02/04/2019

Labor's Emissions Trading Scheme

AFRPhillip Coorey

Industry's 250 heaviest polluters will face possible penalties for breaching new emissions caps, and 50 per cent of all new cars sold by the end of next decade should be electric, under long-awaited details of Labor's ambitious climate change policy.
All carbon-intensive sectors of the economy will contribute to achieving Labor's goal of cutting emissions by 45 per cent on 2005 levels by 2030, well above the Coalition's target of 26 per cent to 28 per cent.
Under Labor's policy, energy will be exempt from the new emissions cap, known as a baseline and credit scheme.
Bloomberg
Key Statistics
  • 50% The share of new cars sales in 2030 that Labor wants to be electric.
  • 105g Limit on carbon per kilometre for cars under Labor's new emissions standards.
  • 250 The number of big polluters to be caught by Labor's emissions cap, 100 more than now.
  • 25,000 The tonnes of carbon polluters can emit before being subject to a cap.
The policy has been unveiled the day before Tuesday's federal budget and less than a week before Scott Morrison calls the election, ensuring climate change becomes a key feature of the forthcoming campaign.
The Coalition's claims Labor's target will wreck the economy and that it is trying to hide the policy behind the budget.
Labor has refuted this, claiming the Coalition is neglecting climate change and the policy will overshadow the budget.

Energy, farmers exempt from caps
Under Labor's policy, energy will be exempt from the new emissions cap, known as a baseline and credit scheme, in which a penalty is paid if pollution exceeds a certain cap, or baseline.
Labor announced a separate climate policy for the energy sector last year that inoculated it against claims it would drive up power prices.
That policy involved subsidising 100,000 household batteries, underwriting clean energy generation, and, if the Coalition changes its mind, embracing the National Energy Guarantee.
Also, agriculture will not be slugged by the baseline and credit scheme. Instead, it will contribute through increased carbon farming; farmers being paid to offset carbon emissions by other sectors through such measures such as growing trees and managing their soil.
There will also be nationwide bans on large-scale land clearing.

Ramping up Coalition safeguards scheme
The baseline and credit scheme involves ratcheting up the Abbott and Turnbull governments' safeguards mechanism for heavy polluters which set a emissions threshold so high at 100,000 tonnes per year that it covered about 140 businesses and no-one was penalised for exceeding it.
Under Labor's scheme, that cap will be phased down to 25,000 tonnes of carbon emissions a year.
The lower threshold will cover about 250 businesses. Labor will consult over the phasing in of the new cap and there will be escape clauses allowing businesses to offset excess emissions.
If, for example, a business comes in under the threshhold, it can carry the credit over to the next year, or it could make money on its achievement by selling the credit to another business, or it could use agricultural offsets.

International permits, no Kyoto carry over
The controversial option will be to allow the heavy polluter to offset its emissions through the purchase of relatively cheap international credits, as Opposition  leader Bill Shorten indicated last week and which is something the Coalition policy does not allow.
But unlike the Coalition, Labor will not contribute to its emissions reduction target by factoring in the carry over from Australia supposedly exceeding its Kyoto target of cutting emissions by 5 per cent on 2005 levels by 2020.
The government claims the Kyoto target will be exceeded and it will use the credits towards its 26-28 per cent targets. Labor says this is "a dodgy accounting trick''.
"This is a particular accounting technique which only the Australian Liberal Party and the Ukraine use,'' Mr Shorten said.
Emissions intense, trade exposed industries such as steel, cement and aluminium will be given preferential treatment via exemptions so as not to damage their international competitiveness.
"Labor's approach isn't about punishing polluters, it's about partnering with industry to find real, practical solutions to cut pollution, in a way that protects and grows industry and jobs,'' the policy document says.

Electric vehicle strategy
The transport sector will contribute by a move towards electric cars and tighter emissions standards on petrol and diesel vehicles.
Labor will set a target for 50 per cent of all new cars sales by 2030 to be electric vehicles. It will set the same 50 per cent target for 2025 for the purchase of the government vehicle fleet in an effort to both set an example and create a secondhand market.
And Labor will introduce emissions standards on petrol cars with the aim of phasing in a limit of 105 grams per kilometre travelled.
This, Labor says, will bring Australia into line with US standards but not up to the stricter European Union standards.
It will also offer businesses incentives to replace their fleets with electric vehicles by including the purchase of such cars in its proposed Australian Investment Guarantee.
This policy allows businesses to immediately deduct 20 per cent off any new eligible asset worth more than $20,000.
A report commissioned by the government last year found electric cars will be as ­affordable as petrol vehicles within seven years and were likely to represent 90 per cent of all cars on Australian roads by 2050.
The report by consultancy Energeia says sales could take off by the early 2020s, with only moderate taxpayer support required to entice uptake before sales boom within a decade.
It forecasts rapid ­advances in technology would eliminate “range anxiety”, with experts predicting charging time and range will match internal combustion engines by 2024.

Not trying to hide behind budget
While any emissions reduction policy is a risk, Labor believes the political climate is such that it will be rewarded for taking action. One source said the aim was to to knock the budget off the front page.
Mr Shorten said Labor stuck with the Coalition's baseline and credit scheme because industry did not want another policy change.
"They don't want to start from scratch with another mechanism,'' the policy document says.
"Industry feedback has been unanimous, businesses want Labor to expand the safeguard mechanism and we've listened.''
Labor will also confirm today that if elected, it will scrap the Coalition's direct action scheme which will spend another $2 billion between 2020 and 2030 effectively buying emissions reductions.

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