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University of Technology Sydney Law Research Series |
Last Updated: 16 May 2017
Carbon Policy in Australia – a Political History
Dr Evgeny
Guglyuvatyy & Prof Natalie P. Stoianoff
Abstract
Australia
had actively participated in the 1992 Earth Summit in Rio de Janeiro, endorsing
the Summit goals which were formed by the
desire for sustainable development.
Australia also joined the United Nations Framework Convention on Climate Change
and much later
signed the Kyoto Protocol enthusiastically supporting greenhouse
gas reduction. A range of measures aimed to reduce Australia’s
greenhouse
gas emissions have been on the agenda at the Federal and State level for the
last two decades. Until recently, successive
Australian governments have been
committed to the introduction of a carbon tax or an emissions trading scheme
designed to mitigate
climate change. This paper examines the historical progress
of Australian climate change policy including the implementation of the
present
Australian Government’s Direct Action Plan. The article in particular
observes several interesting and significant
aspects of Australian climate law
highlighting governmental approaches and processes leading to the introduction
of those laws. The
historical perspective is necessary to identify most common
features of the climate law implementation procedures and to identify
what
political factors influence these processes in Australia. Examination of the
Australian climate change regime indicates how
different actors influence policy
proposals to achieve their own goals, rather than to cooperate in a process of
generating the best
overall legal option. This paper concludes that the
development of climate law in Australia required some innovative and responsive
law initiatives. However, the practical implementation of various climate change
laws had been constantly impacted by various economic
and political factors.
Introduction
In June 1992
at the Rio Earth Summit, 154 countries joined the United Nations Framework
Convention on Climate Change
(UNFCCC).[1] The UNFCCC set the goal
for industrialised countries to limit Greenhouse Gas (GHG) emissions to 1990
levels in the year 2000. However,
since the targets were voluntary, only some
countries introduced legally binding policies to reduce GHG emissions and
achieve the
goal.[2] Australia had
actively participated in the Rio Earth Summit in 1992, endorsing the Summit
goals which were formed by the desire for
sustainable development. Australia
also joined the United Nations Framework Convention on Climate
Change[3] and later signed the Kyoto
Protocol[4] supporting GHG reduction.
However, even before the Rio Summit, climate change was on the agenda in
Australia. In 1989, in the lead up to the 1990 Australian
federal election, both
leading political parties discussed the introduction of GHG reduction policy.
The Labor Party in particular
considered a GHG emissions reduction target of 20
percent by 2005.[5] Simultaneously,
the Liberal Party was developing similar policies and the Liberal shadow
environment minister at the time argued
during the 1990 election campaign that
the Liberal Party was ahead of Labor on climate change, and on many other
environmental issues.[6] However,
interest in climate change issues diminished during the 1990s. Environmental
issues were gradually dropped from the political
agenda and did not appear in
the 1993 election campaign. According to some commentators, the 1990s recession,
increasing dominance
of neoliberalism among Labor ministers and ascendancy of
the energy and coal lobby were amongst the factors leading to declining
interest
in environmental issues.[7]
Howard Government (March 1996 - December 2007)
Despite the
declined attention given to environmental issues in the early 1990s, a range of
measures aimed at reducing Australia’s
greenhouse gas emissions have been
on the Federal and State level agendas for the last two decades. Successive
Australian governments
have been committed to the introduction of either a
carbon tax or an emissions trading scheme (ETS) designed to mitigate climate
change.[8] Some Australian state and
local governments have introduced pollution and waste management charges for
example, landfill levies.
There has been some experience with the deployment of
ETSs in Australia. At a sub-national level, that is state level, for instance,
the NSW Greenhouse Gas Abatement Scheme (GGAS) commenced in 1997 and became
mandatory in 2003 imposing obligations on all electricity
retailers in New South
Wales.[9] This was the world’s
first mandatory GHG ETS.[10]
At the federal level, support for a national ETS followed long-standing
support at the state government level. According to Senator
Birmingham, the
Howard Government considered climate change issues and acted upon them from the
moment of election in 1996.[11] For
example, in 1997 Prime Minister Howard announced a $180 million package to
reduce GHG, established the Australian Greenhouse
Office in 1998 together with a
$555 million package to develop systems for measuring and monitoring GHG
emissions as well as energy
performance standards for a range of appliances and
equipment.[12] In 2000 the Howard
Government introduced the Renewable Energy (Electricity) Act 2000, which
established the Mandatory Renewable Energy Target Scheme aimed to boost the
development of renewable energy sources across
Australia.
