Climate phoenix: a sustainable Australian climate policy - Grattan Institute

Climate phoenix: a sustainable Australian climate policy

by Tony Wood, David Blowers

10.04.2016 report

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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.

A bipartisan approach to reducing greenhouse gas emissions is within reach. This policy roadmap 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.

Grattan’s assessment of Australia’s climate change options against a range of criteria indicates that none is perfect. Trade-offs are needed for a policy that both major parties can live with, and that will achieve 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, which should be taken within a decade, creates the structure to deliver tougher future targets at low cost.

With bipartisan agreement that Australia must move to a low-emissions economy, this report aims to provide a clear and workable plan for how to get there.

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