Abby L. Harvey
GHG Monitor
4/25/2014
The Australian government late this week issued a white paper outlining a new approach to addressing climate change—the Direct Action Plan—that would include a proposed Emissions Reduction Fund. The proposed ERF will work in a series of “reverse auctions” in which companies will be paid to volunteer to reduce their emissions. The white paper says that an additional $1 billion will be budgeted for the ERF, an addition that Minister for the Environment Greg Hunt said was “a pretty big vote of confidence” in the plan by the coalition during a press conference.
At the center of the ETF is a belief that incentive, rather than punishment is the best way to promote better climate policies. The white paper states, “For Australia, an incentive-based approach that directly purchases emissions reductions and rewards practical and positive action is a better way to achieve the 2020 emissions reduction target than an approach that raises prices for all Australians. That is why the Government is repealing the carbon tax and replacing it with the Emissions Reduction Fund. Rather than increasing prices and eroding Australia’s competitive advantage, the incentive-based approach adopted through the Emissions Reduction Fund will invest in Australian businesses, reducing their energy costs and increasing our productivity as a nation.”
The ERF will work as a series of auctions conducted by the Clean Energy Regulator during which companies can purchase emissions reductions at the lowest available cost. It is the hope of the government that the auctions will create competitive pressures to purchase the reductions. Should the plan be passed, auctions will begin in the second half of 2014 and will run quarterly. At the close of each auction period the government will enter into contracts with successful bidders to guarantee payment for the delivery of emissions reductions. At this time, the suggested contract length is five years, though as development of the plan continues, that is subject to change.
Direct Action is the Liberal Party’s response to the Labor Party’s carbon tax, which was adopted during the summer of 2012. “Very importantly, what the Emissions Reduction Fund will do is help drive private sector investment in practical actions such as cleaning up waste coal mine gas, cleaning up waste landfill gas, cleaning up methane, energy efficiency on a significant scale, whether it’s industrial, commercial or residential. We will look at cleaning up power stations, and, of course, ways of capturing carbon in the land sector, whether it’s through soil, through re-vegetation, re-forestation or other proposals that are put forward,” Hunt said.
New Plan Faces Scrutiny in Parliament
While Hunt expressed confidence in the Liberal Party’s ability to pass Direct Action through Parliament, Clive Palmer, member of the Australian Parliament and leader of the Palmer United Party (PUP), made it clear that Direct Action will not have the support of him or his party, representing four essential votes in Senate. Palmer said earlier this week that the ERF is "a token gesture to addressing carbon issues. On one hand the government makes broken promises, yet on the other hand they commit to campaigns that waste money like direct action.”
Palmer’s remarks left Hunt unabashed, saying “I am confident that we can get the legislation through, and I look forward to working with all of the crossbenchers and making contact directly with them, having made contact with a number of them so far. But let me also say this – that my view is that we will be implementing the Emissions Reduction Fund, and we won’t stop until it’s done.”
