Australia could contract up to A$1 billion ($700m) worth of emission cuts in the next Emissions Reduction Fund (ERF) auction as big emitters like BHP Billiton and Qantas join, market analysts Reputex said Thursday.
The Nov. 4-5 auction will be the A$2.55-billion ERF’s second, after the government spent A$660 million buying 47.3 million tonnes of CO2e cuts in the first one.
Reputex predicted the volumes would be bigger the next time, given that major emitters like Qantas, Visy, Woolworths and BHP Billiton subsidiary Endeavour Coal have registered projects.
“While industry accounts for only a small percentage of total projects, the sheer size of those projects means that they will supply considerable ACCU volumes into the second auction,” Bret Harper, Reputex head of research, said.
“In particular, coal mine waste gas projects and industrial energy efficiency projects may supply large emissions reductions, which has the potential to change the game in terms of market prices and the behaviour of other bidders.”
If the Reputex prediction proves correct, that would only leave around A$900 million for future auctions in what is Australia’s main tool to meet its emission reduction targets for 2020 and beyond.
Environment Minister Greg Hunt has said that another A$200 million per year will be made available to the fund, but it remains unclear when this would happen, and that contribution would likely only buy 10-15 million tonnes of CO2e cuts annually.
“As a result, we continue to believe that the ERF is unlikely to play any major role in supporting Australia’s long-term emissions reduction target unless funding is considerably scaled up, or the scheme is transitioned into the safeguard mechanism,” Harper said.
Meanwhile, Prime Minister Malcolm Turnbull on Thursday illustrated that the rhetorics against using carbon markets to cut emissions will be toned down while he is in office, even though he harbours no plans to immediately introduce one.
“Emissions trading schemes are a valid mechanism. I have to be honest and say that they have to date worked better in theory than in practice,” he told ABC radio.
“The (Direct Action plan) will be reviewed in 2017 and obviously if there are elements of it that are not working as well as they should they can be tweaked or amended,” Turnbull said, leaving the door open for a possible change in climate policies after the next election.
By Stian Reklev – email@example.com