a>” in 2009. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/148064/original/image-20161130-17028-k34sr7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/148064/original/image-20161130-17028-k34sr7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/148064/original/image-20161130-17028-k34sr7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/148064/original/image-20161130-17028-k34sr7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/148064/original/image-20161130-17028-k34sr7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/148064/original/image-20161130-17028-k34sr7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/148064/original/image-20161130-17028-k34sr7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A pro-carbon tax protest for climate action in Sydney in June 2011.</span>
<span class="attribution"><a class="source" href="http://one.aap.com.au/#/search/carbon%20tax%20campaign%20australia?q=%7B%22pageSize%22:25,%22pageNumber%22:3%7D">AAP Image/Dean Lewins</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Turnbull didn’t change Abbott’s policy when he became prime minister in September 2015. It has been recently reported that the Direct Action scheme’s Emissions Reductions Fund is <a href="https://www.theguardian.com/environment/2016/nov/24/direct-action-carbon-reduction-policy-running-out-of-steam">“running out of steam”</a>. </p>
<h2>What next?</h2>
<p>Only the brave or ignorant would make any specific predictions about the absurd(ist) rollercoaster that is Australian climate change policy. </p>
<p>In the last few months we’ve seen the Climate Change Authority issue <a href="https://theconversation.com/the-climate-change-authority-report-a-dissenting-view-64819">a majority and minority report</a>. </p>
<p>On Tuesday, transmission <a href="https://www.theguardian.com/environment/2016/dec/06/australias-energy-transmission-industry-calls-for-carbon-trading">companies called for a trading scheme at least for the electricity sector</a>, but the right wing of Turnbull’s <a href="https://www.theguardian.com/australia-news/2016/dec/05/malcolm-turnbull-direct-action-carbon-trading-climate-change">own party seems implacably opposed</a>, as do commentators <a href="https://www.theguardian.com/australia-news/2016/dec/05/malcolm-turnbull-direct-action-carbon-trading-climate-change">such as Andrew Bolt</a>. Now the <a href="https://theconversation.com/turnbull-government-rules-out-an-emissions-intensity-scheme-70039">Turnbull government appears to have capitulated</a>.</p>
<p>Business, industry and green groups have been crying out for <a href="http://www.australianclimateroundtable.org.au/">policy consistency</a> and an <a href="https://www.theguardian.com/australia-news/2016/nov/07/quentin-bryce-in-high-powered-group-calling-for-coal-power-to-be-phased-out">orderly transition away from coal</a>. </p>
<p>Now we wait for the results of the two reviews into Australia’s electricity and climate policy.</p>
<p>There’s the <a href="http://coagenergycouncil.gov.au/news/finkel-review">Finkel Review</a> into the reliability and stability of the National Electricity Market, which was commissioned in response to the South Australian blackout of September 28. That will presumably create new terrain in the debate on renewable energy for which there is currently no additional target beyond 2020. </p>
<p>Then there’s the <a href="https://www.environment.gov.au/climate-change/emissions-reduction-fund/publications/factsheet-erf-safeguard-mechanism">review of Direct Action</a> itself, and its safeguard mechanism. In 2015, under pressure from Nick Xenophon, the government promised it would begin the review on “<a href="https://www.theguardian.com/environment/2015/oct/08/coalition-promises-review-of-direct-actions-safeguards-process-in-2017">30 June 2017, and complete it within five months</a>”. </p>
<p>Meanwhile, the Labor Party will have to come up with its own specifics for how it would hit the Paris targets. It’s hard to see the Liberal and National parties changing their minds on this issue, having somewhat painted themselves into a corner (<a href="https://theconversation.com/how-climate-denial-gained-a-foothold-in-the-liberal-party-and-why-it-still-wont-go-away-56013">it was not always so</a>).</p>
<p>Ten years ago, after successfully fending off action, John Howard finally had to do a U-turn, but it was too little too late. The pressures are now building again. It will be interesting to see if Labor is capable of capitalising on them, and if social movements are more able than they were to keep Labor to its rhetoric this time around. </p>
<p>Ten years from now, will we be charting another ten tempestuous and wasted years?</p><img src="https://counter.theconversation.com/content/69641/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marc Hudson 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>Ten years ago on Saturday Prime Minister John Howard announced the Coalition government would investigate an emissions trading scheme to reduce greenhouse gas emissions.Marc Hudson, PhD Candidate, Sustainable Consumption Institute, University of ManchesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/676492016-10-26T04:54:32Z2016-10-26T04:54:32ZAnother prime minister, another endorsement for coal – but why?<p>Here’s a quick politics quiz. Who said this?</p>
<blockquote>
<p>Australia has a major stake in the fossil fuel industries… Australia is the world’s largest exporter of coal and the fifth largest exporter of LNG. We have just below one-tenth of the world’s known coal reserves. Coal has been a major contributor to our nation’s prosperity and that of many of our trading partners.</p>
</blockquote>
<p>And who said this?</p>
<blockquote>
<p>Coal is good for humanity, coal is good for prosperity, coal is an essential part of our economic future, here in Australia, and right around the world… Energy is what sustains our prosperity, and coal is the world’s principal energy source and it will be for many decades to come.</p>
</blockquote>
<p>And what about this?</p>
<blockquote>
<p>Coal is going to be an important part of our energy mix, there is no question about that, for many, many, many decades to come, on any view.</p>
</blockquote>
