7. It’s designed to cut emissions intensity, not absolute emissions

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Previous: 6. It rewards polluters

One of the most important things to understand about the Emissions Reduction Fund is that, despite the Government’s stated aim to cut Australia’s absolute emissions 5% by 2020, the policy is not actually designed to cut emissions. It is explicitly designed to allow the fossil fuel economy to continue growing along a business-as-usual trajectory, while merely encouraging voluntary reductions relative to historical levels of emissions intensity (emissions per economic output).

Offering incentives for emissions intensity reduction, instead of reduction in absolute emissions levels, is essentially pointless. Emissions intensity will fall automatically even if emissions rise; it would be unusual for emissions intensity to not decrease. Efficiency tends to improve naturally as technology improves; the problem is that those efficiency gains are being cancelled out by the exponential growth of the fossil fuel economy. The Government itself implicitly acknowledges this when it says Australian businesses have already halved their emissions intensity during the last two decades, because during that period Australia’s absolute emissions increased. Abbott says the Fund is for “reinforcing what businesses are already doing”, but rewarding businesses for what they are already doing is not enough: climate change requires urgent action on a far grander scale.

As of the Green Paper stage, it is unclear to what extent emissions intensity will be used to set baselines, and exactly how those baselines will be determined. The Government intends to consult closely with polluting companies on these details. On the surface the Green Paper suggests historical absolute emissions will be used to set baselines, but on closer examination it becomes clear those baselines will not apply to new companies or significant business expansion. In other words, emissions will be allowed to increase wherever production increases. The same goes for the baselines that companies would need to exceed to trigger the safeguard mechanism. Effectively, this means most or all of the credits issued by the Fund will represent merely reductions in emissions intensity, and the safeguard mechanism is extremely unlikely to come into play.

Next: 8. Its claimed emissions intensity cuts may not be real

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