However, in
2004 the Howard Government produced an Energy White Paper which rejected an
Emissions Trading System, refused to adopt
a mandatory renewable energy target
of 20% by the year 2020 and confirmed its 2002 decision not to ratify of the
Kyoto Protocol.[13] Two years later,
in 2006, ‘doing something’ about global warming gathered strong
political momentum in Australia.[14]
In particular, the Labor Opposition called for the ratification of Kyoto
demonstrating a deeper commitment to action on global
warming.[15]
In order to
‘do something’ the Howard Government responded by accepting the
recommendation of a joint Business/Government
taskforce to introduce an ETS that
would protect export exposed sectors and the mining
industry.[16] Additionally, the
government indicated that Australia would support a new international agreement
to limit the growth of GHG emissions,
provided that it bound all
nations.[17]
In December
2006, Prime Minister Howard announced that Australia would move towards a
domestic ETS, to start no later than
2012.[18] The Prime Ministerial Task
Group on Emissions Trading was established to develop an ETS considering the
following terms of reference:
The
Task Group reported that ‘the most efficient and effective way to manage
risk is through market mechanisms’ and that
accordingly an ETS is the
preferable emission reduction mechanism for
Australia.[20] This firm belief was
based on the view that it is far better to enable the market to ‘decide
which new or existing technologies
will reduce emissions at least cost’
rather than leaving it to the government to ‘pick
winners’.[21] The main design
features of the Task Group’s proposed ETS were based on a ‘cap and
trade’ system and included the
following:
In
addition to these design features, The Task Force noted the necessity for the
ETS to be flexible, technology neutral and operating
nationally. It was made
clear in the report that complementary measures addressing market failures not
corrected by the ETS would
need to be adopted, including informational or
educational and voluntary
strategies,[23] as well as subsidies
for the development of new
technologies.[24]
In
September 2007, the National Greenhouse and Energy Reporting Bill was
introduced as a first step towards emissions trading. This Bill established an
emissions reporting scheme that would cover around
75 per cent of total
emissions in Australia.[25] The
coverage of the scheme incorporated transport and other fuels as well as
including all six gases identified by the Kyoto Protocol.
The scheme’s
reporting requirements covered about 700 Australian companies and provided a
uniform, national reporting framework
that removed duplicative arrangements
developed by state and territory
governments.[26] The legislation
passed both Houses of Parliament and received Royal Assent by the end of the
month.[27] The next Federal election
was called and 24 November 2007 saw the demise of the Howard
Government.[28]
Rudd
Government (December 2007 – June 2010)
In the lead up to the 2007
Federal Election, Opposition Leader Kevin Rudd declared Labor’s intention
to ‘tackle’[29] climate
change as a crucial point distinguishing Labor from the Liberal – National
Coalition (Coalition).[30] In
particular, Labor indicated its intention to ratify the Kyoto Protocol,
supported the Garnaut Review[31]
commissioned by the Labor State premiers and confirmed the introduction of an
ETS that included a set of targets aligned with a 60
per cent reduction of GHG
emissions below 2000 levels by
2050.[32] It appeared that Labor
would act determinedly on climate change.
Indeed, soon after the election
the Rudd Government ratified the Kyoto
Protocol[33] and, by the middle of
its first year in office, proposed the Australian Carbon Pollution Reduction
Scheme (ACPRS). The proposed ACPRS
had two objectives: first, to meet
Australia’s emissions reduction targets in the ‘most flexible and
cost-effective way’;
and second, to sustain a global response to climate
change.[34] In July 2008 the Rudd
Government issued a Green Paper that outlined the preferred design of the ACPRS
and identified the parameters
which needed to be considered
further.[35] Then a White Paper was
made public in December 2008[36]
including a third objective of ‘adapting to the impacts of climate change
that we cannot avoid’[37]
(which will not be considered in this paper), followed by the proposed
legislation in May 2009.
