Climate Change Authority suggests emissions trading but no new climate targets

An “intensity-based” emissions trading scheme for the electricity sector, to begin in 2018, is among a “toolkit” of policies recommended by the Climate Change Authority in a report setting out how Australia can meet its obligations under the Paris climate treaty.

The scheme, similar to a plan proposed by Labor at the last federal election, would set “baselines” for greenhouse emissions per unit of electricity generation, awarding credits to generators who emit less. The report recommended that these baselines be steadily reduced to zero “well before 2050”.

But it stopped short of recommending a planned phase-out of the most polluting power sources such as brown coal power stations, concluding that this will not be a cost-effective way to decarbonise the sector.

“The final composition of the electricity sector would be a matter for various electricity companies,” said Climate Change Authority chair Wendy Craik, although she added that the new scheme would help to incentivise renewable energy.

The report also recommended applying baselines to other emissions-intensive industries such as cement, steel and natural gas, under the government’s existing “safeguard mechanism” which penalises emitters who overshoot these limits.

The report also calls for five-yearly reviews of Australia’s climate policies, beginning in 2022 – a similar timetable to the five-year reviews under which nations are required to review and strengthen their climate pledges under the Paris agreement. The government is already set to review the effectiveness of its existing climate policies next year.

The report does not recommend any strengthening of Australia’s current emissions target, which calls for a 26-28% reduction in greenhouse emissions on 2005 levels by 2030, or of the Renewable Energy Target, which was scaled back last year.

It also recommends continuing with the government’s A$2.55 billion Emissions Reduction Fund, which “reverse-auctions” taxpayer funds for emissions-reducing projects.

Craik said that Australia needs a wide range of policies to drive down emissions in different sectors of the economy.

But the report has revealed divisions within the Authority, with members Clive Hamilton and David Karoly reportedly planning to issue their own dissenting report in the coming days.

Last July, the Authority recommended much deeper emissions cuts of 40-60% on 2000 levels by 2030. But in December Australia’s more modest target was enshrined in the Paris agreement.

Craik said the Authority stands by its earlier report, despite it having been ignored by the government, and that the new report is “focused on the policies the government might use to hit its targets”.

She said that talk of ramping up Australia’s emissions targets is premature while the Intergovernmental Panel on Climate Change is still working to calculate the carbon budget associated with the Paris agreement’s most ambitious goal of restricting global warming to 1.5℃. But she added that the policies recommended are designed to be “scalable” in future.

Climate Institute chief executive John Connor said the report’s recommendations “neglect a key fundamental of climate science” by failing to endorse deeper emissions cuts before 2030.

“If we emit more now, we have to emit much less later in order to keep within the overall temperature limits of 1.5-2℃ that the government agreed to in Paris,” he said.

The Climate Council also criticised the recommendations as “woefully inadequate”.

“Accepting Australia’s current 2030 emissions-reduction targets rather than the action required to limit global warming to less than 2℃ means the report’s recommendations will not protect Australians from dangerous climate change,” said council member Will Steffen.

The current targets would use up 84% of Australia’s overall carbon budget to meet the 2℃ target by 2030, he said.

Dylan McConnell, a research fellow at the Melbourne Energy Institute, said the suggestion of a baseline-and-credit scheme was unsurprising, as “that’s the direction everyone has been rowing in for the past 18 months or so”.

He said the report outlines ways in which the electricity sector can significantly cut its emissions by 2050, but none that is in line with meeting the Paris agreement’s goal of keeping global warming below 2℃.

To do that, Australia would need to emit less than 15g of CO₂ per kilowatt hour of electricity in 2050 – compared with 800g today. But the scenarios outlined in the report would fall well short of this, he said.

A baseline-and-credit scheme, unlike a carbon tax, would avoid passing on significant costs to consumers. But that would also mean consumers will be less likely to change their own behaviour and try to use less electricity, McConnell said.

He added that Australia’s current emissions targets, like those of many other nations, are not consistent with the 2℃ warming goal, and that any delay to strengthening these targets will make the job tougher still. “Kicking the can down the road always makes it harder,” he said.

RMIT University energy researcher Alan Pears said the gap between the politics and the science is “enormous and widening”.

“All we can hope for really in the next few years, regardless of who is in power, is to put in place the mechanisms for carbon pricing or trading, and see the beginnings with very low carbon prices and lots of generous exemptions,” he said.