Much more work needed on Government emissions reduction plan



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The Federal Government’s Direct Action Plan and Emissions Reduction Fund do not make up “a comprehensive climate change policy” consistent with holding global warming to two degrees, a Grattan Institute paper has warned.

A submission responding to the Emissions Reduction Fund Green Paper finds that the Green Paper lacks vital detail and “does not provide confidence” that key elements of the Government’s design principles for the Fund will be met.

The submission, published today, argues that the Fund “can achieve effective and cost-efficient reductions” towards meeting Australia’s unconditional emissions target of 5 per cent below 2000 levels by 2020.

But “it will require extension and/or enhancement” to go beyond that target or past 2020.
Grattan’s submission also argues that the Government’s “firm and capped” commitment of $2.55 billion over four years may constrain the effectiveness of the Fund.

It warns that the Green Paper does not provide confidence that the three guiding design principles of the Fund – that reductions should be lowest cost, they should be genuine and administration should be streamlined – will be met.

The submissions sees strengths and weaknesses in the Government’s plan to use a competitive auction system to fund the lowest-cost emissions reduction activities.

While auction schemes generally reduce the cost of low-emission energy technology projects, they have a mixed record, and can induce developers to bid low in order to win the auction, then fail to deliver the project.

The government’s proposed Emissions Reduction Fund is intended to create a form of carbon price and work in parallel with the Renewable Energy Target to cut emissions effectively and efficiently.

Grattan Institute’s submission argues that “only an economy-wide carbon price can achieve the scale and speed of emissions reductions required for Australia to meet its 2020 commitments without excessive cost to the economy or taxpayer”. It remains unclear whether the Emissions Reduction Fund will achieve this goal.

The deadline for submissions to the Green Paper process closed on Friday and the Government will release a White Paper on the Emissions Reduction Fund in March.

View the submission

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