According to the proposed legislation, a
series of short-term annual caps for overall emissions were to be established
from 2011,
consistent with meeting the long-term goal to reduce
Australia’s emissions by 60 per cent by
2050.[38] The emissions cap would be
progressively reduced over time which should result in a higher GHG price,
enhanced investment in low-emissions
technologies and a decline in overall
emissions. Participants in the scheme would need to hold enough emissions
permits to account
for their annual emissions. Permits would be allocated
through auctioning, though some would be grandfathered in order to assist
emissions-intensive trade exposed (EITE) industries in adjusting to a carbon
constrained economy.[39]
The
Rudd Government was committed to reducing emissions by 5 per cent of 2000
emissions levels by 2020.[40] This
reduction level was expected to increase to as much as 25 per cent of 2000
levels by 2020, conditional on an international
agreement.[41] Originally, however,
the reduction target was 5 per cent on 2000 levels by 2020 and 15 per cent if an
international agreement was
reached. As a result of industry pressure, the Rudd
Government delayed the start of the scheme (initially until 2010, then 2011)
until 2012, kept the 5 per cent goal and enlarged the conditional 15 per cent to
25 per cent.[42] In addition, the
compromise included a relatively low, fixed initial price for permits of $10 per
tonne, and even more permits were
to be
grandfathered.[43]
The ACPRS
covered the same GHGs as the Kyoto Protocol – those emitted by stationary
energy, transport, fugitive emissions (such
as methane emissions from black coal
mining), industrial processes, imports, production and use of synthetic GHGs,
and wastes.[44] The proposed ACPRS
expected to cover around 1,000 large emitters estimated to be responsible
for/account for 75 per cent of Australia’s
emissions.[45] It was also expected
to be broader in coverage and scope than any other ETS proposed or operating in
Australia or overseas, including
the EU ETS, and the proposal put forward by the
Australian states and territories in 2006.
The development of the ACPRS
from its conception in the Green Paper to the draft legislation was a movable
feast. For example, in
relation to the international offset credit arrangements,
the Green Paper proposed restricted linkage, explicitly stating that only
a
limited number of international offset credits could be surrendered for
compliance.[46] Meanwhile, the
exposure draft legislation later provided unrestricted linkage –
participants would be able to use an unlimited
number of Kyoto
units[47] on top of GHG permits.
Unlimited use of Kyoto units could have potentially jeopardised the achievement
of Australia’s national
reduction target. It would have been reasonable
for the Rudd Government to set a limit on the amount of international offset
units
that could be surrendered by businesses, as is provided, for example, in
the EU ETS. This relaxing of restrictions demonstrated the
need to address the
intense political environment brewing around the attempt to introduce the
ACPRS.
There are further examples of where the Rudd Government needed to
placate a variety of industry sectors, such as the emissions-intensive
trade
exposed (EITE) industries. The Rudd Government proposed to allocate more than 30
per cent of annual permits free of charge
in order to assist EITE industries to
meet their obligations under ACPRS. EITE activities that would generate more
than 1,500 tonnes
of CO2 for each million dollars of revenue would receive free
permits to cover up to 66 per cent of their emissions; meanwhile, EITE
activities that would generate more than 2,000 tonnes of CO2 for each million AU
dollars of revenue would receive free permits to
cover up to 94.5 per cent of
their emissions.[48] However, the
expectation was that the level of assistance to EITE sectors would decline over
time.
In addition, special attention was given to industries expected
to be strongly affected by the ACPRS but not eligible for EITE assistance.
The
proposed legislation indicated that coal-fired electricity generators were
likely to be included in this category. Thus, additional
assistance was to be
provided to the coal-fired electricity generation industry, such as support for
carbon capture and storage technology
development, and structural adjustment for
affected workers, communities and
regions.[49] Direct cash payments to
these coal-fired electricity generators were to be provided as
well.[50]
It should be noted
that more than 50 per cent of Australia’s GHG is emitted by electricity
generators and 77 per cent of Australia’s
electricity is generated from
coal. Consequently, any serious climate change solution must target the
electricity sector directly.[51] A
price on GHG through the ACPRS would provide some incentive for the energy
generation sector to reduce its GHG intensity. However,
the significant
compensation to EITE sectors and to the coal-fired electricity generation
industry proposed by the then Rudd Government
would have almost certainly given
businesses the wrong signal, and distorted the ultimate target of mitigating
climate change. Substantial
compensation can wipe out, or at least seriously
diminish, the projected incentives for developing new energy efficient
production
processes or shifting to renewable energy
sources.[52] Furthermore, if
external costs are not internalised by the producers, the environmental impact
of such a climate change mitigation
instrument would be
neutralised.
