Abbott sabotages RET, Palmer greenwashes ERF

It’s been a depressing three weeks for Australian climate policy.

Abbott kills large-scale renewables

On 22 October, the Abbott government announced it would seek to persuade the Senate to slash the 2020 large-scale renewable energy target (LRET) from 41,000 to 26,000 GWh. Renewables will be allowed to meet no more than 50% of new energy demand (if there is any new demand). This, the main recommendation of the Warburton review, will essentially kill Australia’s wind and large-scale solar industries. The day after the announcement Keppel Prince, Australia’s largest manufacturer of wind towers, closed most of its wind tower manufacturing operations.

Even before the announcement, large-scale renewable energy investment in Australia had already ground to a halt, because of a surplus of RET certificates and the political uncertainty fostered by the fossil fuel lobby and government. For these reasons, and because of the urgent need to get to 100% renewables to mitigate global warming, the target should have been increased, not decreased.

On the bright side, the government says it will continue to support “household solar”, which at face value appears to mean the small-scale renewable energy scheme (SRES) will be left intact. Ominously, though, the government has refused to clarify that there will be absolutely no changes to SRES, so it too could yet be quietly weakened or sabotaged.

It’s pretty obvious solar would never have been (apparently) saved if not for the “Save Solar” campaign, which seems to have blindsided the government. Tony Abbott had assumed that if the public opposed the carbon price they must also oppose the RET, but he was wrong. The RET remains extraordinarily popular despite all the lobbying against it. Ironically, Abbott’s anti-carbon-tax campaign, by drawing attention to electricity prices, may have contributed to the take-up of solar and energy efficiency… so it might be Abbott’s own fault that Australians have turned on him now he has revealed the true extent of his anti-climate crusade.

To change the RET, Abbott needs to get legislation through the Senate. He tried to negotiate with Labor leader Bill Shorten, but Shorten responded that Abbott’s proposal was a “fraud”. He even met with Greens leader Christine Milne, who had offered to in return negotiate on Abbott’s proposed voluntary Emissions Reduction Fund (ERF, aka “Direct Action”). But predictably, on both the RET and ERF he wound up doing deals with coal mining billionaire politician Clive Palmer.

Indirect inaction

The Emissions Reduction Fund is a scheme in which the government purchases carbon credits from polluting companies who voluntarily act to reduce their future CO2 emissions. The credits will represent not absolute emissions reductions, but instead government-calculated estimates of avoided emissions relative to a counterfactual baseline of CO2 they (supposedly) otherwise would have emitted. (And they said the carbon tax was difficult to understand!)

Contrary to Environment Minister Greg Hunt’s stated intention to cut emissions 5% by 2020, the Clean Energy Regulator has admitted the ERF is not designed to meet any particular target and timetable, merely to fund as much supposed action as possible. Independent analysts conclude it will come nowhere near meeting even the laughably inadequate 5% target; in fact absolute emissions will continue rising. The ERF’s budget is capped at an insignificant $2.55 billion by 2020 (Hunt claims there might be further funding in future budgets, but you’d be mad to believe him). Hunt’s confidence that the government has budgeted enough money to achieve the 5% target seems to be based solely on assurances from polluting companies eligible for support from the Fund.

Supposedly the cheapest actions will be selected, but even if that’s true they might not be the most important or effective actions. For example, the ERF will pay for stored carbon that is allowed to be released after just 25 years, meaning it is not a permanent offset for fossil fuel emissions that will stay in the atmosphere. Finally, the ERF applies only to domestic emissions and won’t affect exported fossil fuels, Australia’s largest contribution to climate change (which the Abbott government is rapidly expanding).

By paying polluters to do little or nothing, the ERF is effectively a financial reward for their bad behaviour over the last 25 years.

Clive Palmer, the climate’s greatest frenemy

On 29 October, Palmer performed two of his trademark backflips in one day.

Firstly, he revealed to Lateline that, at odds with his earlier promise to protect the RET, he wants the RET to count hydroelectricity projects which existed prior to its introduction, including the Snowy Mountain Scheme which was built decades ago. This would effectively reduce the target to 26,000 GWh, exactly what Abbott wants. And let’s not forget Palmer promised to protect the RET only until 2016, not long enough to provide investor certainty. (In the same interview, Palmer falsely claimed that Australian coal exports will reduce emissions by replacing Indonesian coal.)

