Review of Australian Government "Direct Action Plan" to commence in February 2017

According to the Abbott and Turnbull federal governments: The Emissions Reduction Fund is central to the Government’s Direct Action Plan to cut emissions to five per cent below 2000 levels by 2020 and to 26 to 28 per cent below 2005 levels by 2030. It comprises an element to credit emissions reductions, a fund to purchase emissions reductions, and a safeguard mechanism…The safeguard mechanism will start on 1 July 2016. It will require Australia’s largest emitters to keep emissions within baseline levels.

Along with its alleged support of the expansion of renewable energy the Emissions Reduction Fund  (ERF) is the main component of the Coalition’s Direct Action Plan.

The original stated aim of the Direct Action was to reduce Australia’s greenhouse gas emissions by 5% below 2000 levels by 2020.

Having spent most of the original Direct Action funding by 2016 and with national greenhouse gas emissions rising instead of falling, the planned review by the Dept. of Environment and Energy is timely.

According to its terms of reference, the review will look at:

• the opportunities and challenges of reducing emissions on a sector-by-sector basis;
• the impact of policies on jobs, investment, trade competitiveness, households and regional Australia;
• the integration of climate change and energy policy, including the impact of state-based policies on achieving an effective national approach;
• the role and operation of the Emissions Reduction Fund and its safeguard mechanism;
• complementary policies, including the National Energy Productivity Plan;
• the role of research and development and innovation;
• the potential role of credible international units in meeting Australia's emissions targets; and
• a potential long-term emissions reduction goal post-2030. 

The review will commences in February with the release of a discussion paper and a call for public submissions. It is expected to be completed before the end of the year.

On 5 December 2016 the The Sydney Morning Herald reported:

The Coalition will consider a form of carbon pricing for power companies as part of a long-awaited review of Australia's climate policies, Environment and Energy Minister Josh Frydenberg has confirmed.

The review of the Coalition's direct action policy will focus on electricity price rises, energy security and cutting greenhouse gas emissions but will also look at whether to introduce an emissions intensity scheme for electricity generators – a type of carbon price different to the abolished scheme brought in by the Gillard Labor government.

The possible resurrection of carbon pricing is likely to trigger intense internal debate within the Coalition once the review gets under way next year, while environment groups and the federal opposition are likely to claim the terms of reference for the departmental review lack ambition, given the threat posed by climate change to the planet…..

The review comes in the wake of several analyses finding the Coalition's direct action policy - built around an emissions reduction fund that uses taxpayer funds to pay for cuts, mostly through tree-planting and better landfill management - is highly unlikely to be enough to meet Australia's current target of a 26 to 28 per cent emissions cut by 2030 compared with 2005 levels.

The response from Coalition backbenches was immediate and very vocal. Senator Cory Bernardi calling the intention to re-consider a limited form of carbon pricing one the dumbest thing I've ever heard and failed prime minister Tony Abbott MP referring to it as an ETS by stealth.

Expect more behind-the-scenes political brawling to find its way into the mainstream media before the review is completed.

Don't expect any meaningful policy to emerge which would help mitigate the effects of climate change - after all this is a federal government being ruled by an unruly, far-right, climate change denying element on its backbenches.

On 8 December 2016 The Sydney Morning Herald revealed that:

The Turnbull government has been sitting on advice that an emissions intensity scheme - the carbon policy it put on the table only to rule out just 36 hours later - would save households and businesses up to $15 billion in electricity bills over a decade.

While Malcolm Turnbull has rejected this sort of scheme by claiming it would push up prices, analysis in an Australian Electricity Market Commission report handed to the government months ago finds it would actually cost consumers far less than other approaches, including doing nothing.

It finds that would still be the case even if the government boosted its climate target to a 50 per cent cut in emissions by 2030.

Depending on the level of electricity use and the target adopted, modelling by Danny Price of Frontier Economics found costs would be between $3.4 billion and $15 billion lower over the decade to 2030.  Costs would be $11.2 billion lower over this time assuming average electricity use and the existing climate target.

The modelling is part of a group reports on the future of energy to be discussed by the Prime Minister and state premiers ahead at a COAG meeting in Canberra on Friday.

They include a preliminary report into the future security of the electricity market by chief scientist Alan Finkel, which warns that Australia has no clear path to meeting the 2030 emissions target taken to the Paris climate deal under existing policies.

While it makes no recommendations, the Finkel review cites the market commission, Australian Energy Market Operator and Climate Change Authority as all having found an emissions intensity scheme would have lower costs and less impact on energy security than other policies considered.

It comes in a week in which Mr Turnbull launched an aggressive attack on Labor over its support for emissions intensity trading as well as a 50 per cent renewable energy target….

Under all scenarios considered, the modelling in the commission report seen by Fairfax Media found an emissions intensity scheme was the cheapest option for consumers and business.

That remained the case if the emissions target was beefed up from a 28 per cent to a 50 per cent cut by 2030 compared with 2005 levels. Under the latter consumers and businesses would still pay $3.4 billion less than if no policy was introduced.

If demand for electricity was higher than average, the collective saving on electricity bills was estimated to be $15 billion.

An emissions intensity scheme sets a limit on how much a power station can freely emit for every unit of power generated. Cleaner generators that emitted less than the limit earn credits, and sell them to high-emitting generators above the baseline.