Direct Action Not As Motivating As Carbon Tax Say Some Of Australia’s Biggest Emitters

The Conversation - Jayanthi Kumarasiri | Christine Jubb | Keith Houghton

A price on carbon introduced by the Labor government, dubbed the "carbon tax", was more effective at motivating big emitters to act, compared to the current Direct Action plan. Mick Tsikas/AAP

Australia's largest listed, carbon intensive companies say management lost focus on carbon matters, abandoned energy projects and didn't have the commercial imperative to produce long-term strategic action on reducing emissions after the carbon tax was repealed, new research finds.
Our research looked at the comparative views of emitters before and after the repeal of the carbon tax legislation, in interviews with 18 senior managers from nine carbon-intensive listed companies.
Two years have passed since Australia's carbon tax was repealed. It was introduced by the Labor government and came into effect in 2012.
The carbon pricing scheme asked big emitters to pay for each tonne of emissions above a threshold of 25,000 tonnes, in carbon units, and these were at a fixed charge of: $23 a tonne in 2012, $24.15 a tonne in 2013 and $25.40 a tonne in 2014.
The Swinburne research found the financial pressure exerted by the carbon tax forced companies to take action to manage emissions. As one senior executive observed at the time:

"…the threat is our operating costs will increase, and we won't be able to pass that cost on through to our customers, and, therefore, our earnings suffer as a result".

In July 2014, the coalition government repealed the carbon tax by replacing it with the "Direct Action" plan which works primarily by providing funding to companies to incentivise emission reduction activities. The government has spent A$1.7 billion on 143 million tonnes of emissions, at an average cost of A$12 a tonne.
Many of the companies interviewed for our research said Direct Action was not as effective as a carbon tax in driving companies to act urgently and manage emissions. The carbon tax gave companies incentives to act because it increased utilities prices, adding financial burden for some companies, in addition to these companies being liable under the tax.
One manager said:

"The scheme [carbon tax] now obviously having a cost associated with those emissions, it was a case of trying to understand where the costs were and essentially how we capture that information and how we track it."

The existing National Greenhouse Energy Reporting Act 2007 (which requires high emitters to report emissions) does not provide the same incentives because it's only a compliance measure with no direct financial burden.
Our research found the carbon tax created not only financial pressure but also a reputation threat for high emitting companies.
When the carbon tax was repealed, the focus on carbon emissions in these companies shifted. In some cases this showed up in the form of changes to staff hiring, away from environmental or technical specialists and towards legal staff. One manager explained it as:

"Even though we may not have the technical background in some respects, I think there's a lot of interest in the legal profession into climate issues, you know, the social issues."

This shift in focus was partly due to a lack of top management attention to the issue and partly because the financial justification for having dedicated personnel to tackle emissions decreased.
Some companies postponed or abandoned energy management projects after the repeal of the carbon tax. For example, one manager observed that his company had postponed A$1.5 billion worth of long term renewable investment projects due to the carbon tax repeal and the political uncertainty around the Renewable Energy Target.
Another factor is the lower use of techniques such as provision of incentives and setting targets for emissions management compared with the period of the carbon tax. One manager stated his company was no longer investing in target setting as there was no financial return for doing so.
Almost all interviewees in our research agreed that the carbon tax had been an effective mechanism when it was in place. Certain companies have a clear expectation a carbon price will re-emerge. They are proactively monitoring this issue. One manager described it as:

"We shadow in a carbon price across our portfolio of assets, determine what the potential impact is for [company name] and how we would manage that. We've continued to invest in carbon reduction…The business now looks at it as a cost-of-doing business opportunity."

Overall, the research provided mixed evidence about achieving Australia's commitment, made at the Paris climate change summit, to reduce emissions to 26-28% on 2005 levels by 2030. Some companies are acting as though the carbon tax never left us, while for others carbon emission management is no longer a strategic issue.
The financial pressure exerted from the carbon tax was a strong motivation for all sample companies to take urgent action on emissions management. So the challenge for the current government is whether Australia's current policy incentives for corporate constraint of carbon are strong enough to deliver.

