Incoming Prime Minister Malcolm Turnbull may have opted for party harmony over headline changes to Australia’s climate change policy, but the safeguard mechanism might provide him with the opportunity to subtly tighten up some of his predecessor’s loose ends, according to observers.

Turnbull made it abundantly clear on Monday that he has no intention to spend the run-up to next year’s election developing new climate policies for Australia.

For the next year at least and probably a while longer, the Direct Action Policy with its Emissions Reduction Fund will remain the country’s key tool to cut carbon emissions.

But the ERF’s safeguard mechanism, which aims to ensure that the fund’s emission cuts aren’t cancelled out by increases elsewhere in the economy, might give Turnbull – an outspoken supporter of climate policies – an opportunity.

With only relatively minor adjustments, the mechanism could be turned into something akin to a baseline and credit scheme.

CROSSBENCH TALKS

The mechanism, criticised for its lack of teeth, is still out for public consultation and negotiations with the opposition are expected before the final version will be adopted by both houses of parliament.

Market analysts Reputex said some “amendments are likely to be brought forward by the Senate crossbench over the upcoming weeks, and will present the most immediate opportunity for Mr Turnbull to fine-tune government policy, while working within the constraints of the Coalition party room mandate to avoid a de facto carbon pricing regime”.

Descending emission baselines for big polluters after 2020 might be an option, as could “default baselines” if the baseline issue is not solved in the government’s planned 2017-2018 climate policy review, Reputex said.

Analysts have said the proposed baseline levels for emitters – set at their highest level of emissions over the past five years – are so high they will fail to restrict carbon output for most of the companies that would be covered by the mechanism.

“Even should only minor adjustments be made to government policy, we anticipate the cumulative safeguard compliance market may grow to between 200 and 500 million tonnes of carbon dioxide equivalent (Mt), covering around 100 companies,” Reputex said.

“In a scenario where descending baselines are applied, this would grow the total compliance market to approximately 1,000 MtCO2e, considerably expanding the compliance market.”

EVOLUTION

Richard Hobbs, an analyst with Bloomberg New Energy Finance, agreed Turnbull is likely to want to add substance to Australia’s climate policy, at least in the longer term.

“Turnbull may seek to evolve Abbott’s Safeguard Mechanism that places loose baselines on emitters – which is likely to drive very little abatement as currently proposed – to a more robust baseline-and-credit emissions trading scheme,” he said in a research note.

“This will be a substantial policy and perhaps political challenge – and is a key policy to watch in the coming weeks and months.”

However, he stressed that any policy changes would likely be evolutionary rather than revolutionary.

“Turnbull was ousted as opposition leader in 2009 for not being consultative, and for pressuring the Coalition to support an emissions trading scheme, which is still deeply opposed by many in the party room,” Hobbs said.

PRIORITY DOUBTS

But some doubted that even minor tweaks of the safeguard mechanism would be part of Turnbull’s strategy.

“My sense is that Turnbull’s promise to leave climate policy intact until after an election will probably extend to changing baselines or any of the significant rules in the exposure draft,” said Declan Kuch, a research fellow at the University of New South Wales.

“I think it’s an open question, and an entirely political one – ie. how much pressure will his government be subjected to on the issue of climate over coming months?”

Green groups, the renewable energy industry and others are likely to heap as much pressure as they can on Turnbull ahead of December’s pivotal UN climate summit, but the question is whether that will have any effect at all.

Tony Abbott did just fine at the last election without their backing, and Turnbull likely sees far more potential for winning sufficient support to be elected PM by focusing on broad issues like the economy and defence.

By Stian Reklev – stian@carbon-pulse.com

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