<p>If you answered <a href="https://pmtranscripts.dpmc.gov.au/release/transcript-16501">Kevin Rudd</a>, <a href="http://www.abc.net.au/news/2014-10-13/coal-is-good-for-humanity-pm-tony-abbott-says/5810244">Tony Abbott</a> and <a href="https://www.theguardian.com/environment/2016/oct/25/coal-will-be-important-for-many-many-decades-to-come-says-turnbull">Malcolm Turnbull</a> (in that order), give yourself top marks. </p>
<p>Since John Howard, all Australian prime ministers have faced major challenges regarding the gap between Australia’s role as a major exporter of coal and its fluctuating ambitions to help tackle climate change. </p>
<p>Turnbull has now shown himself to be no exception, with <a href="https://www.theguardian.com/environment/2016/oct/25/coal-will-be-important-for-many-many-decades-to-come-says-turnbull">yesterday’s comments</a> about coal being important for decades to come marking a retreat from his <a href="https://www.youtube.com/watch?v=68tJXvn7cjk">previous rhetoric of policy change</a>. Perhaps this is unsurprising, given how bloody the past few years of Australian climate policy have been.</p>
<h2>Howard’s end</h2>
<p>Howard spent the first decade of his prime ministership denying the urgency of the climate issue, blocking several proposals for emissions trading schemes (for the gory details see Guy Pearse’s <a href="https://penguin.com.au/books/high-and-dry-9781742284057">High and Dry</a> and Clive Hamilton’s <a href="http://clivehamilton.com/books/scorcher/">Scorcher</a>). </p>
<p>By late 2006, with the millennium drought and water restrictions affecting not just rural Australia but cities too, and with Al Gore driving a worldwide change in attitudes, Howard performed a spectacular U-turn, commissioning a high-profile <a href="https://en.wikipedia.org/wiki/Prime_Ministerial_Task_Group_on_Emissions_Trading">review of an emissions trading scheme</a>. But it was too little, too late.</p>
<p>Rudd, using climate change to distinguish himself from Howard, memorably labelled the issue as the “<a href="https://www.youtube.com/watch?v=CqZvpRjGtGM&ab_channel=AustralianLaborParty">great moral challenge of our generation</a>” while still in opposition.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/CqZvpRjGtGM?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Kevin Rudd declaring climate change was “the great moral challenge of our generation”.</span></figcaption>
</figure>
<p>Later, he spoke of the “<a href="https://pmtranscripts.dpmc.gov.au/release/transcript-16501">responsibility</a>” that comes with mining fossil fuels. But when his 2009 legislation for a Carbon Pollution Reduction Scheme (CPRS) was blocked twice, Rudd failed to call the expected double dissolution election, and the scheme was <a href="http://www.smh.com.au/federal-politics/political-opinion/ets-off-the-agenda-until-late-next-term-20100426-tnbc.html">notably missing from the 2010 budget</a>. Within a month, a weakened Rudd saw his personal approval ratings plummet from 50% to 39%, amid a growing perception that he <a href="http://www.theage.com.au/insight/the-day-the-rudd-government-lost-its-way-on-climate-change-20140509-zr7fm.html">did not believe his own fine words about climate policy</a>.</p>
<p>His successor Julia Gillard found climate change just as tricky. Her problems began early in the 2010 federal election campaign, with the much-derided proposal for a <a href="https://griffithreview.com/articles/dilemmas-disasters-and-deliberative-democracy/">citizens’ assembly</a> to discuss climate policy.</p>
<p>Then came her infamous interview, three days before the election, featuring the immortal words “there will be no carbon tax under a government I lead”. (However she went on to say in the same interview that she would be “leading a national debate to reach a consensus about putting a cap on carbon pollution” – in other words, working towards an emissions trading scheme.)</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/n-HP00lxC30?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Watch all of Julia’s Gillard famous pre-election ‘no carbon tax’ interview.</span></figcaption>
</figure>
<p>Gillard’s fate was effectively sealed by her decision in February 2011 not to challenge the characterisation of her new carbon pricing scheme as a “tax”. In her <a href="https://penguin.com.au/books/my-story-9780857983992">memoir</a>, Gillard describes this as “the worst political mistake I have ever made, and I paid dearly for it”.</p>
<p>Abbott had declared himself a “weather vane” on climate change, but in late 2009, appropriately enough in a town called Beaufort, he <a href="http://www.theaustralian.com.au/archive/politics/the-town-that-turned-up-the-temperature/story-e6frgczf-1225809567009">found his new direction</a>.</p>
<p>He challenged Turnbull for the Liberal leadership of the Liberal Party over the latter’s support for Rudd’s CPRS, and won by a single vote (one Liberal, never identified, had spoilt their ballot, with a simple “no”). He spent the next three years crusading against Labor’s “great big new tax on everything”, and <a href="https://theconversation.com/carbon-tax-axed-how-it-affects-you-australia-and-our-emissions-28895">repealed it within a year of becoming prime minister</a>. </p>
<p>At least he had remained consistent all along, so it was little surprise when Abbott later declared that “<a href="http://www.abc.net.au/news/2014-10-13/coal-is-good-for-humanity-pm-tony-abbott-says/5810244">coal is good for humanity</a>”.</p>
<h2>Malcolm in the middle</h2>
<p>Turnbull is perhaps the most interesting case of all. In October 2009, with pressure building in the wake of the <a href="https://en.wikipedia.org/wiki/Utegate">utegate scandal</a>, he declared on talk radio that he would not lead a party that was not as committed to climate change action as him. </p>
<p>His party duly obliged him the following month. Days later, he branded Abbott’s “direct action” climate policy “<a href="http://www.smh.com.au/federal-politics/political-opinion/abbotts-climate-change-policy-is-bullshit-20091206-kdmb.html">bullshit</a>”. </p>
<p>In mid-2010, while launching the 100% renewables plan for Beyond Zero Emissions, Turnbull <a href="https://www.youtube.com/watch?v=68tJXvn7cjk">declared</a> that “concentrated solar thermal is a more proven technology than clean coal”.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/68tJXvn7cjk?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">A very different Malcolm Turnbull on climate and energy in 2010.</span></figcaption>
