The results of the government’s first reverse auction of carbon-cutting projects have been released. Where is the money going?
The government will spend A$660 million of its A$2.55 billion Emissions Reduction Fund on contracts set to reduce emissions by some 47 million tonnes, more than half of it in “carbon farming” projects to lock up carbon in vegetation.
Federal environment minister Greg Hunt described the outcome as a “stunning result” for Australia, pointing out that the average price of A$13.95 per tonne of carbon is cheaper than the previous government’s carbon pricing scheme.
But critics have pointed to the lack of involvement so far from industry sectors that were covered by the previous carbon tax, and the fact that the new scheme is paid for by taxpayers rather than the businesses creating the pollution.
Here are the numbers:
Review: Anita Talberg, Australian German College of Climate and Energy Transitions, University of Melbourne
The Emissions Reduction Fund was legislated as an amendment to the existing Carbon Farming Initiative. It effectively expanded and tweaked the carbon farming scheme to include some projects outside the land sector. As Hunt explained when introducing the legislation to Parliament: “This bill will use positive incentives to reduce emissions, unlock economic activity, boost energy efficiency and improve agricultural productivity.”
This first auction has been effective in capturing the low end of the marginal abatement cost curve without dipping below the zero net-cost line (the point beyond which projects would “pay for themselves”, and therefore shouldn’t in theory be publicly funded).
However, as the final bar graph in this infographic shows, more than half of the purchased abatement is in the form of vegetation sequestration. So what this first auction has failed to do is unlock positive longer-term changes in energy efficiency, especially in the most carbon-intensive industries.
In essence, the land sector is offsetting emissions from the rest of the economy and delaying any real change to emissions intensity.
As the infographic’s carbon abatement task chart shows, there is still work to be done to meet Australia’s 2020 target. And in fact it may be more than is shown in that figure. The first projects purchased through the Emissions Reduction Fund have varying time frames, but many are between 7 and 10 years. Yet less than 6 years remain to meet our 2020 target.
Some of that abatement purchased through the Emissions Reduction Fund (the orange section in the graph) will occur after the 2020 deadline and may not count towards Australia’s international commitment.