10
Apr
2016

Out of the climate policy ashes, a new plan both sides of politics can follow

by Tony Wood


After a decade of toxic political debates and a policy bonfire, there is an opportunity to forge a stable and compelling policy on climate change that could be supported by both sides of politics, according to a new Grattan Institute report.

Climate phoenix: a sustainable Australian climate policy shows that with both major parties committed to reducing emissions, a bipartisan approach is within reach. The report sets out a realistic policy roadmap that builds on the Coalition’s current climate policies while maintaining direction towards the long-term target. Its recommendations are designed to ensure both environmental credibility and the predictability essential to attract investment in clean technology.

‘An economy-wide carbon price remains the ideal climate policy. But pragmatism and urgency demand a practical, next-best approach,’ says Grattan Institute Energy Program Director Tony Wood.

‘Our assessment of Australia’s climate change options against a range of criteria indicates that none is perfect and that trade-offs are needed to ensure that both major parties are heading towards the commonly agreed objective.’

The roadmap allows a Coalition government to modify its Safeguard Mechanism so that it no longer merely prevents emissions from going up, but drives them down in line with agreed targets – and via steps that are consistent with its political constraints. Equally, it shows how a future Labor government could take the Coalition’s policy framework and move to its preferred emissions trading model.

Government should take three steps. First, it should tighten the emissions limits (‘baselines’) of the Safeguard Mechanism in line with Australia’s agreed targets. This forces our largest emitters to make significant reductions in their emissions.

Next, it should auction tradeable permits that allow businesses to emit above the baselines, but within the target trajectory to 2030. This step ensures that reductions are achieved at lowest possible cost.

The third step is to expand the Safeguard Mechanism to cover more emitters while reducing baselines to zero. Businesses covered by the scheme will then have to hold permits for all their emissions. This final step creates the structure to deliver tougher future targets at low cost.

‘With bipartisan agreement that Australia must move to a low-emissions economy, all we need now is a clear and workable plan for how to get there,’ Mr Wood says. ‘This report aims to provide it.’

Read the report

For further enquiries: Tony Wood, Energy Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au