Researchers outline path for Australia to bipartisan, market-based climate policy

Published 10:05 on April 11, 2016  /  Last updated at 11:03 on April 11, 2016  /  Asia Pacific, Australia  /  No Comments

Australia could create investor certainty and break its political deadlock over climate policy by making simple changes that would establish a carbon market while upholding both major parties’ main core principles, according to think-tank the Grattan Institute.

Australia could create investor certainty and break its political deadlock over climate policy by making simple changes that would establish a carbon market while upholding both major parties’ main core principles, according to think-tank the Grattan Institute.

After years of polarised debate and curtailed leadership, climate policy remains a contentious issue in Australian politics, with little prospect of the Coalition government and the opposition Labor party finding common ground.

Some observers say this has delayed industry investments in low-carbon technologies and put the nation on its back foot when it comes to meeting future emission targets, with analysts predicting Australian GHG output will continue to increase for years.

The Grattan Institute report outlines measures that the government could take that would align with the main principles of both main parties while creating a more predictable regulatory environment for emitters.

Using the current Safeguard Mechanism as a starting point, the Grattan researchers list three stages towards a new policy platform that both parties might support, and that would drive down emissions:

  1. Tighten baselines to be in line with Australia’s 2020 target to cut emissions 26-28% below 2005 levels.
  2. Allow companies with emissions below the baselines to earn permits that could then be sold to firms exceeding those levels.
  3. Gradually reduce the baselines to zero and replace them with government-auctioned permits, lower the 100,000 tCO2/y threshold to participate and bring in more sectors.

Electricity generation should be given its own rules during the first two stages, with baselines based on emissions intensity. This would lead to carbon-intensive coal power generators needing to buy permits from renewables and natural gas-fired generators.

Within this policy framework, emitters should be allowed to use a limited amount of international carbon units, while some form of compensation should be offered to consumers and some trade-exposed industries, the researchers said.

BIPARTISAN

Some within the government are keen to change the current policy but are being held back by a right-wing faction in the Coalition that opposes any move towards stricter carbon regulations.

Should the ruling Coalition win this year’s election, it plans to review its climate policies in 2017. Environment Minister Greg Hunt has said he expects one outcome of that to be to allow the use of international offsets.

Meanwhile, Labor has pledged to introduce an emissions trading scheme, but has yet to release details on what such a programme would look like.

“The roadmap allows a Coalition government to modify its Safeguard Mechanism so that it no longer merely prevents emissions from going up, but drives them down in line with agreed targets – and via steps that are consistent with its political constraints,” said Tony Wood and David Blowers, the report’s authors.

“Equally, it shows how a future Labor government could take the Coalition’s policy framework and move to its preferred emissions trading model,” they said.

“Broad bipartisanship on climate change policy would give Australian business the predictability it desperately needs to transition to a low-emissions economy.”

By Stian Reklev – stian@carbon-pulse.com

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