</figure>
<p>While he never set expectations as high as Rudd, and Liberal voters are generally less concerned about climate change than Labor’s, Turnbull’s turnaround puts him in just as perilous a position. </p>
<p>As both Rudd and Gillard discovered, once voters start to think you don’t mean what you say, your personal approval dips and trouble begins to brew. Fine words can land you in a fine mess if you don’t stick to them.</p>
<h2>Why does the coal rhetoric never change?</h2>
<p>The gap between what the scientists tell us we need to do to have any hope of avoiding catastrophic warming and what is politically possible seems to be growing daily. One way of explaining that is by looking at the power of vested interests. </p>
<p>It’s true that some resource industry advertising campaigns have <a href="https://theconversation.com/hashtags-v-bashtags-a-brief-history-of-mining-advertisements-and-their-backlashes-47359">fallen flat and been mocked</a>. It’s also true that the climate denial lobby, while small, has recently gained some fresh power through the election of One Nation’s <a href="https://theconversation.com/one-nations-malcolm-roberts-is-in-denial-about-the-facts-of-climate-change-63581">Malcolm Roberts</a> to the Senate and the appointment of <a href="https://www.theguardian.com/australia-news/2016/aug/29/climate-sceptic-mp-appointed-chair-of-environment-and-energy-committee">Craig Kelly as chair of the federal environment and energy committee</a>.</p>
<p>But more important is the broader picture of policy failure and stasis globally. In truth, no country is doing a particularly good job on climate change, and climate change is hardly the only issue that has the gears of Australian governance grinding (along with the teeth of the populace). </p>
<p>Laura Tingle, in two recent Quarterly Essays, has looked at both the <a href="https://www.quarterlyessay.com.au/essay/2012/06/great-expectations">contradictory expectations Australians have of their governments</a>,
and also what <a href="https://www.quarterlyessay.com.au/essay/2015/11/political-amnesia/extract">institutional memory</a> exists within the bureaucracies, the political parties and the media. Her conclusions are alarming and depressing. </p>
<p>Perhaps our best hope is that the amnesia deepens, so that in 30 years’ time young people with pitchforks will not remember that we did not act when there was still a chance.</p><img src="https://counter.theconversation.com/content/67649/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marc Hudson 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>Malcolm Turnbull has said coal will be important for “many decades to come” – joining a long line of prime ministers who talked big on climate policy but found themselves talking up fossil fuels.Marc Hudson, PhD Candidate, Sustainable Consumption Institute, University of ManchesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/669442016-10-24T08:21:02Z2016-10-24T08:21:02ZHow to reverse the dangerous decline in low-carbon innovation<figure><img src="https://images.theconversation.com/files/142521/original/image-20161020-8828-15oeesq.jpg?ixlib=rb-1.1.0&rect=72%2C134%2C912%2C499&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/bciccotelli/5582235986/in/photolist-9vhqh3-sg2T25-qZniPx-62LB1J-667YEk-nE9D5W-223ywm-5t5L5w-nWsPYq-agMffm-83A3A9-4R3Qnr-HYu7G-57PnPw-5LJ72q-57PojL-4XS2Lm-aNUZ8X-612ve4-9mf6P-tMzw-wK439-4Evdwx-CYMQE-4Rmdjo-2e48X8-3X5rTs-zaaX9-dqGrp-wu5dG-4kJ4km-4pnqx1-3bNFEK-aL9h2t-dNAYQ4-5DXTaX-8X8hi-5rFTuS-47cdVE-4x33j5-7y8s8T-dCRWyV-67raEh-aVHcxi-nPA5bv-4HCpLz-3bNGc4-Bi4Zf-Hf1cyd-7C8igp">Brett Ciccotelli/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>The <a href="https://theconversation.com/the-paris-climate-agreement-the-real-work-starts-now-52264">Paris Agreement goal</a> to limit global warming to less than 2°C at the end of the 21st century demands that we sharply reduce global greenhouse gas emissions, reaching <a href="http://www.ipcc.ch/pdf/assessment-report/ar5/wg3/ipcc_wg3_ar5_summary-for-policymakers.pdf">near zero in less than 100 years</a>. Achieving this long-term decarbonisation while sustaining economic growth requires massive investment in innovation across existing and potential low-carbon technologies. So why is activity slowing down just when we need it most?</p>
<p>We can measure the pace and progress of low-carbon innovation by looking at global <a href="https://worldwide.espacenet.com/classification?locale=en_EP#!/CPC=Y02">patenting activity in related technologies</a>. Growth here could reflect general growth of patenting in all technologies, and so the chart below indicates low-carbon inventions as a share of inventions in all technology areas.</p>
<p>We can see rapid growth in the number of green patents filed over the last 30 years and particularly since 2005. Between 2000 and 2013, the number of new climate-mitigation inventions patented globally grew at an annual rate of almost 10%, more than double the rate of innovation in all technologies. However, low-carbon innovation efforts have started to slow since 2013.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/142174/original/image-20161018-16145-b1ibfz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/142174/original/image-20161018-16145-b1ibfz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/142174/original/image-20161018-16145-b1ibfz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=459&fit=crop&dpr=1 600w, https://images.theconversation.com/files/142174/original/image-20161018-16145-b1ibfz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=459&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/142174/original/image-20161018-16145-b1ibfz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=459&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/142174/original/image-20161018-16145-b1ibfz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=576&fit=crop&dpr=1 754w, https://images.theconversation.com/files/142174/original/image-20161018-16145-b1ibfz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=576&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/142174/original/image-20161018-16145-b1ibfz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=576&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Author's calculations from the European Patent Office's Global Patent Statistical Database.</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Priced out?</h2>