Links

• Carbon tax axed: how it affects you, Australia and our emissions
• Carbon pricing is still the best way to cut emissions, if we get it righ
• Australia is losing ground as the climate policy race gains pac
• Despite its imminent demise, the carbon price has cut emissions

Global Warming Exposes Fossils In Greenland From Time Earth Was Like Mars

Japan Times - Reuters

Allen Nutman of the University of Woollongong and Vickie Bennet of the Australian National University hold a specimen of 3.7 billion-year-old fossils found in Greenland in Canberra Aug. 23. | YURI AMELIN/AUSTRALIAN NATIONAL UNIVERSITY / HANDOUT VIA REUTERS

The earliest fossil evidence of life on Earth has been found in rocks 3.7 billion years old in Greenland, raising chances of life on Mars aeons ago when both planets were similarly desolate, scientists said on Wednesday.
The experts found tiny humps, between 1 and 4 cm (0.4 and 1.6 inches) tall, in rocks at Isua in southwest Greenland that they said were fossilised groups of microbes similar to ones now found in seas from Bermuda to Australia.
If confirmed as fossilised communities of bacteria known as stromatolites — rather than a freak natural formation — the lumps would predate fossils found in Australia as the earliest evidence of life on Earth by 220 million years.
“This indicates the Earth was no longer some sort of hell 3.7 billion years ago,” lead author Allen Nutman, of the University of Wollongong, told Reuters of the findings that were published in the journal Nature.
“It was a place where life could flourish.”

This photo provided by Allen Nutman shows a rock with stromatolites, tiny layered structures from 3.7 billion years ago that are remnants from a community of microbes that used to be live. Scientists have found what they think is the oldest fossil on Earth, a remnant of life from 3.7 billion years ago when Earth's skies were orange and its oceans green. In a newly melted part of Greenland, Australian scientists found the leftover structure from a community of microbes that lived on an ancient seafloor, according to a study Wednesday in the journal Nature. | ALLEN NUTMAN / UNIVERSITY OF WOLLONGONG VIA AP

Earth formed about 4.6 billion years ago and the relative sophistication of stromatolites indicated that life had evolved quickly after a bombardment by asteroids ended about 4 billion years ago.
“Stromatolites contain billions of bacteria … they’re making the equivalent of apartment complexes,” said Martin Van Kranendonk, a co-author at the University of New South Wales who identified the previously oldest fossils, dating from 3.48 billion years ago.
At the time stromatolites started growing in gooey masses on a forgotten seabed, the Earth was probably similar to Mars with liquid water at the surface, orbiting a sun that was 30 percent dimmer than today, the scientists said.
Those parallels could be a new spur to study whether Mars once had life, the authors said.
“Suddenly, Mars may look even more promising than before as a potential abode for past life,” Abigail Allwood, of the California Institute of Technology, wrote in a commentary in Nature.
The Greenland find was made after a retreat of snow and ice exposed long-hidden rocks. Greenland’s government hopes that a thaw linked to global warming will have positive spinoffs, such as exposing more minerals.
Nutman said the main controversy was likely to be that the fossils were in metamorphic rocks, reckoned to have formed under huge stress with temperatures up to 550 degrees Celsius (1,022°F) — usually too high to preserve any trace of life.
Still, Van Kranendonk told Reuters that dried-out biological material could sometimes survive such a baking, adding he was “absolutely convinced” by the Greenland fossils.

Links

• New find might be oldest evidence of life on Earth
• Hints of oldest fossil life found in Greenland rocks
• Australian researchers discover oldest evidence of life on Earth
• 3.7-Billion-Year-Old Rock May Hold Earth's Oldest Fossils

Australia Worst Among G20 When It Comes To Action On Climate Change, Report Finds

The Guardian - Michael Slezak

Australia the only country to receive a rating of 'very poor' in a majority of categories in Climate Transparency scorecard

Australia was rated by Climate Transparency as being the worst country for action to combat climate change before the G20 summit in China. Photograph: Steve Parsons/PA

