The issue of voluntary action under the CPRS is one that the Government has tried to avoid talking about since last year. Now it’s finally getting media attention.
Penny Wong argued in an op-ed in The Australian on Monday that:
“There has also been misunderstanding of the impact voluntary action by households can have under a cap-and-trade scheme. Some argue that household action simply frees up carbon pollution permits for others to use.”
“In fact, individual and community action to be more energy efficient not only saves them money, it will contribute directly to Australia meeting our emissions reductions targets.
Saving households money, while good, is certainly not a major aim of the CPRS. Saving the planet, however, is. And as for “contributing directly” to Australia’s (weak) target of 5%, the Minister is right to suggest that household action will, but it does so at the expense of large polluters having to do it. That is, an aluminum smelter or coal-fired power station gets the advantage from your energy-saving actions at home.
The Minister went on to write: “Strong household action also helps make it easier for governments to set even more ambitious targets in the future.”
This echoes what Minister Wong said on ABC’s 7.30 report on Monday night when challenged by Kerry O’Brien. The Minister said that individual action does contribute to reducing emissions because it (a) allows the Government to reach the targets it has set and (b) allows the government to set more ambitious targets into the future.
On the first point, Penny Wong stated, “a range of measures can contribute to those targets” (meaning both voluntary action and reductions from large polluters). At face value, this seems reasonable. However, the CPRS is supposed to cover Australia’s 1000 biggest polluting companies and begin what is essentially a structural adjustment program for these companies, as our economy phases out carbon intensive industry and creates new clean industries with new green jobs. So, if voluntary action gets in the way of this transformation and means we as a nation can’t do more than the weak 5%, then it isn’t reasonable at all.
Now to Minister Wong’s second point. On the 7.30 Report, Kerry O’Brien explained that when individuals reduce emissions it frees up permits for polluters which allows them to pollute more or trade to other companies who will pollute more (as long as the overall emissions of the companies covered by the scheme is 5% by 2020). Minister Wong’s response was “and the cap can be reduced the next year”.
My mouth dropped at this point. I’ve read the white paper, and that’s not what it says. Had Minister Wong changed the scheme in response to these criticisms? But as Andrew McIntosh writes in yesterday’s Crikey:
“Either Wong doesn’t understand her own scheme or she is deliberately lying.”
The way the scheme is designed, the Government can alter the cap but only for a point five years in the future, and even then it must stay within the 5-15% target range by 2020. Macintosh explains in more detail:
“Under the CPRS, the caps will be set for a minimum of five years. If the international commitment period is longer than five years, the caps might be extended to the end of this period. The scheme caps will be updated each year, to maintain “a minimum five-year certainty period”.
In addition to the certainty period, there will be “gateways”, which are essentially a range within which the cap will fall beyond the certainty period. The gateways will be set for each year from the end of the certainty period to the end of the gateway period, which the White Paper says will be up to ten years. The gateways will be reviewed every five years, meaning the length of the gateway period will fluctuate from year-to-year.
The combined effect of these rules is to provide at least 10 to 15 years of caps — 5 years of set caps and 10 years of a cap range. Consequently, Wong is wrong to suggest the Government will be able to reduce the cap to account for voluntary action in the following year.
Once the scheme starts, the best she’ll be able to do is reduce the cap five years in advance, and even then her capacity to do so will be limited by the gateways. Further, if the Government chooses to extend the certainty period to the end of the international commitment period, she may be unable to change the cap at all until sometime around 2020.”
In her op-ed in The Australian, Minister Wong stated:
“Why else would the Government provide $3.9 billion of new investment to insulate homes and install solar hot water if we didn’t value the contribution households can make?”
Why indeed? I honestly don’t know.