<p>One of the main drivers of low-carbon innovation is the price of energy. It is clear from our chart above that innovation efforts in low-carbon technologies go hand-in-hand with the price of oil, which is strongly correlated with the price of coal and gas, the two other major fossil fuels. Correlation, of course, is not necessarily causation, but there <a href="http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2016/01/Dechezlepretre-et-al-policy-brief-Jan-2016.pdf">is ample evidence</a> that inventors react to higher energy prices by developing energy-saving (and hence carbon-saving) technologies. </p>
<p>We suspect, therefore, that the recent decline in low-carbon innovation is a direct consequence of the <a href="http://www.macrotrends.net/1369/crude-oil-price-history-chart">collapse in oil prices</a> from US$110 a barrel in August 2013 to US$51 this month, which makes the value of future energy savings smaller.</p>
<p>Low-carbon innovation also responds to the price that carbon emitters pay on their carbon emissions. When carbon can be emitted without cost – despite the damage created through increased climate change – companies and consumers lack incentives to invest in emissions‐reducing technologies. Without appropriate policy interventions, the market for technologies that reduce emissions will then be limited. </p>
<h2>Ebb and flow</h2>
<p>By making carbon emissions costly, climate policies such as carbon taxes or emissions allowances encourage the development of new low-carbon technologies. Research and development is motivated by profit, after all. </p>
<p><a href="http://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00470#.WAieAZOLTOZ">A recent paper</a> demonstrates this very clearly. The <a href="http://ec.europa.eu/clima/policies/ets/index_en.htm">European Union carbon market</a>) (EU ETS) obliges 12,000 industrial facilities to purchase allowances to cover carbon emissions. The chart below shows how this has increased innovation activity in low-carbon technologies among regulated companies. The chart plots the low-carbon patenting activity of firms regulated under the EU ETS against that of a carefully selected control group of unregulated but similar firms.</p>
<p>Both groups showed similar innovation activity before the introduction of the EU ETS, but companies facing a price on their carbon emissions from 2005 reacted by filing 30% more patents in low-carbon technologies, particularly in renewable energy, energy storage, energy efficiency and carbon sequestration.</p>
<p>Interestingly, the effect on innovation occurred when the price of carbon on the market was about €30/tonne CO<sub>2</sub> and when firms expected prices to remain at a high level in the foreseeable future. Since expectations over future prices are what determine innovation, long-term regulatory consistency is crucial. <a href="https://www.mcc-berlin.net/en/media/press-information/press-release-detail/article/carbon-price-drop-recession-innocent.html">Recent evidence suggests</a> that up to 90% of the recent fall in EU ETS carbon prices <a href="https://www.eex.com/en/market-data/environmental-markets/spot-market/european-emission-allowances">to about €6 a tonne</a> could be explained by the uncertainty about the level of ambition around long-term climate targets. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/142185/original/image-20161018-15096-1jcbsg5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/142185/original/image-20161018-15096-1jcbsg5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/142185/original/image-20161018-15096-1jcbsg5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=427&fit=crop&dpr=1 600w, https://images.theconversation.com/files/142185/original/image-20161018-15096-1jcbsg5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=427&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/142185/original/image-20161018-15096-1jcbsg5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=427&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/142185/original/image-20161018-15096-1jcbsg5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=537&fit=crop&dpr=1 754w, https://images.theconversation.com/files/142185/original/image-20161018-15096-1jcbsg5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=537&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/142185/original/image-20161018-15096-1jcbsg5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=537&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Calel & Dechezleprêtre 2016</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>So a sufficiently high and stable carbon price encourages the development of low-carbon technologies. However, recent <a href="http://dx.doi.org/10.1787/9789264260115-en">analysis by the OECD</a> shows that the price of carbon emissions globally is still extremely low. Among the 41 OECD and G20 countries surveyed (accounting for 80% of all energy use and carbon emissions worldwide), some 70% of emissions are not priced at all and only 4% are subject to a carbon price above €30, a conservative <a href="http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/06/Working-Paper-159-Dietz-and-Stern-20141.pdf">estimate of the damage</a> that results from emitting one tonne of carbon dioxide. </p>
<p>A consequence of our analysis is that higher and more stable carbon prices than observed today are a necessary condition to restart the <a href="http://bruegel.org/2009/11/cold-start-for-the-green-innovation-machine/">low-carbon innovation machine</a>. This is particularly important given that the other major driver of low-carbon technology development – the price of fossil fuels – is both at a historical low and volatile. Agreeing on a single internationally <a href="http://www.journals.uchicago.edu/doi/abs/10.1086/676039">binding minimum carbon price</a>, or establishing a price band <a href="http://energypost.eu/eu-emissions-trading-scheme-can-saved-price-band/">for CO<sub>2</sub> emission rights</a> in existing carbon markets would offer the kind of stability that innovators are currently lacking.</p>