Australia is the worst country among the G20 when it comes to action on climate change, according to a comprehensive assessment before the G20 summit in China.
Under China's leadership, this weekend's G20 in the eastern city of Hangzhou has had a strong focus on climate-related issues.
By analysing the policies and actions of each of the 20 countries, which together produce 75% of the world's greenhouse gas emissions, Climate Transparency produced a report, scorecard and series of country profiles detailing their findings, revealing Australia was not pulling its weight.
On the scorecard, Australia was the only country to receive a rating of "very poor" in a majority of categories.
Australia was given the worst possible rating of "very poor" for its performance on emissions trends, carbon intensity, share of renewables in its energy supply and overall climate policy.
It was rated as "poor" in every other category: for its energy intensity, share of coal in energy supply and electricity emissions intensity.
Alvaro Umaña, co-chair of Climate Transparency and a former Costa Rican environment minister, said: "The G20 has proven that it can be nimble and take action on economic issues, so we are looking to these countries to do the same for the climate."
Along with half the other G20 nations, Australia's 2030 emissions reduction targets committed to at Paris – making up Australia's intended nationally determined contribution – were given the worst possible rating of "inadequate".
However, none of the 20 nations' commitments were labelled as "sufficient" or "role model", with the remaining 10 scored as "medium".
The report notes that if every country emulated Australia's level of ambition, global warming would likely exceed 4C.
It also said that Australia's currently implemented policy measures were not set to achieve even those inadequate targets and instead would rise to about 27% above 2005 levels by 2030, rather than the targeted 26 to 28% below 2005 levels.
The report comes one day after Australia's Climate Change Authority produced its long-awaited "special review", recommending that the country should institute two emissions trading schemes.
The review also highlighted that Australia's current policies were not able to achieve the existing inadequate targets. But the report was heavily criticised by commentators – and also by two of the authority's members – for not making recommendations about how the country can meet international obligations to do its part in keeping global warming "well below" 2C.
Australia's support for financing the transition to renewable energy was rated as "medium" by Climate Transparency, noting there had been "prolonged policy uncertainty resulting from volatile political support for substantive climate change policy".
Those findings are expected to be underlined in another report being released on Thursday by WWF France and WWF China arguing that a global energy transition is already under way and the G20 countries need to simply accelerate action towards that goal. WWF Australia will say the report serves as a wakeup call for Australian policy makers.
Last week international investors controlling $13tn worth of funds urged the G20 to accelerate investment in clean energy, saying countries that ratified the Paris agreement early would benefit by attracting investment in low-carbon technology.
Those calls were particularly timely, coming as the the Australian parliament considers the effective abolition of the Australian Renewable Energy Agency, and one day after Guardian Australia revealed that new uncertainty had already caused at least two renewable energy projects to be suspended.

Links

• NASA: Earth is warming at a pace 'unprecedented in 1,000 years'
• Investors controlling $13tn call on G20 leaders to ratify Paris climate agreement
• Australia needs two emissions trading schemes, Climate Change Authority says
• Climate Change Authority splits over ETS report commissioned by Coalition
• Climate change: poll finds support for strong action at highest level since 2008
• Tony Abbott rules out more contributions from Australia to Green Climate Fund
• G20 climate change statement's evolution reveals backroom battle
• David Cameron urges Tony Abbott to do more on climate change
• G20: Obama puts climate change in spotlight as Australian agenda sidelined
• G20: Obama to pledge up to $3bn to help poor countries on climate change

The Climate Change Authority’s Gamble On Political Pragmatism

The Conversation - Frank Jotzo

The suggested new scheme aims to cut emissions from the electricity sector while sidestepping the political poison of increased power prices. AAP Image/Julian Smith

The Climate Change Authority's latest report outlining a recommended climate policy "toolkit" is a reflection of what is seen by many as politically feasible in Australia now. But it is piecemeal and lacks a vision for the longer-term policy framework needed to get Australia on track to a low-carbon economy.
After years of political fighting over carbon pricing, a conventional emissions trading scheme - the instrument of choice in many other countries - is widely seen as politically impossible in Australia. And both major parties are scared of any policy that is seen as raising electricity prices.
The CCA seems to take this political situation as a starting point, and makes a series of judgements about specific policy options. The intent clearly is to help policy progress in the medium term. But it risks locking in a policy suite that will not deliver much, or may cost too much.
If the CCA's recommendations are misconstrued as being ambitious, we could end up with policy that falls far short of these recommendations. And if its political judgements are off the mark, the CCA's specific recommendations could become an obstacle for the government's 2017 policy review.

Electricity intensity scheme
The CCA's "toolkit" suggests a mix of different policy instruments for different sectors of the economy, with quite specific suggestions in some areas and less detail in others.
For the power sector, the recommendation is for an "emissions intensity scheme", designed to create a carbon price signal in electricity production while limiting the effect on power prices. This is its main selling-point: it would result in less price uplift than a standard emissions trading scheme or carbon tax.
The flipside is that this does not encourage households and businesses to save energy, and so without other interventions it will be less efficient.
Another serious downside is that the government earns no money from the scheme because all permits are given out for free to industry. So there is no source of income to cut other taxes and help low-income households, as there was under the Gillard government's carbon price.
Such a power sector scheme is in line with what Labor took to July's election, so there may be hope for bipartisanship. It is a scheme you choose if you are afraid of political backlash over power prices, and if you are prepared to forego fiscal revenue.
Its effectiveness will depend on its credibility and ambition. The CCA envisages it as a stand-alone scheme without trading links (except possibly sales of "white certificates" from energy efficiency schemes). The CCA recommends baselines going linearly to zero before 2050, which could drive significant change in power generation. But whatever trajectory is mandated is certain to be economically less efficient than a standard emissions trading scheme with flexibility between sectors and over time.