Secondly, Palmer agreed to vote for the ERF with minor amendments, despite having previously rightly described it as

an ineffective policy and a waste of money at a time when families, pensioners, young Australians, stay-at-home mums, single parents and our Indigenous communities are facing unfair measures in the budget.

Palmer’s amendments include some things that might be improvements but are technical tweaks of little consequence (somewhat longer crediting periods and slightly greater powers for an Emissions Reduction Assurance Committee). On the downside, Abbott has agreed to prioritize Palmer’s selection of emissions reduction methods which, funnily enough, exclude the mining and energy sectors. They also agreed to expand the range of eligible projects to include burning of native forest timber, another recommendation of the Warburton review and something the business lobby has demanded for years. According to Milne, this means the government can

create any bogus method that says something like, because native forest burning to create electricity will ‘displace’ brown/black coal, that there are less emissions, so they can be eligible for credits to be bought by the Commonwealth. This provides a long-sought after business case for the destruction of Tasmania’s and other forests.

Abbott and Palmer also agreed that between now and mid-2016 CCA will deliver a series of reports on a hypothetical Australian emissions trading scheme (ETS) conditional on similar schemes being adopted in China, US, India, EU, Japan, and South Korea. Until such time as all those countries have ETSs, Palmer wants any Australian ETS to have a carbon price of $0 (ie. inactive). Making Australian action conditional on actions in other countries cripples both the already-timid CCA and Palmer’s proposed ETS. It means future arguments over Australian climate policy will hinge on whether the actions of other countries live up to Australia’s ridiculous conditions, instead of on the urgent need for all countries to act and Australia’s obligation to lead.

Even if CCA does recommend Australia introduce emissions trading, so what? Emissions trading does not equal effective climate action. Indeed the trading aspect, in and of itself, is not designed to cut emissions, merely to (supposedly) limit the cost to polluters. Trading is meaningless without an emissions cap (ie. target). Palmer has not proposed any such cap, Abbott’s 5%-by-2020 reduction target is ludicrously weak, and even the CCA’s 19%-by-2020 is underwhelming given the urgency of action. As discussed below, the process may lead to a type of ETS which has no emissions cap. Furthermore, I’m skeptical about even a capped ETS, which could actually prevent action via external offsets and other loopholes.

In any case, Hunt brags that the government will pay no attention to the CCA report when it is finally delivered. He says the study is a “gesture”, emissions trading “is never coming back in any form” because the ERF is designed to last 20 years, and if CCA can’t be abolished it “might as well do work”. On the bright side, CCA have also decided to do their own RET review – hopefully this time around they will advocate increasing the RET.

In the last six months, Palmer has made allies among ex-Greens, environmental lobbyists, the Australia Institute, Al Gore, and possibly Malcolm Turnbull. These allies evidently believe the Abbott government can be reformed, and have convinced themselves they are more likely to make progress working with Palmer than with the Greens. Tellingly, several individuals have credited themselves with changing Palmer’s mind on climate. They are all deluded. Palmer is motivated only by his own interests, and it wouldn’t surprise me if he’s been working with Abbott behind the scenes.

To evaluate Clive Palmer, I think it’s important to focus on his actions, not his words – I’m reminded of an old joke about “when their lips are moving”. Until recently, Palmer was a decades-long member of the Queensland Liberals and their biggest donor, and in 2012 helped elect them by accusing the Greens of being funded by the CIA. Then, due to a rivalry with another donor he fell out with the Queensland government, who blocked his “China First” mega-coal mine. Then he created the Palmer United Party and poured billions of dollars into it. After being elected to federal Parliament in September 2013, Palmer initially played up his party’s ability to block Abbott’s agenda in the Senate. The Abbott government approved China First on the Friday before Xmas.

Since then, Palmer has followed a clear modus operandi: make as much noise as possible about partially or fully opposing a government-proposed repeal (or in the case of the ERF, a proposed policy), then quietly vote it through with very minor changes. Palmer has now pulled this trick on the ARENA, carbon tax, mining tax, ERF, ETS, CCA, and the RET. Looking forward, somehow I suspect he won’t follow through on his promise to protect the Clean Energy Finance Corporation (CEFC). Milne points out that Abbott and Palmer have merely agreed to not abolish the CEFC and ARENA this year, meaning they could still be abolished early next year.