<h2>Funding</h2>
<p>As with all innovation, it is usually impossible for inventors of low-carbon products to capture all the benefits of their innovations. Smartphone makers were all able to copy Apple’s iPhone idea even if they couldn’t copy the device itself. This low appropriation of the returns from innovation leads to under-investment in R&D. This is particularly <a href="http://www.lse.ac.uk/GranthamInstitute/publication/knowledge-spillovers-from-clean-and-dirty-technologies-a-patent-citation-analysis-working-paper-135/">the case in clean technologies</a>.</p>
<p>Overcoming this requires innovation policies such as public funding for basic research, subsidies for private R&D, better access to finance, funding for demonstration projects, technology accelerators and incubators, and support for commercial deployment of early-stage technologies, for example feed-in tariffs that subsidise electricity produced from renewables. </p>
<p>During the Paris talks, 20 countries from across the developed and developing world promised to <a href="http://mission-innovation.net/">double their clean energy R&D investment</a> over five years. This is welcome, and now needs to materialise. </p>
<p>However, technology support policies on their own are irrelevant. If no carbon pricing is in place to create a market demand for things like carbon capture and storage (CCS), then no R&D will be conducted even with large subsidies in place. In 2009 the European Commission implemented a programme which dedicated €1 billion <a href="http://ec.europa.eu/energy/eepr/projects/">to co-finance projects</a> in CCS, but all publicly supported projects have <a href="http://www.cam.ac.uk/research/news/global-learning-is-needed-to-save-carbon-capture-and-storage-from-being-abandoned">since been abandoned</a> because of the low carbon price on the market. </p>
<p>Meeting the commitment made in the Paris Agreement will require all countries to adopt low-carbon alternative technologies in all their sectors. Greater public funding for low-carbon R&D and higher and stable carbon pricing mechanisms are essential to achieve this. With <a href="http://sdg.iisd.org/events/unfccc-cop-22/">all eyes now on COP22</a>, it is to be hoped that events in Marrakesh can offer a greater commitment to low-carbon innovation as a central part of the way forward.</p>
<p><em>This piece is co-published with the World Economic Forum as part of its Final Frontier series. <a href="https://www.weforum.org/focus/agenda-in-focus-the-final-frontier?delete_local=36">You can read more here</a>.</em></p><img src="https://counter.theconversation.com/content/66944/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Antoine Dechezleprêtre acknowledges funding from the Grantham Foundation for the Protection of the Environment, and from the UK Economic and Social Research Council through the Centre for Climate Change Economics and Policy. He has previously received funding from the European Investment Bank, the Swiss National Science Foundation, the Global Green Growth Institute, the French Ministry of Environment, the European Commission (FP7), INPI (Institut National de la Propriété Intellectuelle), and
ADEME (France’s Environmental Protection Agency).</span></em></p>New technologies that can help us to meet climate change targets are struggling to see the light of day. Incentives need to be fixed, and carbon pricing is at the heart of the matter.Antoine Dechezleprêtre, Associate Professorial Research Fellow, London School of Economics and Political ScienceLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/648192016-09-04T20:07:06Z2016-09-04T20:07:06ZThe Climate Change Authority report: a dissenting view<figure><img src="https://images.theconversation.com/files/136410/original/image-20160902-20238-1czc9fi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Climate Change Authority's latest report has divided its membership.</span> <span class="attribution"><span class="source">Shutterstock.com</span></span></figcaption></figure><p>As Members of the Climate Change Authority who have participated fully in the <a href="http://climatechangeauthority.gov.au/reviews/special-review/towards-climate-policy-toolkit-special-review-australias-climate-goals-and">Special Review of Australia’s Climate Goals and Policies</a>, we reached the conclusion, after much consideration, that we could not in good conscience lend our names to its report, published last week. </p>
<p>Rather than resign from the Authority we decided to write a minority report. Here we present edited extracts from our <a href="http://www.climatecouncil.org.au/cca-minority-report">report</a>, which is released today.</p>
<p>The basis of our disagreement with the majority report is its failure to recognise the importance of the constraint put on all future emissions-reduction targets and policies by Australia’s carbon budget. The carbon budget is the total emissions that Australia can release between now and 2050 while still contributing its fair share in holding the global temperature rise to less than 2°C – a key goal of the <a href="https://theconversation.com/the-paris-climate-agreement-at-a-glance-50465">Paris climate agreement</a> negotiated last December.</p>
<p>The majority report should, but does not, address the relationship between its recommendations and Australia’s carbon budget, consistent with a fair and equitable national contribution to the global carbon budget. </p>
<p>This is all the more regrettable because the requirement to do so is embedded in the Special Review’s <a href="http://climatechangeauthority.gov.au/files/files/special-review-request.pdf">terms of reference</a> and was analysed in the <a href="http://climatechangeauthority.gov.au/special-review/first-draft-report">First Report of the Special Review</a> released in April 2015 (before the appointment of six new Members to the Authority in October 2015).</p>
<h2>The budget constraint</h2>