Since the ACPRS was expected to cover approximately 1,000
businesses, a relatively small number of entities would receive valuable
free
permits. This was expected to result in considerable extra costs to non-EITE
industries and to those EITE businesses falling
outside the eligibility
thresholds.[53] Assistance to EITE
industries and the energy generating sector would effectively provide a subsidy
to the worst carbon emitters leaving
the burden of the ACPRS to less polluting
industries and reducing the opportunities for cleaner energy
alternatives.[54] Instead of
compensating designated businesses, the revenue from the ACPRS would have been
put to better use by providing additional
assistance for the implementation of
low emissions technologies.
In order to eliminate the negative impact of
the ACPRS on the cost of living of households, the Rudd Government proposed to
increase
payments to people receiving social allowance benefits above automatic
indexation.[55] In addition to that,
targeted assistance was to be provided to low-income households through the tax
and welfare systems.[56]
Further, with the inclusion of petrol in the proposed scheme, the cost
of fuel would increase and that increase would be passed on
to consumers. In
order to compensate the initial price increase to be caused by the ACPRS, the
Government indicated that the excise
tax on petrol would be reduced on a
‘cent-for-cent’
basis.[57] However, as a result of
this measure, petrol consumers would not notice the price effect of the ACPRS
and would not see an emissions
cost included in the petrol price. Consequently,
an incentive to reduce petrol consumption would be eliminated as the
preferential
fuel prices regime would not pass a correct price signal onto
consumers.
Like the EU ETS, the Rudd Government prioritised an
international harmonisation of emissions trading. Many analysts agree that an
ETS is much easier to harmonise with other countries’ carbon mitigation
programs.[58] Indeed, an ETS
generates a natural unit of exchange for harmonisation: permits denominated in
units of GHG emissions. If emissions
reductions are cheaper to make in China
than in Australia, emissions ought to be reduced first in the former where costs
are lower.[59] Another key
consideration of the Rudd Government was international competitiveness. In other
words, Australian industries subject
to the proposed ACPRS would be
disadvantaged in international markets compared to their competitors from
countries that did not impose
a price on carbon. To address this issue the Rudd
Government proposed that exposed industries would receive free permits to
diminish
this concern.[60] Unlike
the EU ETS, ACPRS extensively addresses distributional issues associated with
it.[61]
Despite the
numerous concessions and preferential treatment incorporated in the design of
the ACPRS, industry pressure led to the
Rudd Government deciding to delay the
start of the proposed scheme as mentioned above. However, in the end, the ACPRS
legislation
was twice defeated in the Australian Parliament in 2009 despite
extensive political negotiations with the Liberal – National
Coalition
Opposition led by Malcolm Turnbull, who was then deposed by Tony Abbott as
leader while the legislation was in play. The
defeat occurred in the upper
house, the Senate, with The Greens members voting with the Coalition against the
ACPRS legislation. [62] An unlikely
alliance, The Greens voted against the legislation on the basis that the scheme
did not do enough while the Coalition
voted against the legislation due to a
strong objection to an emissions trading scheme on the basis that is was just
another tax.[63] As a result, in
April 2010 the Rudd Government put the ACPRS on hold.
Gillard
Government (June 2010 – June 2013)
Later in 2010, there was a
change of leadership in the Labor party and the Deputy to Kevin Rudd, Julia
Gillard, became Australia’s
first female Prime Minister. She led the
government into the next election with an election promise of no carbon tax but
due to a
significant swing toward the Coalition Opposition, found that she could
only form government with the assistance of The Greens and
three independent
members of parliament. In order to maintain this alliance so as to form
government, Prime Minister Gillard announced
the new government’s
intention to propose a temporary carbon pricing
scheme[64] as well as to establish
the Multi-Party Climate Change Committee (the
Committee)[65] consisting of members
of the federal government and
senators.[66]
The
Committee’s intention was to establish a climate change framework
outlining the broad architecture for a carbon price. The
Committee issued eleven
policy principles designed to provide a consistent basis for the deliberations
on a carbon price.[67] The
principles were as follows:
• To support Australia’s international objectives and obligations [68]
The
Multi-Party Climate Change Committee stated that the 11 principles would guide
the design decisions of the pricing mechanism.