Xenophon’s pointless vision

Meanwhile, independent Nick Xenophon also agreed to support the ERF, won over by a promise of penalties for businesses that exceed their emissions baselines, along with an option for those businesses to buy emissions credits from other companies instead of paying the penalty. Yet these obligations will be extremely unlikely to ever apply, because the government has made it crystal clear that baselines will effectively be set at business-as-usual levels, allowing emissions to increase wherever economic production increases. (Although in some cases historical absolute baselines may be used, they will not apply to new companies or significant business expansion.) Also, these rules will not come into effect until 2016. Obsessing over the rules for companies who exceed their baselines misses the point that the baselines will probably never be exceeded anyway. As the Green Paper explicitly stated, the policy’s purpose is to “allow businesses to continue ordinary operations without penalty”.

Abbott’s deals with Palmer and Xenophon go partway toward a reform of the ERF that has long been advocated by the pro-ETS faction of the business lobby, some elite political commentators, and some reformist greens. This group is excited about Abbott’s deals with Palmer and Xenophon because they think it might open the door to a baseline-and-credit ETS. That’s a type of ETS that has no emissions cap – instead, like the ERF, companies who pollute below their baseline are credited, while companies who pollute above their baseline are penalized, and they can trade credits with each other. Again my reaction to this possibility is, so what? Adding tradeable credits into the ERF won’t improve it, for the same reasons I outlined above: in an ETS it’s the cap that cuts emissions, and neither Palmer nor Xenophon is offering one. Anyway, no significant trading will happen unless baselines wind up being much stricter than foreshadowed.

The ERF passed the Senate in the early hours of Hallowe’en (though at the last minute it was nearly killed by the Liberals’ own Cory Bernardi who wants no climate policy at all). The Greens expressed concerns that the ERF might provide grants to Palmer’s companies. The Business Council of Australia cheered for the amended ERF, with their only complaint being that it still won’t allow international offsets (which in my view is the only positive aspect of the ERF). Former Liberal leader Malcolm Turnbull also backed the ERF, despite having previously described it as a “con” (notably, Turnbull met with Palmer in May).

To top it all, the day after the legislation passed, the government revealed that ERF funds will be allocated in secret because they are “commercial-in-confidence”. As Environment Victoria CEO Mark Wakeham wrote in a letter to The Age:

So taxpayers will fork out $2.5 billion to unnamed polluters, to deliver undisclosed reductions in an unknown time period. While the risks of global warming and the warnings from scientists have never been starker Australia’s policy response to climate change plumbs new depths.

The media gets it wrong

Media coverage of all this has been appalling. It is a sad illustration of the fossil fuel lobby’s power that killing large-scale renewables was portrayed as a moderate decision. As usual, the right-wing media played bad cop, pushing Abbott to go even further. And The Age responded to the Abbott-Palmer deal with a ridiculous editorial stating:

Australia today is in a better position to tackle climate change than it was at the start of the week – but only just. The climate-action agreement between the Abbott government and Clive Palmer’s party is a positive development for several reasons. Before the deal was struck, Australia had no active strategy to tackle climate change… Now there is an agreement to do something about climate change. The Abbott government has skin in the game, billions of dollars in fact… We are confident the Fraser report will point to the benefits – economic as well as environmental – of Australia moving to an emissions-trading scheme.

The editorial did criticize some details in the government’s approach, but to give them any credit at all is out of touch with reality. What occurred in reality were Abbott’s latest wins in his (and Palmer’s) war on the environment.

Too many elite commentators continue to speculate on how the ERF might be improved. Their proposals tend to converge on Xenophon’s dream of a baseline-and-credit ETS with international offsets. These commentators are either naïve or dishonest, because the reality is that Abbott and Palmer are only interested in protecting the fossil fuel industry and have intentionally set out to do everything they can to prevent climate action. Hence the ERF is intentionally designed to not work. The ERF’s true function is to greenwash the government, specifically to reassure the 40% of Australians who are concerned about climate change but nervous about the costs of action (though in reality the ERF merely transfers the cost from polluters to taxpayers).

The Greens are under constant pressure to be more conciliatory in their approach to the Abbott government – both externally, from the commentators, and internally, from the aforementioned Palmer supporters. The Greens should ignore those calls: reformists trying to work with Palmer has resulted in Palmer achieving everything he wanted.

Instead the Greens and the climate movement should shout loud and clear about the scale of action that is truly needed. That means doing what Abbott says is the worst thing we could do – leaving fossil fuels in the ground.

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