The federal government has begun the process of unwinding the carbon price, moving to cancel further auctions of carbon permits, ahead of its hoped-for repeal of all carbon-pricing legislation after the new Senate takes its seat in July.
But arguments about whether the Federal Government’s proposed Emissions Reduction Fund or the existing carbon pricing mechanism is better — or cheaper — misses an important point. We’ll have to do more to meet our current 5% target at the lowest cost and to achieve a 25% target — the minimum recommended by scientists for developed countries.
While many are debating which policy will prevail, we should get on with the job. Three extra measures that could go with either the Emissions Reduction Fund, or a carbon price, could dramatically help reach our emissions targets without costing the earth.
Failing to meet the target
Australia’s emissions reductions target currently stands at 5% below 2000 levels by 2020. The legislation provides a way for this to be increased, taking into account advice from the Climate Change Authority, whose report on the options from 5-25% is expected at the end of this week.
The current legislation ensures that the target is met, if not through domestic abatement then by the obligation for companies liable to the carbon price to purchase offsets from international carbon credits or local carbon farming projects.
The proposed Emissions Reduction Fund focuses on domestic abatement activities. It has a limited pot of money which would also make it difficult to reach the target without other measures. Whilst the final design is not yet clear, early estimates have indicated that the proposed budget for the Emissions Reduction Fund will fail to reach the 5% target (see modelling from the Climate Institute and Monash University and Reputex).
The award-winning Low Carbon Growth Plan for Australia from ClimateWorks at Monash University showed that Australia can cost-effectively meet emissions reduction targets without changes to lifestyle or industry mix.
The least-cost approach involves activity across all sectors of the economy – efficiency in transport, buildings and industry; forestry and carbon farming; and cleaner power.
The recent Tracking Progress report series from ClimateWorks found that over the past decade, companies across all sectors of the economy have actually started taking steps to reduce their emissions, a process that has accelerated in recent years. This means that while the economy has been growing strongly, emissions have remained stable.
The main emissions cuts observed over the past decade were in reduced deforestation, increased plantation forestry and a combination of more renewables and lower demand for grid-supplied electricity, which has reduced coal-fired power generation.
ClimateWorks’ research found that if current momentum is maintained, Australia would get around 40% of the way towards the minimum 5% emissions reduction target through this kind of abatement. These advances have taken place in a domestic policy environment that now includes a price on carbon, a scheduled transition to an emissions trading scheme and a suite of complementary measures. Any replacement of these policies needs to be able to maintain this momentum.
Emissions reduction in three easy steps
But to continue the good work, these extra measures to reduce carbon emissions will need policies to back them up.
Three options would deliver significant additional emissions reductions and economic benefits. These are consistent with either a carbon price or an Emissions Reduction Fund and should be used to further drive domestic emissions reductions.
First, Australia needs to set and improve emissions standards for vehicles, buildings and equipment. Currently, for example, Australia has no standard for vehicle fuel efficiency. Adopting European standards of 130 grams CO2 per kilometre moving to 99 grams CO2 per kilometre four years later (compared to our 199 grams CO2 per kilometre now) would cut emissions by 8.7 million tonnes and reduce fuel costs by A$850 a year within a decade. It could save the economy as a whole A$7.9 billion per year. The US has similar standards for cars already, and will soon be setting them for trucks.
Similarly, standards for new buildings are not keeping up with the improvements in technology and design in the market. For example, one third of new offices are now voluntarily built to Green Star standard and emit almost 50% less greenhouse gases than required by minimum standards.
Second, Australia should include energy efficiency or abatement requirements in industrial environmental approvals processes. A recent example is the inclusion of carbon capture and storage technology into the environmental approval for the Gorgon LNG project, resulting in the sequestration of 120 million tonnes of carbon dioxide.
Third, Australia should establish a national energy savings initiative to streamline and build on existing state-based schemes. These state schemes are working now. If expanded nationally they could reduce emissions by up to 6 million tonnes annually and could deliver A$2.2 billion overall net benefit to the Australian economy between 2015 and 2020.
Changing international climate
Getting moving on these policies could deliver some big wins and help increase the ambition of Australia’s emissions reduction. The current debate is heavily focused on the bipartisan 5% target. However, Australian emissions reduction policy will unavoidably be affected by the international commitment to limit global warming to 2C.
Major economies have already begun to plan for this commitment in their domestic energy policy. The United States, which has offered a 17% emission reduction by 2020 and momentum is growing in the lead-up to international climate negotiations in 2015.
Whichever policy is in place, taking steps to prepare for a likely international agreement in the coming years including increased targets is prudent. Our research demonstrates delay in reducing emissions increases the cost to government, business and the community.
There now exists a credible and detailed body of research about how Australia can substantially cut its emissions, meet its international obligations and transition to a low carbon economy.
Whatever the form of the headline carbon policy measure, we must also start implementing some of these other real measures that we know can reduce Australia’s emissions.