Turnbull government reverses course on climate change policy

The Turnbull government will reverse course and allow businesses to buy overseas carbon credits to meet Australia’s emissions reduction targets, a policy long questioned by climate experts and once labelled “dodgy” by Tony Abbott.
Nanjing Night Net

Backed by industry and some climate change observers, the move allows big businesses to purchase emissions reductions in other countries – most likely at lower prices – to offset their own carbon production.

Environment and Energy Minister Josh Frydenberg on Tuesday gave “in-principle” support to joining 60 other nations – including Canada, New Zealand, Japan and South Korea – in an international trading market once rules are finalised after 2020.

“Our thinking is to find the lowest-cost abatement,” Mr Frydenberg said on Tuesday. “When it comes to helping the environment, it doesn’t matter if you’ve reduced a tonne of CO2 here in Australia or in another country.”

That differed from the view given by Mr Abbott in 2011, while opposition leader, that overseas permits involved money “going offshore into dodgy carbon farms in Equatorial Guinea and Kazakhstan”.

Mr Abbott’s views were backed by the Greens on Tuesday, whose climate spokesman Adam Bandt accused the government of “outsourcing” climate policy by allowing firms to buy “dodgy permits from pig farms in China”.

Many climate change campaigners have expressed concern about Australia shirking its domestic obligations in favour of cheaper overseas permits that might be fraudulent or involve double-counting of reductions.

And in a report last week, the independent Climate Change Authority recommended against Australian companies using international credits to meet domestic obligations, arguing it would slow down our transition to a lower-carbon economy. It cited a submission from energy giant AGL stating such a scheme would “effectively defer Australia’s own decarbonisation”.

Kate Mackenzie, a director at the non-profit Climate KIC and research fellow at the Centre for Policy Development, said buying foreign credits was a good idea but should not substitute reducing electricity emissions.

“If it’s seen as being an easier or a cheaper way of meeting our emissions reduction targets, that poses the risk that the really necessary policy work won’t be done,” she told Fairfax Media.

The government will also wait until the market rules of the Paris Agreement are finalised to decide whether other countries can purchase Australia’s mostly land-based carbon credits, fearing it could drive up the cost of domestic abatement. There is no guarantee international negotiations will finish by 2020, however, with talks mired in disagreement about how to link various schemes.

International permits will become particularly important for 140 large Australian businesses with facilities that emit more than 100,000 tonnes of carbon dioxide a year. Under the “safeguard mechanism”, these operations will need to keep their emissions below baseline levels or offset them using domestic and, now, international credits.

As part of the climate review released Tuesday, the government flagged those baselines could “increase with production, supporting business growth”, and allowing companies to pollute more as long as they produce more.

Tony Wood, energy program director at the Grattan Institute, said the decision to allow international credits “makes an enormous amount of sense” as a way to put a “safety valve” on the price of carbon abatement, at least temporarily. At present, international permits are significantly cheaper than the cost of abatement domestically under the Emissions Reduction Fund, although overseas credits will likely become more expensive as global demand rises.

Tuesday’s announcement was foreshadowed after the 2015 Paris climate conference, when then environment minister Greg Hunt said international permits would “probably be allowed. Mr Frydenberg, who took over the role after last year’s election, strongly suggested the change would be made when he commissioned the climate change review a year ago.

Labor’s environment spokesman Mark Butler dismissed the review as containing “no significant change” to Mr Abbott’s climate change policies.

Industry groups including the Business Council of Australia welcomed the change-of-heart as a “practical” measure giving businesses flexibility. Peter Castellas, head of the Carbon Market Institute, said it was an “encouraging signal” but there would need to be more input from industry on the detail.

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