<p>In 2014 the Authority <a href="http://climatechangeauthority.gov.au/reviews/targets-and-progress-review-3">recommended</a> an Australian emissions budget of 10.1 billion tonnes of greenhouse gases for the period 2013-2050. On this basis, it advised that Australia should set an emissions-reduction trajectory for 2030 in the range of 45-65% below 2005 levels. Contrast that with the current 26-28% target <a href="https://theconversation.com/australias-2030-climate-target-puts-us-in-the-race-but-at-the-back-45931">set by the Abbott government</a>.</p>
<p>Against the constraints of the carbon budget, the majority report accepts – explicitly in some places, implicitly in others – the government’s current target. </p>
<p>But accepting this less ambitious target for 2030 is consistent neither with the Authority’s own advice to government, nor with Australia’s commitment under the Paris Agreement to play its role in holding warming below 2°C.</p>
<p>The graph below shows the carbon budget for Australia put forward by the Climate Change Authority in its earlier report. (The budget is the area under the curve.) </p>
<p>The embedded pie chart shows the sliver of emissions that would remain to cover the 20-year period after 2030 if there is no change from the 26-28% target. More than 90% of Australia’s carbon budget to 2050 would be used up by 2030. Australia’s emissions would have to decline precipitously and reach net zero by 2035. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/136401/original/image-20160902-20232-1dcd138.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/136401/original/image-20160902-20232-1dcd138.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/136401/original/image-20160902-20232-1dcd138.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=368&fit=crop&dpr=1 600w, https://images.theconversation.com/files/136401/original/image-20160902-20232-1dcd138.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=368&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/136401/original/image-20160902-20232-1dcd138.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=368&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/136401/original/image-20160902-20232-1dcd138.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=462&fit=crop&dpr=1 754w, https://images.theconversation.com/files/136401/original/image-20160902-20232-1dcd138.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=462&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/136401/original/image-20160902-20232-1dcd138.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=462&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Keeping Australia’s current emissions targets in place would leave a huge amount of work to do after 2030.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Such a dramatic reduction would be impossible to achieve. So the current target of 26-28% lacks credibility because it is wholly inconsistent with Australia’s international obligations. If pursued it is likely to lead to a policy crisis within a decade or less. </p>
<h2>Political independence</h2>
<p>In our view, the failure of the majority report to make this clear to government and the public contravenes the Authority’s legislated obligation to deliver independent advice and to recommend measures that are “environmentally effective” and based on science. </p>
<p>We believe that the effect of the majority report will be to sanction further delay and a slow pace of action, with serious consequences for the nation. Those consequences include either very severe and costly emissions cuts in the mid-to-late 2020s, or alternatively a repudiation of Australia’s international commitments, and <a href="https://theconversation.com/australia-the-us-and-europe-are-climate-free-riders-its-time-to-step-up-53953">free-riding</a> on the efforts of the rest of the world. </p>
<p>As we see it, the recommendations of the majority report are framed to suit a particular assessment of the <a href="https://theconversation.com/the-climate-change-authoritys-gamble-on-political-pragmatism-64745">prevailing political circumstances</a>. We believe it is inappropriate and often counterproductive to attempt to second-guess political negotiations, especially for a new and uncertain parliament. </p>
<p>The unduly narrow focus of the majority report, seemingly based on a reading from a political crystal ball, has ruled out policies, such as a strengthened renewables target and stronger land clearing restrictions, that have a proven capacity to respond most effectively to the nation’s climate change goals. </p>
<h2>Policy recommendations</h2>
<p>At the centre of the majority report’s recommendations is the retention of the current <a href="https://theconversation.com/au/topics/direct-action-plan-5063">Direct Action policy</a> as the basis for further action. Its two pillars are the <a href="https://www.environment.gov.au/climate-change/emissions-reduction-fund">Emissions Reduction Fund (ERF)</a> and its incorporated <a href="https://www.environment.gov.au/climate-change/emissions-reduction-fund/about/safeguard-mechanism">Safeguard Mechanism</a>, which sets an upper limit on emissions from major polluters. </p>
<p>The report also recommends a new emissions trading scheme for electricity generation, based on an emissions-intensity baseline. Such a scheme would have lower price rises than the kind of cap-and-trade scheme favoured everywhere else in the world, and which Australia would have now if not for the Abbott government. After the rancour that engulfed the carbon price, the intensity-based scheme is presumably seen as more appealing to nervous politicians.</p>
<p>The majority report downplays the drawbacks of emissions-intensity schemes and the Safeguard Mechanism. There is not space to discuss them here, but we would like to comment on the flaws in the ERF because the majority report recommends that it be hugely expanded.</p>
<h2>Flaws in the ERF</h2>
<p>Under an expanded ERF policy, the cost to the federal budget would increase sharply, and even more so if Australia adopted tougher emissions targets in line with the science. Using the ERF in this way would be, in <a href="https://blogs.unimelb.edu.au/rossgarnaut/files/2016/01/SENATE-COMMITTEE-Ross-Garnaut-070314-rek812.pdf">Professor Ross Garnaut’s words</a>, “an immense drain on the budget”. </p>
<p>We believe it is unwise to make Australia’s climate policy hostage to disputes over fiscal policy.</p>
