Rudd’s Changes to the CPRS

I’m sure you’ve all heard about the Government’s changes to the emissions trading scheme announced yesterday. At first glance, extending the upper limit to 25% is positive – and it’s due to the hard work of the climate movement and millions of Australians who have exterted pressure on Rudd. But the other things he announced are actually really bad, and as Bernard Keane wrote in yesterday’s Crikey, a real capitulation to polluting industries. So what are we dealing with?

1. The scheme will be delayed until July 2011.

All the advice that the Government has seen on the economics of climate change shows that the sooner we cut emissions, the less expensive it will be. Early action is much cheaper than waiting. This was a central tenet of the UK’s Stern Review and our own Garnaut Review.  We need to move quickly, especially if we want to create new green jobs and new investments in clean tech and renewable energy in Australia.

2. In 2011-2012 the carbon price will be set at $10/tonne and there will be an unlimited amount of permits;

This is almost a joke  – $10 a tonne! To change energy supply here modelling (from ROAM) suggests we need a carbon price north of $60 to promote renewables. What does that mean?

A $10 carbon price won’t even be enough to make the switch from brown coal to less polluting black coal – at $20 that will happen. At a carbon price of $50/tonne gas will displace coal fired power. At $60/ tonne we get some wind technology and solar thermal. This is of course factoring in the current $10-$11 billion worth of subsidies the Federal Government currently gives the fossil fuel industry per year (Chris Reidy, Institute of Sustainable Futures report).

In the European Union ETS, where prices are so volatile, carbon permits are currently trading below $15/tonne. They have found that this is not enough to keep renewable energy projects going.

3. Emissions trading will be begin proper in July 2012

It’s important to note that a carbon price is not enough as a central policy. The UK recently announced a ban on coal without CCS. Price mechanisms to date have been totally inadequate to drive significant transformation – the age of cheap energy (coal and oil) is catching up on us. We need to come to terms with that and get serious about complementary measures.

4. There will be “recession buffer” where industries eligible for assistance at the 60% rate “would receive a 10% buffer for a finite period”, while those eligible at the 90% rate “will receive a 5% buffer for finite period”.

The Government should be standing up to this kind of pressure. If we are giving billions of dollars more to our most polluting industries, then the rest of the economy will have to bear the brunt of emission reductions. Furthermore, this makes it much more difficult to actually achieve emission reductions because the amount of assistance that the worst polluters are getting offers little economic incentive for them to change their behaviour. Lastly – revenue from the ETS should go to large-scale renewable energy and clean tech projects, and to assisting developing countries to deal with climate change.

5. The Government has added an extra option to its target range (previously 5-15%) of 25% by 2020 over 2000 levels if the world reaches an agreement to reduce greenhouse emissions to 450 parts per million.

The one shimmer of light, of course, is that the target range has been upped from 5-15% to 5-25%. Well, kind of. If, and only if, the rest of the world shows leadership and creates a global deal at the UN Copenhagen climate negotiations in December this year, then Australia will do 25% reduction by 2020 (over 1990 levels). That is, the 5%-15% target reduction range will be kept unless an agreement consistent with 450ppm CO2-e is agreed to, in which case Australia will do a 25% reduction.

Those targets are simply not strong enough to actually do the job of solving climate change. If the UN Intergovernmental Panel on climate change says the minimum that industrialised countries like Australia should do is 25-40% by 2020 over 1990 levels, and even that only gives us a 50/50 chance of avoiding a 2 degree temperature rise, than even the 25% target falls far short of what is needed.