Governments have a key role to play in mitigation of, and adaptation to, climate change, including:
- supporting scientific studies that are unlikely to be undertaken by the private sector (particularly relevant to the Australian Government)
- providing information to the private sector and the community to encourage and assist adaptation (relevant to all tiers of government, but of particular importance to state, territory and local governments)
- adopting policy settings that facilitate adaptation and a regulatory framework that supports, rather than distorts, effective market signals (a critical role for the Australian Government, but one that state and territory governments can significantly reinforce)
- employing policy mechanisms such as land-use planning, building codes and product standards to deal with situations where short-term market responses may act to restrict longer term adaptive action (primarily relevant to state and territory governments, but also to the Australian Government for setting minimum energy performance standards and the Building Code of Australia, and to local governments, which play an important role in on-ground implementation)
- fully factoring climate change into planning, resourcing and managing the provision of public goods and services such as public health and safety, emergency services, flood and coastal protection, water supply, drainage and sewerage services, protection of public lands, parks and reserves, fisheries and other natural resources (relevant to all three tiers of government, but especially to state, territory and local governments).
A key part of the Australian Government’s three-pillars strategy has been the introduction of a price on carbon to drive reductions in emissions via least-cost means. An initial attempt in 2008–10 to do this by means of an emissions trading scheme (the Carbon Pollution Reduction Scheme) failed to gain bipartisan support in parliament and did not proceed.
In July 2011, the Australian Government released its new plan for the introduction of a price on carbon (titled Securing a Clean Energy Future). Although the plan has four components (a carbon price, renewable energy, energy efficiency and land-based action to sequester carbon), the critical element is a mechanism to put a price on carbon and thereby stimulate least-cost abatement measures.47
Unlike the earlier failed attempt to move directly to a carbon emissions trading scheme, the plan involves moving to a trading scheme via a three-year transitional period. During this period, starting from 1 July 2012, facilities directly emitting 25 000 tonnes or more of CO2-e per year (excluding transport fuel emissions) and large suppliers of natural gas will have to buy and surrender to the Australian Government a carbon permit for each tonne of GHG they emit. The government will issue as many permits as businesses need to cover their emissions. The starting price will be fixed at $23 per tonne, increasing by 2.5% per year in real terms. GHGs for which permits will have to be purchased are carbon dioxide, methane and nitrous oxide, and PFC emissions from the aluminium sector. Existing legislation relating to synthetic GHGs will be used to apply an equivalent tax on manufacturing and import of all the synthetic GHGs covered by the Kyoto Protocol—HFCs, PFCs and sulfur hexafluoride. In combination, this will cover around 60% of Australia’s emissions, including emissions from electricity generation, stationary energy, some business transport, nonlegacy waste, industrial processes and fugitive emissions. (Emissions from agriculture will not be covered.)
On 1 July 2015, the fixed price (or carbon tax) period will be replaced by an emissions trading scheme (ETS). Under the ETS, the government will set an annual carbon pollution cap that will determine the number of permits issued. Market forces will then act to influence the price of a permit at any time. However, for the first three years of the scheme, a ceiling and floor price will be in place to limit extreme price volatility. The ceiling will be set at $20 per tonne above the anticipated international price, rising by 5% per year in real terms. The floor price will start at $15 per tonne and increase by 4% per year in real terms. The role of the ceiling and floor price will be reviewed in the third year of operation of the ETS. From the outset of the ETS, businesses will be able to purchase international permits from credible carbon markets. Until 2020, businesses will be able use international permits to meet up to 50% of their required permits each year. (This restriction will be reviewed in 2016.)
Fifty per cent of the revenue from the carbon pricing mechanism will be used to assist households to deal with price impacts. The balance will be divided between supporting a range of industries directly or indirectly affected by the introduction of a carbon price (including energy-intensive, trade-exposed industries) and expanding existing funding for clean energy and energy efficiency programs.
The plan provides for a legislated independent expert body (the Climate Change Authority) to advise government on matters such as future pollution caps, indicative national emissions trajectories and long-term emissions budgets, and the progress made towards national reduction targets. Legislation will also establish a clean-energy regulator to administer the carbon pricing mechanism.
Although a carbon price will not apply to agriculture, the plan will continue the existing Carbon Farming Initiative to encourage and support farmers and land managers to reduce emissions and store carbon in soil and vegetation. Funding for such actions will be available through an ongoing Biodiversity Fund ($946 million over the first six years) and an ongoing Carbon Farming Futures program ($429 million over the first six years).
Under the plan, the existing Renewable Energy Target will be complemented by the establishment of a new statutory authority, the Australian Renewable Energy Agency, which will provide funding for projects through a range of competitive grants programs. The agency will consolidate existing funding of $3.2 billion over nine years to support innovation in renewable energy and will make additional funds available. In addition, a Clean Energy Finance Corporation will be established to invest in the commercialisation and deployment of renewable energy and in enabling technologies, energy efficiency and low-emissions technologies.
Emissions reduction targets for 2020, to which the Australian Government had already committed, have been maintained, and the long-term target (2050) has increased from 60% to 80% of 2000 levels (Box 3.4). To meet the government’s minimum emissions reduction target (a 5% reduction from 2000 levels by 2020) in the face of projected continuing growth in emissions will require abatement of at least 159 MtCO2-e (23%) by 2020.
At the time of writing (July 2011), the Australian Government proposes to introduce the necessary supporting legislation to parliament before the end of the year.