<p>As a rule, the replacement of the widely accepted “polluter pays” principle with the ERF’s “pay the polluter” principle is bad economics, bad ethics and bad policy. The practical drawbacks include the need for an expert bureaucracy to evaluate each prospective project and then to monitor, over several years, each successful project to ensure that the promised emissions reductions actually happen. </p>
<p>There are also serious and continuing concerns about the issue of “additionality”. Under the ERF, it is hard to know whether the Commonwealth is wasting money by paying for emissions reductions that would have taken place anyway – that is, projects that are not additional. Bear in mind that businesses plan energy-saving projects all the time, so why wouldn’t they try to get a subsidy if one is on offer?</p>
<p><a href="http://www.tai.org.au/content/poll-electorate-reject-arena-cuts-backs-new-mechanism-retire-coal">Surveys show</a> that a large majority of Australians want stronger action to reduce Australia’s emissions. The role of the Climate Change Authority is to advise on how that desire can be realised, in a way that is consistent with the best scientific and economic evidence.</p>
<hr>
<p><em>The full minority report can be read <a href="http://www.climatecouncil.org.au/cca-minority-report">here</a>.</em></p><img src="https://counter.theconversation.com/content/64819/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Karoly receives funding from the Australian Research Council. He also shares in funding from the European Commission for his role as a Research Director in the EU Centre on Shared Complex Challenges at the University of Melbourne. He is a member of the Wentworth Group of Concerned Scientists.</span></em></p><p class="fine-print"><em><span>Clive Hamilton 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>Two members of the Climate Change Authority offer an alternative view on its latest report, arguing that the recommendations are not in line with Australia’s international climate obligations.Clive Hamilton, Professor of Public Ethics, Centre For Applied Philosophy & Public Ethics (CAPPE), Charles Sturt UniversityDavid Karoly, Professor of Atmospheric Science, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/647452016-09-01T20:17:45Z2016-09-01T20:17:45ZThe Climate Change Authority’s gamble on political pragmatism<p>The Climate Change Authority’s <a href="http://climatechangeauthority.gov.au/reviews/special-review/towards-climate-policy-toolkit-special-review-australias-climate-goals-and">latest report outlining a recommended climate policy “toolkit”</a> is a reflection of what is seen by many as politically feasible in Australia now. But it is piecemeal and lacks a vision for the longer-term policy framework needed to get Australia on track to a low-carbon economy. </p>
<p>After years of political fighting over carbon pricing, a conventional emissions trading scheme - the instrument of choice in many other countries - is widely seen as politically impossible in Australia. And both major parties are scared of any policy that is seen as raising electricity prices. </p>
<p>The CCA seems to take this political situation as a starting point, and makes a series of judgements about specific policy options. The intent clearly is to help policy progress in the medium term. But it risks locking in a policy suite that will not deliver much, or may cost too much. </p>
<p>If the CCA’s recommendations are misconstrued as being ambitious, we could end up with policy that falls far short of these recommendations. And if its political judgements are off the mark, the CCA’s specific recommendations could become an obstacle for the government’s 2017 policy review. </p>
<h2>Electricity intensity scheme</h2>
<p>The CCA’s “toolkit” suggests a mix of different policy instruments for different sectors of the economy, with quite specific suggestions in some areas and less detail in others.</p>
<p>For the power sector, the recommendation is for an “emissions intensity scheme”, designed to create a carbon price signal in electricity production while limiting the effect on power prices. This is its main selling-point: it would result in less price uplift than a standard emissions trading scheme or carbon tax. </p>
<p>The flipside is that this does not encourage households and businesses to save energy, and so without other interventions it will be less efficient. </p>
<p>Another serious downside is that the government earns no money from the scheme because all permits are given out for free to industry. So there is no source of income to cut other taxes and help low-income households, as there was under the Gillard government’s carbon price.</p>
<p>Such a power sector scheme is in line with what <a href="https://theconversation.com/policycheck-labors-phased-emissions-trading-scheme-58496">Labor took to July’s election</a>, so there may be hope for bipartisanship. It is a scheme you choose if you are afraid of political backlash over power prices, and if you are prepared to forego fiscal revenue. </p>
<p>Its effectiveness will depend on its credibility and ambition. The CCA envisages it as a stand-alone scheme without trading links (except possibly sales of “white certificates” from energy efficiency schemes). The CCA recommends baselines going linearly to zero before 2050, which could drive significant change in power generation. But whatever trajectory is mandated is certain to be economically less efficient than a standard emissions trading scheme with flexibility between sectors and over time. </p>
<h2>Renewables, innovation and coal exit</h2>
<p>The report notes that uncertainty over the future of an emissions intensity scheme “could affect investor confidence” and cause cost increases and delays, and that this is an argument for continued support for renewable energy deployment policies. However it recommends that the <a href="https://theconversation.com/au/topics/renewable-energy-target-8912">Renewable Energy Target</a> not be continued beyond the present commitment to new investments until 2020 and support for existing plants until 2030. </p>
