International comparisons can be a useful tool for a politician looking to gain credibility, but Environment Minister Greg Hunt is about to learn that comparisons can quickly backfire. In a speech to Australia’s annual Carbon Expo, Greg Hunt took a selective look at direct and regulatory measures applied overseas. In doing so he inadvertently highlighted the many flaws in the Coalition's carbon policy.
Take for instance the Norwegian Carbon Procurement Program, which Hunt referenced in his speech.
Norway has established a fund to buy carbon credits from UN-approved abatement projects. But it only buys from projects at risk of collapse because of falling global carbon prices, which crashed because of an oversupply of credits. Reduced pollution also drove prices down following the global financial crisis, which saw production and pollution fall dramatically.
What Hunt fails to mention is that since 1991 Norway has levied a carbon tax on oil and gas, pulp and paper, fishmeal, aviation and shipping, in addition to an emissions trading scheme introduced in 2005.
Norway’s bipartisan climate change policy, which is expressly based on the polluter-pays principle, sets a target of cutting pollution by at least 30 per cent by 2020 and 100 per cent by 2050 (by 2030 if other developed countries also take on ambitious commitments). Hunt refuses to commit to anything beyond a 5 per cent cut by 2020, despite the independent Climate Change Authority advice that Australia should cut pollution by at least 15 per cent and more likely 25 per cent by 2020.
In Japan, like Australia, industry opposition to emissions trading is intense — although a modest scheme operates in Tokyo and a national voluntary trial continues. In the absence of a more comprehensive approach, Japan has opted to pay other countries to cut pollution (something Hunt has inexplicably ruled out).
Japan plans to secure most of its pollution cuts through a UN scheme, with the remainder to come from its new Bilateral Offsets Credits Mechanism. Under this approach, Japan will purchase direct abatement and fund bilateral agreements with developing countries. Early analysis suggests this approach is as much about selling Japanese technology to developing countries as cutting pollution.
Japan recently confirmed that it wouldn’t be able to meet its Kyoto targets, although unlike Canada, which made history in 2011 as the first country to withdraw from the Kyoto Protocol, Japan remains committed to global efforts to halt climate change. Hunt likes to quote Parliamentary Secretary to the Canadian Prime Minister, Paul Calandra, who applauded the Abbott Government’s decision to abandon the carbon price.
Given most economists say Australia couldn’t even achieve a 5 per cent cut by 2020 based on Hunt’s direct action plan, perhaps Calandra will soon be congratulating Australia as the second nation to withdraw from Kyoto.
Hunt also spoke about the UN’s Clean Development Mechanism (CDM). He didn't acknowledge that it was created to help developed countries with Kyoto targets and emissions trading schemes to meet their domestic targets at lower cost, while supporting technology transfer to developing countries.
The CDM is an example of what is wrong with plans like Hunt's. It includes complex rules to avoid rewarding pollution cuts that would have occurred anyway. Baselines must be calculated to determine how much pollution would have been created in the absence of efforts to cut pollution.
Because it rewards pollution cuts, it can create a perverse incentive for business to raise their pollution in the short-term, with the aim of getting paid to cut pollution later. These issues combine to create bureaucracy and delays – the length of time needed to create just one credit stretched into years under the CDM, although is now down to a more manageable 100-200 days on average.
Finally Hunt notes the varied regulatory approaches deployed in many countries, ranging from energy efficiency and renewable energy target schemes, vehicle emissions standards, electricity generator standards to forest emissions reduction programs.
Again, he is selective, failing to mention that regulatory approaches are piecemeal and operate in tandem with emissions trading — or where difficult political circumstances dictate a less than optimal approach.
Norway, for instance supports a renewable energy target, energy efficiency measures, is investing in cycling, walking and public transportation, provides tax incentives for more fuel efficient vehicles, mandates forestry conservation, invests in climate change R&D, committed US$1 billion to help developing countries reduce pollution from deforestation and is contributing to an international Green Climate Fund (the Abbott Government refused to commit to similar funding).
Facing a deeply partisan parliament, US President Barack Obama said in his most recent State of the Union address:
“I urge this Congress to pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago. But if Congress won't act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.”
Hunt may wish it otherwise but international experience confirms that direct action can support an emissions trading scheme. Direct action can even be introduced in advance of emissions trading, where partisan politics stands in the way of good policy. But it is not a standalone measure.
Hunt’s international comparison confirms what the majority of experts have been saying. Direct action may support pollution cuts, particularly in sectors of the economy where an emissions trading is less effective, and it may encourage adoption of efficient technologies, but direct action is no panacea. The carbon price works, direct action alone won’t.