Power sector to get special treatment under Direct Action

Power sector to get special treatment under Direct Action

The Abbott government has proposed a major concession to the heavy-polluting electricity industry in its Direct Action climate change policy by exempting individual companies from caps on emissions.

The government is beginning public consultation for the so-called safeguards mechanism for its $2.55 billion Emissions Reduction Fund, which will pay major polluters to reduce their pollution.

Hazelwood: Australia's most emissions-intensive major power plant.

Hazelwood: Australia's most emissions-intensive major power plant. Credit:Reuters

With the first auctions for the fund only three weeks away, companies are yet to see what penalties they would face if they increased emissions.

The office of Environment Minister Greg Hunt said on Thursday the "safeguard mechanism will ensure that abatement achieved under the emissions reduction fund is not offset by rises in emissions elsewhere in the economy".

<i>Illustration: Cathy Wilcox.</i>

Illustration: Cathy Wilcox.

But the Greens and climate groups said that the measures proposed would not ensure Australia cut greenhouse gases and met emissions reduction targets for 2020 and beyond.

"It's a climate policy you have when you don't want to reduce emissions," Climate Institute deputy chief executive Erwin Jackson said.

"In theory, it starts to create absolute limits on emissions for polluting facilities…but they're creating a whole bunch of wriggle room."

The consultation paper released on Thursday suggests the government plans to be lenient towards the 140 largest polluters in the economy expected to exceed 100,000 tonnes a year of carbon emissions, said Grant Anderson, an emissions policy specialist with law firm, Allens.

"This mechanism isn't going to do much to control Australia's emissions," Mr Anderson said.

For one thing, baselines for pollution will be set at the highest point over the previous five years, covering the period between 2009-2010 and 2013-14. The government also indicates that it expects to generate no revenue from the scheme, offering firms that exceed historical emission levels various paths to make good on excess pollution.

But the most favourable treatment appears to be reserved for the electricity sector, the largest single emitting industry in Australia, accounting for about one third of emissions.

Unlike other sectors, the government said it was considering treating the industry as a whole, giving it a special status because of its "vital role" in the economy and the fact that low-cost electricity was important for the competitiveness of other industries, the consultation paper said.

Mr Anderson said the concession may be "a case of special pleading", adding that the report itself highlighted the sector's collective behaviour. "The electricity sector has identified the grid-connected generators behave more like a single entity that coordinates production," the paper said.

The paper also seemed to suggest low-emitting generators may pull back from supplying power if they looked like exceeding their baseline, leading to rising emissions if more pollution-intensive generators stepped in to fill the void.

Mr Anderson said such an outcome is unlikely: "If the baseline is set generously, which the government has said, no one is going to exceed their baseline on a normal business scenario."

Mr Hunt defended the proposal for the electricity sector, with a spokesman saying it was the measure supported by the industry.

The safeguards won't take effect until July 1, 2016, more than a year after the first auctions are held.

Greens leader Christine Milne said the policy would not raise revenue because the baselines were being set so high that no company would breach them.

"It's just a joke of a policy which will do nothing to reduce emissions and nothing to drive energy efficiency or more innovative practices," she said.

"It's just a business as usual document."

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