<p>On innovation for low-emissions technologies, the CCA calls for government support both through debt and equity funding, as well as public funding for research, development and demonstration. The former is currently done through the <a href="http://www.cleanenergyfinancecorp.com.au/">Clean Energy Finance Corporation</a>, the latter by the <a href="http://arena.gov.au/">Australian Renewable Energy Agency (ARENA)</a>. This recommendation runs counter the government’s present plan – possibly supported by Labor – to <a href="https://theconversation.com/cutting-arena-would-devastate-clean-energy-research-64586">withdraw A$1.3 billion in funding from ARENA</a>. </p>
<p>Mechanisms to facilitate closure of high emissions power stations have received much support in the debate over the last year. The idea of a <a href="http://www.climateinstitute.org.au/verve/_resources/TCI_A-Switch-In-Time_Final.pdf">regulated closure scheme</a> is rejected by the CCA, on the basis of modelling of a version of the proposal that would not allow any flexibility. The proposal for a <a href="https://ccep.crawford.anu.edu.au/department-news/7022/phasing-out-emissions-intensive-power-stations">market-based scheme to help shut down the highest-emitting power stations</a> is mentioned only in the CCA’s accompanying <a href="http://climatechangeauthority.gov.au/reviews/special-review/special-review-electricity-research-report">electricity report</a>, where it is dismissed without analysis. </p>
<h2>Emissions Reduction Fund and more complexity</h2>
<p>Outside the power sector the CCA proposes evolving the existing <a href="https://www.environment.gov.au/climate-change/emissions-reduction-fund">Emissions Reduction Fund (ERF)</a>, a patchy scheme of subsidies paid to businesses for projects presumed to cut emissions. </p>
<p>It suggests that industries that burn fossil fuels or otherwise release greenhouse gases should be covered by an ERF with “enhanced safeguards”. Companies that exceed a specific benchmark emissions intensity (falling over time) would have to buy emissions credits, while companies can earn credits for projects that meet the ERF’s criteria. But companies that remain below the benchmark and do not engage in projects would not be involved at all and have no incentive to cut emissions. </p>
<p>The government would continue to buy credits from land sector projects. This means continued payments of taxpayer dollars to businesses, and continued <a href="https://theconversation.com/direct-action-not-giving-us-bang-for-our-buck-on-climate-change-59308">doubts over whether the emissions reductions are real</a>. </p>
<p>For energy efficiency, yet another approach is recommended, by harmonising existing state-based “white certificate” schemes that award credits for energy savings, and then feeding those credits back into the electricity supply scheme. Selective efficiency standards are also supported, along with emissions standards for cars and perhaps trucks.</p>
<h2>Setting our sights higher</h2>
<p>The CCA’s report focuses heavily on Australia’s existing emissions target, of a 26-28% reduction on 2005 levels by 2030. But in reality, Australia will have to do more as part of the <a href="https://theconversation.com/the-paris-climate-agreement-at-a-glance-50465">Paris Agreement</a> ratcheting process. The existing target is too weak to meet the Paris deal’s global warming limit of below 2°C. The goal must be a net zero-emission economy around mid-century.</p>
<p>The more hodge-podge our climate policy regime, the weaker the signals to promote investment in modern, clean technologies. The incrementalism of the CCA’s proposed approach contrasts starkly with the need to drive a <a href="https://theconversation.com/australia-can-get-to-zero-carbon-emissions-and-grow-the-economy-32015">fundamental transformation to a low-carbon economy</a>, and is at odds with the Authority’s own <a href="http://climatechangeauthority.gov.au/reviews/targets-and-progress-review-3">recommended carbon budget</a>.</p>
<p>An apt comparison is with Australia’s economic reforms of the 1980s. The road to success was fundamental change such as floating the dollar and dismantling tariffs, not timid tinkering. Today, neither side of politics shows such vision or determination. So it is all the more important that independent bodies raise everyone’s sights to the larger possibilities. </p>
<h2>The CCA’s judgements</h2>
<p>The “policy toolkit” report is not supported by two of the CCA’s board members, Clive Hamilton and David Karoly, who have <a href="https://www.theguardian.com/australia-news/2016/aug/30/climate-change-authority-splits-over-ets-report-commissioned-by-coalition">made it known that they will issue a dissenting minority report</a>. </p>
<p>Under its previous board the CCA provided strongly principled advice for ambitious climate policy, such as its recommendations for emissions targets and a carbon budget. A report on climate policy instruments that put principle over political circumstance would almost inevitably recommend a comprehensive carbon pricing scheme as its core. </p>
<p>The hope for this week’s report is that it might help achieve some convergence on climate policy, albeit at a lower denominator, and encourage the government to embark on reform. </p>
<p>The initial signals from the government are not positive. Environment and Energy Minister Josh Frydenberg was <a href="https://www.theguardian.com/australia-news/2016/sep/01/josh-frydenberg-rejects-climate-change-authority-calls-for-tougher-emissions-limits">quick to distance the government from the report</a>. He said that there are no plans to change baselines for the “safeguards”, which would be required for the main aspects of the CCA plan. </p>
<p>Meanwhile the CCA has ruled out a number of options, making it harder for the government to pick up these options if it wanted to. </p>
<p>The pragmatic gamble could backfire.</p><img src="https://counter.theconversation.com/content/64745/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Frank Jotzo has received grant funding from various organisation including the Australian government. He has been a member of various advisory bodies. None of the funding or affiliations impinges on the subject of this article. </span></em></p>A new “toolkit” of suggested climate policies looks politically feasible, but it’s too complicated and not ambitious enough to drive a real move to a low-carbon economy.Frank Jotzo, Director, Centre for Climate Economics and Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.