Transcript Carbon Reduction Policies

A Layman’s View of Carbon Reduction Policies
A Layman’s View of
Carbon Reduction Policies
A Layman’s View of Carbon Reduction Policies
Overview
• History of climate change policy debate
• Projected impacts
• Australian Government’s response
• Opposition proposal
• Implications for agricultural sector
A Layman’s View of Carbon Reduction Policies
The Development of Australia’s
Climate Change Policy
A Layman’s View of Carbon Reduction Policies
Intergovernmental Panel
on Climate Change
• The IPCC is acknowledged by Governments
around the world, including the Australian
Government, as the leading authority on
climate change science
A Layman’s View of Carbon Reduction Policies
Intergovernmental Panel
on Climate Change
It states:
• Warming of the climate system is unequivocal
• Humans are very likely to be causing most of the
warming that has been experienced since 1950
• It is very likely that changes in the global climate
system will continue well into the future, and
that they will be larger than those seen in the
recent past
A Layman’s View of Carbon Reduction Policies
Since the 1950’s our climate has
changed
• 0.9°C warming since 1950 • More rain in NW Australia
• More heat waves
• Less rain in S & E Australia
• Fewer frosts
• Sea level rise 70mm
Source: BOM
A Layman’s View of Carbon Reduction Policies
Local changes – NSW
By 2030 Canberra’s climate
could be similar to Dubbo:
• Warming of 0.6 to 1°C
• 2 to 5% decrease in rainfall
This is a moderate climate
scenario.
Source: CSIRO
A Layman’s View of Carbon Reduction Policies
Potential impacts on agriculture
• More heatwaves likely
• Fewer cold and frosty days
• More intense and sporadic rainfall
• More frequent or intense droughts
• Exceptional circumstances declarations
likely twice as often and over twice the
area by mid century
A Layman’s View of Carbon Reduction Policies
Australia’s policy response
• Both the Australian Government and Opposition parties have
agreed to reduce 2000 emissions by at least 5% by 2020 and
possibly by up to 25% depending on what the rest of the world does
A Layman’s View of Carbon Reduction Policies
Government’s key policy response
• An Emissions Trading Scheme (ETS) or Carbon
Pollutions Reduction Scheme (CPRS)
• Market based solution
• Sets targets (cap) and issues permits (trade)
• Makes big polluters pay (ultimately consumer funded)
• Uses money collected from big polluters to
compensate households
A Layman’s View of Carbon Reduction Policies
Cap and trade
• An ETS places a price on carbon emissions
• CPRS is a ‘cap and trade’ system
– It works by putting a ‘cap’ – or annual limit on
emissions
– Permits or Australian emissions units (AEUs) will be
allocated or auctioned up to the total annual cap
– Over time the scheme cap will reduce in line with
Australia’s international obligations
– Long-term certainty for investment
A Layman’s View of Carbon Reduction Policies
Government’s key policy response
is CPRS How does it work?
A Layman’s View of Carbon Reduction Policies
Cap and trade
• The second aspect of the scheme, is that
businesses will be able to ‘trade’ permits
• Businesses have
a choice:
– reduce emissions
– buy more permits
• Market draws
out the least
cost abatement
A Layman’s View of Carbon Reduction Policies
Why an ETS?
• Climate change is a global problem
– Guaranteed emission reductions
– International linkages
– Least cost abatement, at least in theory
A Layman’s View of Carbon Reduction Policies
Why not an ETS?
• If not introduced across the globe
– Make Australian production relatively more
expensive
– Shift production and pollution to countries that do not
price carbon
– Reduces our employment and shrinks our economy
without addressing global warming
– Political reality is that an ETS is unlikely to be
consistent across industries nor across national
borders
A Layman’s View of Carbon Reduction Policies
Opposition’s key policy response
• Direct action to reduce emissions – command
and control
• Driven by regulation and subsidies
• Offers a quick fix and arguably easier to adjust
to economic changes
• Works for small reductions but not able to be
scaled up
• Government to try and pick winners
• Public purse (taxpayer) funded
• Emissions Reduction Fund is the key vehicle
used
A Layman’s View of Carbon Reduction Policies
Emissions Reduction Fund
• Funded by the Government
• Invest annual average $1.2 billion in CO2
emission reduction activities
• Businesses that reduce emissions below their
baseline able to sell abatement to the
government
• Businesses that emit above baseline
penalised
• Small businesses able to opt-in
A Layman’s View of Carbon Reduction Policies
Agricultural emissions
• Agricultural emissions have been excluded
from CPRS indefinitely
– Therefore, farmers will be excluded from liabilities by
not having to buy permits
A Layman’s View of Carbon Reduction Policies
Agricultural offsets
• CPRS offsets will apply to agriculture
– Offsets are rewards for reductions in emissions from
sources not covered by CPRS such as agriculture
– Offsets are sold into the covered sector (high
emitters such as power stations) for use against
CPRS liabilities
– Therefore, farmers will be able to generate income
from reducing emissions, earning offsets and
selling them
A Layman’s View of Carbon Reduction Policies
What are offsets?
Source: DCC
A Layman’s View of Carbon Reduction Policies
Two types of offsets
• CPRS offsets
– Uncovered sources that are counted towards
Australia’s international commitments, such as
agricultural emissions including livestock, fertiliser use
and burning of agricultural residues
A Layman’s View of Carbon Reduction Policies
Two types of offsets
• Voluntary market offsets – not CPRS permits
– Uncovered sources not counted towards Australia’s
international commitments, including through soil
carbon and biochar
– Transition to CPRS once abatement internationally
recognised
• International rules satisfied and CPRS
requirements met
A Layman’s View of Carbon Reduction Policies
Agricultural opportunities under
Opposition proposal
• Like CPRS, no direct costs or liabilities
• Potential income through:
– replenishment of soil carbons
– tree planting and forestry activities
A Layman’s View of Carbon Reduction Policies
In summary
CPRS
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Market based solution
Emissions certainty
Provides target flexibility
Scalable
Market draws out least
cost abatement in theory
• International linkages
• Costs passed to
consumer
vs
Direct action
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Regulation and subsidies
No emissions certainty
Less flexible
Not scalable
Government to try and pick
winners
No international linkages
Taxpayer funded
A Layman’s View of Carbon Reduction Policies
Questions
?