Concerns grow that Australia will rely on cheap CERs to meet emissions targets

Published 08:54 on October 30, 2015  /  Last updated at 08:54 on October 30, 2015  /  Asia Pacific, Australia, International, Kyoto Mechanisms  /  No Comments

The recent Australian rush to buy millions of cheap, soon-to-be-cancelled CP1 CERs has fuelled concerns that the government plans to use them to cover any shortcomings of its Direct Action Plan, even though using international units goes against its long-standing policy.

The recent Australian rush to buy millions of cheap, soon-to-be-cancelled CP1 CERs has fuelled concerns that the government plans to use them to cover any shortcomings of its Direct Action Plan, even though using international units goes against its long-standing policy.

Australian landfill owners have driven demand for 20-40 million CP1 CERs costing €0.12-0.15 (A$0.18-0.23) in recent weeks, according to European traders. Unused CP1 CERs will be cancelled on Nov. 18 as the compliance period for the Kyoto Protocol’s first commitment period ends.

The landfill owners are buying the CERs as part of a deal with the government to compensate for future income it earned by passing on the costs from Australia’s now-dismantled carbon tax.

As part of the deal, the CERs will be transferred to the government, but Environment Minister Greg Hunt’s office has so far not responded to questions about whether the units will be used for Kyoto compliance or cancelled.

CARRY-OVER

Australia will easily meet its KP1 target, but if they surrender 40 million newly bought CP1 CERs next month, a corresponding number of other units can be carried over to the next Kyoto period, making the 2020 target easier to achieve.

The government has estimated it needs to cut emissions by a further 236 million tonnes of CO2e between now and the end of the decade to meet its 2020 target, although some analysts say that number is likely to be adjusted downwards. Hunt has repeatedly said he is “confident” of meeting the target.

But the landfill owners don’t have to finalise their carbon tax compensation until Dec. 2017 and the amount of money they will spend on offsets has already been set – A$10-20 million, the Landfill Owners Association CEO has told the Guardian – so the rush to buy CP1 CERs three weeks before cancellations has raised questions.

“Anonymous sources have informed Climate Spectator that the Government was very willing to obtain several tens of millions of these soon-to-be void carbon credits,” the Climate Spectator reported on Friday.

“At the very least it appears the government is wanting to have a truckload of insurance to help it get to its minimum and inadequate 5 per cent 2020 reduction target,” John Connor, CEO of the Climate Institute, told Carbon Pulse.

DODGY CARBON FARMS

The Liberal government has for years been against using international units to meet their emissions target, with former Prime Minister Tony Abbott famously saying it would be sending money to “dodgy carbon farms in Equatorial Guinea and Kazakhstan”.

Policies appear to be changing under new PM Malcolm Turnbull, as the Australian Financial Review reported in Sep. that the government may allow CER purchases from next year and on Friday the Sydney Morning Herald wrote that Australia has launched a bid to co-chair the Green Climate Fund, a body despised by Abbott.

But using a loophole to snap up enough CERs to cover almost a fifth of its Kyoto 2 shortage without going through any of the review processes flagged by Turnbull would be a major policy shift and create suspicions that the government is not as confident in the Direct Action Plan as it has claimed to be.

The irony of buying some 40 million CERs and meeting the 2020 target using revenue from the carbon tax would also not be lost on some.

“It should at least honour pre-election commitments to upgrade its 2020 emissions reductions to reflect the level of international action, this would mean 15 to 19 per cent reductions off 2000 levels as independently assessed,” the Climate Institute’s Connor said.

“The offsets purchased appear an interesting class of offsets with little additionality but there’s nothing wrong with international offsets in principle so long as they are credible and part of a fair dinkum climate effort,” he added.

By Stian Reklev – stian@carbon-pulse.com

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