Renewables, innovation and coal exit
The report notes that uncertainty over the future of an emissions intensity scheme "could affect investor confidence" and cause cost increases and delays, and that this is an argument for continued support for renewable energy deployment policies. However it recommends that the Renewable Energy Target not be continued beyond the present commitment to new investments until 2020 and support for existing plants until 2030.
On innovation for low-emissions technologies, the CCA calls for government support both through debt and equity funding, as well as public funding for research, development and demonstration. The former is currently done through the Clean Energy Finance Corporation, the latter by the Australian Renewable Energy Agency (ARENA). This recommendation runs counter the government's present plan – possibly supported by Labor – to withdraw A$1.3 billion in funding from ARENA.
Mechanisms to facilitate closure of high emissions power stations have received much support in the debate over the last year. The idea of a regulated closure scheme is rejected by the CCA, on the basis of modelling of a version of the proposal that would not allow any flexibility. The proposal for a market-based scheme to help shut down the highest-emitting power stations is mentioned only in the CCA's accompanying electricity report, where it is dismissed without analysis.

Emissions Reduction Fund and more complexity
Outside the power sector the CCA proposes evolving the existing Emissions Reduction Fund (ERF), a patchy scheme of subsidies paid to businesses for projects presumed to cut emissions.
It suggests that industries that burn fossil fuels or otherwise release greenhouse gases should be covered by an ERF with "enhanced safeguards". Companies that exceed a specific benchmark emissions intensity (falling over time) would have to buy emissions credits, while companies can earn credits for projects that meet the ERF's criteria. But companies that remain below the benchmark and do not engage in projects would not be involved at all and have no incentive to cut emissions.
The government would continue to buy credits from land sector projects. This means continued payments of taxpayer dollars to businesses, and continued doubts over whether the emissions reductions are real.
For energy efficiency, yet another approach is recommended, by harmonising existing state-based "white certificate" schemes that award credits for energy savings, and then feeding those credits back into the electricity supply scheme. Selective efficiency standards are also supported, along with emissions standards for cars and perhaps trucks.

Setting our sights higher
The CCA's report focuses heavily on Australia's existing emissions target, of a 26-28% reduction on 2005 levels by 2030. But in reality, Australia will have to do more as part of the Paris Agreement ratcheting process. The existing target is too weak to meet the Paris deal's global warming limit of below 2℃. The goal must be a net zero-emission economy around mid-century.
The more hodge-podge our climate policy regime, the weaker the signals to promote investment in modern, clean technologies. The incrementalism of the CCA's proposed approach contrasts starkly with the need to drive a fundamental transformation to a low-carbon economy, and is at odds with the Authority's own recommended carbon budget.
An apt comparison is with Australia's economic reforms of the 1980s. The road to success was fundamental change such as floating the dollar and dismantling tariffs, not timid tinkering. Today, neither side of politics shows such vision or determination. So it is all the more important that independent bodies raise everyone's sights to the larger possibilities.

The CCA's judgements
The "policy toolkit" report is not supported by two of the CCA's board members, Clive Hamilton and David Karoly, who have made it known that they will issue a dissenting minority report.
Under its previous board the CCA provided strongly principled advice for ambitious climate policy, such as its recommendations for emissions targets and a carbon budget. A report on climate policy instruments that put principle over political circumstance would almost inevitably recommend a comprehensive carbon pricing scheme as its core.
The hope for this week's report is that it might help achieve some convergence on climate policy, albeit at a lower denominator, and encourage the government to embark on reform.
The initial signals from the government are not positive. Environment and Energy Minister Josh Frydenberg was quick to distance the government from the report. He said that there are no plans to change baselines for the "safeguards", which would be required for the main aspects of the CCA plan.
Meanwhile the CCA has ruled out a number of options, making it harder for the government to pick up these options if it wanted to.
The pragmatic gamble could backfire.

Links

• One day we won't need a Renewable Energy Target, because we'll have good climate policy
• Explainer: Australia's carbon price mechanism in six dot points
• Climate Change Authority suggests emissions trading but no new climate targets
• Climate Change Authority calls for delayed renewables deadline