Emissions Reduction Fund the great survivor of Australia's climate policy
It is back to the future for the Coalition's climate change policies.
The $2.55 billion Emissions Reduction Fund – created by former environment minister Greg Hunt as part of the Abbott government's Direct Action policy in 2015 – was meant to be temporary stop-gap for the Coalition until it made it through the 2016 federal election and then could put in a more meaningful framework to help Australia reach its international climate targets.
Rather than a more direct mechanism to cut carbon pollution in key sectors such as the electricity industry, the fund was inelegant solution, effectively paying farmers or industry for delivering carbon abatement.
This could be as basic as paying a farmer to grow more trees on their property, Aboriginal groups to burn savannah land or a company to put more energy-efficient light bulbs in their premises. Another project involved collecting and combusting methane from manure in a piggery in Queensland.
Before Malcolm Turnbull's leadership coup against Abbott – and the ambitious Josh Frydenberg was handed the poisoned chalice of energy and environment portfolios – Hunt would privately bemoan to industry and editors that he had not received enough credit for pulling together such a scheme under the nose of Abbott, the climate sceptic.
With the creation of the Turnbull government's National Energy Guarantee – which was to replace the rejected Clean Energy Target proposed by the Finkel Review – many in the industry thought the ERF would slowly slip into irrelevance as its funds dwindled.
The ERF's seventh auction in June delivered $90 million in contract for 6.7 million tonnes of abatement at an average price of $13.52, 29 of which were for growing native forests or plantations, otherwise known as carbon farming.
Total abatement contracted under the ERF is now 192 million tonnes over 461 contracts, with an average price per tonne across all auctions of $11.97.
There is just over $250 million left in the kitty after the June Auction, as the ERF was not topped up over successive budgets. The accompanying safeguard mechanism scheme – which is supposed to penalise large emitters – has also failed to be tightened to force big polluters to change their behaviour.
But with the implosion of the NEG – which many had hoped would be the bipartisan climate policy to end a decade of uncertainty – the ERF has become the Steven Bradbury of climate policy – the last competitor standing in a wasteland of politicians and policies.
New Environment Minister Melissa Price on Monday backed the ERF to help meet Australia's target to reduce carbon emissions by 26 per cent by 2030 and would be pushing for a top-up of the fund in next May's budget.
Despite hopes by the Clean Energy Regulator that big industry would get involved in the ERF, this hasn't happened as carbon farming continues to dominate the contracts written. Others bristle at using taxpayers' money to reduce carbon emissions.
Melbourne-based carbon consultancy RepuTex said there had been a steady drop-off in abatements purchased through the Australian carbon credit units from 51 million in the third auction, down to 34 million, then 11 million, then 7.95 million and then 6 million in the seventh auction in June.
"The poor auction results reflect negative sentiment around the ERF, with the administrative complexity of the scheme and low price environment creating a barrier to participation," says RepuTex executive director Hugh Grossman.
"At this point the ERF is just treading water – any funding top-up is unlikely to trigger any major new appetite."
Other firms such as Climate Friendly – which have helped facilitate carbon farming contracts across Australia – believe the ERF has only just scratched the surface in what it can do and more innovative schemes were coming through.
In the meantime, Australia's carbon emissions continue to rise.
All eyes are now on the ALP and their policies in the lead-up next election. There are hopes Labor will resurrect the NEG, or a policy very similar, to help target a coordinated attempt to bring down carbon emissions in the electricity sector – the biggest polluters.
The ERF may continue to exist to help foster carbon abatement in the farming and agricultural sector, but it won't be the centrepiece of Australia's climate policy.
Thursday, September 20, 2018
Subscribe to weekly updates
- Queensland’s state-owned power firms’ profit bonanza
- Climate pollution still rising, and not consistent with Paris target
- Alinta Energy CEO sees $170m coal power upgrade as a safe bet
- LNG exporters agree to supply more domestic gas in a crunch
- AGL steps up drive to develop Australia’s first LNG import facility
- Emissions Reduction Fund the great survivor of Australia's climate policy
- S&P's sobering warning on energy policy vacuum
- Vintage Energy aims to 'make a difference' in east coast gas supply
- Direct Action back on the agenda-Graham Lloyd
- Origin Energy to cut power bills as it ‘turns the corner’ on prices