The Rudd government's carbon cap and trading scheme is now so badly distorted by narrow political calculations that the Coalition leader Malcolm Turnbull is well placed to offer a better alternative. Turnbull has already outlined proposals that could deliver bigger cuts to greenhouse gases than the government, yet keep costs relatively low. But he can't do this unless he makes tougher choices than Kevin Rudd did in his Carbon Pollution Reduction Scheme (CPRS).
Before the election, Rudd described tackling global warming as the "great moral challenge" confronting the nation. When he released the CPRS design details last December, however, he boasted that he had got the political balance right by annoying the Greens who wanted bigger cuts and Coalition members who allegedly want none. But the Greens and the Coalition are now cooperating on a potentially damaging Senate inquiry and many householders, farmers and corporate executives are disconcerted to discover that a design feature of the CPRS means that they are powerless to make a difference to Australia's overall emissions before 2020.
Although the CPRS will initially raise around $12 billion a year by putting a price on emissions, Rudd has negated much of the intended impact by giving all the money back as compensation to heavy polluters and households. Perversely, this compensation severely muffles the price "signal" meant to make the CPRS the least cost way of cutting emissions. Rudd even lacked the political courage to let the price of petrol to go up by cent to meet these goals.
The deployment of low emissions technologies is crucial to combating global warming, but not a cent of the $12 billion will be used for this purpose. In contrast, Rudd’s own climate change adviser Professor Ross Garnaut recommended that at least $3 billion of the annual CPRS revenue be spent on low emissions technologies.
The CPRS relies on government regulation to set a cap on the overall emissions of carbon dioxide and other greenhouse gases. Following a neo-liberal model now denounced by Rudd, the cap is supplemented by an artificial market for trading a synthetic financial product called a carbon pollution permit. The government will sell, or give away, enough permits to meet the cap for 2020 — expected to be set early next year at 5 percent below emissions in 2000.
The government promises not to issue fewer permits than needed to meet the 2020 cap. To do so would tighten the cap and the government wants to give business the certainty that this won’t happen. But this renders it futile for people to "do their bit" by cutting their carbon "footprint" — all their cuts will do is make it easier for the big polluters to keep polluting. Not surprisingly, the Climate Change minister Penny Wong struggled last week to reassure the public that the government still values individual efforts. No doubt it does, but for a less than noble reason — voluntary cuts made by conscientious citizens eases the pressure on the heavy polluters that the government has gone out of its way to placate with free permits.
In speech on January 24, Turnbull outlined how the Coalition could cut emissions by an additional 150 million tonnes by 2020 without incurring heavy costs. This is an ambitious target compared to the government's expected cut of 28 million tonnes below 2000 levels. But it seems feasible to at least do much better than this modest figure.
Turnbull's plan includes what he calls a "comprehensive bio-carbon strategy" to restore soil carbon by reversing over-grazing and excessive tillage, embedding CO2 in biochar (charcoal fertiliser), selective tree planting, and revegetation. He also wants to encourage energy efficiency in commercial buildings, and construct industrial scale power plants deploying low emissions technologies.
The shadow environment minster Greg Hunt says the 150 million tonnes of additional cuts in CO2 is a conservative estimate based on options outlined in reputable studies such as the Garnaut report. Turnbull also cites figures from the big metals company Alumina Limited, which has funded research into biochar in Western Australia. It estimates that biochar could sequester at least 100 million tonnes of CO2 emissions a year for less than $20 a tonne (A CPRS permit is expected start at $25 a tonne.)
One of biochar's political advantages is that its production process converts organic waste into renewable energy in addition to locking CO2 into a form of charcoal that can be used to improve soil fertility and help retain soil moisture and nitrogen. With food shortages of international concern, Turnbull sees his biochar policy as appealing to National Party voters who want to increase crop and pasture yields.
Hunt also argues that significant cuts to transport emissions can be achieved by requiring cars sold in Australia to meet better emissions standards. In Europe, emissions have to be below 120 grams of CO2/km by 2015 . Australia's voluntary target is 222 grams/km by 2010. Others suggest that higher registration fees on big emitters would help the switch to cleaner vehicles.
To achieve his objectives, Turnbull would have to redesign of the CPRS to provide offset credits for soil sequestration and improved building efficiency. He would have to incorporate these gains, and the efforts of households that "do their bit", in a tighter cap. He also has fund to his proposals. The government intends spending $6 billion in 2011-12 to compensate households and another $2 billion on fuel subsidies.
Given that households will have enjoyed tax cuts and pensions rises that more than cover the extra costs of the CPRS, Turnbull could divert at least $3 billion to something that makes a difference to emissions. Perhaps more funding could also be "borrowed" from later years when some of the government’s compensation is due to expire.
Another option would be for Turnbull to drop the CPRS and rely on a simple carbon levy (or tax) to raise the revenue needed to fund his proposals until an effective international levy or emissions trading scheme is established. A relatively low priced levy, perhaps starting at $10-12 a tonne on emissions, should raise enough revenue. With costs more than halved, there would be little need for compensation.
A levy does not rule out having a target that can be met from a range of abatement measures, including the purchase of carbon offsets from overseas — as allowed in the CPRS. A levy has the added advantage that new technology and energy saving measures can be allowed to cut emissions well below the government's 2020 cap. Because a levy does not require a floor below which emissions can’t fall, it would no longer be pointless for citizens to try "do their bit" on climate change.