The Committee released
draft legislation on 28 July 2011. In October 2011, the Australian House of
Representatives passed the carbon
pricing legislation which was also passed by
the Australian Senate in November. The carbon pricing scheme (the scheme),
forming part
of the Clean Energy Future regime, operated from 1 July 2012 as a
temporary measure designed to reduce greenhouse gases (GHG). The
carbon price
was $23 for the 2012–13 financial year and was designed to increase by 2.5
per cent in each of the following two
years.[69] Under the scheme, liable
entities were to buy and surrender carbon units equal to their direct emissions
(based on historic levels)
of carbon dioxide equivalents (CO2). Failure to
surrender necessary carbon units would result in a fine. After the transitional
period,
the carbon pricing mechanism was to convert to a cap-and-trade ETS
supplying a flexible carbon
price.[70] From 1 July 2015, the
carbon units were intended to be auctioned. Hence, even though the carbon
pricing mechanism is sometimes labeled
a ‘carbon tax’, the
Australian government was committed to emissions trading.
The carbon pricing scheme covered four of the six GHGs counted under the
Kyoto Protocol, those being: carbon dioxide (CO2), methane
(CH4), nitrous oxide
(N2O) and perfluorocarbon (PFC),[71]
and had broad coverage of the following emissions sources:
The
scheme covered around 500 entities emitting 25,000 tonnes of CO2 per year or
more and certain waste facilities emitting more than
10,000 tonnes per year,
constituting about 50 per cent of Australia’s
GHG.[73] Agriculture and transport
fuels were excluded from the scheme, although transport fuels used by off-road
heavy vehicles (except for
agriculture, fishing and forestry) were covered
indirectly by a reduction in existing fuel tax
concessions.[74] To transfer a
carbon price signal to rail, domestic shipping and domestic aviation, fuel tax
excises were increased. The treatment
of fuel was to be reviewed in 2014. During
the fixed price transitional period under the scheme, liable parties could not
use international
emissions reduction units for compliance. However, during the
flexible price period, it was intended that internationally recognised
permits
may be used to acquit up to 50 per cent of a party’s’
liability.[75]
There was no cap on emissions during the fixed price period and the number of carbon units was unlimited. However, starting from 2015–16, it was intended that the Climate Change Authority[76] would set a cap on emissions taking into consideration international and Australian emissions reduction targets. During the Gillard Government, Australia was committed to reducing emissions by 5 per cent of 2000 emissions levels by 2020, and by 80 per cent of 2000 levels by 2050.[77]
It was projected that the carbon price scheme would raise $24.5 billion
over its first four years. However, the scheme would not be
revenue neutral; the
budget deficit was expected to be around $4
billion.[78] The explanation was an
extensive spending plan to compensate industries and households and to invest in
renewable energy including
the provision of significant income tax cuts and
increases in allowances, payments and benefits. In particular, the tax free
threshold
on incomes was more than tripled from the previous $6,000 to $18,200
from 1 July 2012, and then set to increase to $19,400 from 1
July 1 2015. The
consequence of these changes was that all taxpayers with an income below $80,000
effectively received tax cuts from
1 July 1
2012.[79]
Further, an
assistance package of $9.2 billion was allocated over the first three years to
Australian industries to eliminate competitiveness
issues associated with the
carbon price scheme.[80] Most
affected industries such as steel, aluminium, zinc, pulp and paper makers will
acquire free permits covering about 94.5 per
cent of industry’s average
carbon costs. In addition, $300 million was to be assigned to the steel
industry’s shift to
clean energy. A coal sector jobs package of $1.3
billion was dedicated for mines most affected by the carbon
price.[81]
Consideration was
also given to complementary measures that supported research, development and
commercialisation of green technologies.
In particular, a $10 billion Clean
Energy Finance Corporation was created to invest in new technologies, and $3.2
billion was allocated
to the Australian Renewable Energy
Agency.[82] Additionally, small
grants were made available for community-based energy efficiency programs. On
top of that, the Gillard Government
was committed to the closure of 2000
megawatts of the dirtiest power generators by
2020.[83]
Since agricultural
and land sector emissions were not covered under the carbon pricing mechanism
the Gillard Government introduced
the Carbon Farming Initiative. The Carbon
Farming Initiative is a carbon offsets scheme that provides new economic
opportunities
for farmers, forest growers and landholders to help the
environment by reducing carbon
pollution.[84] Farmers and land
managers are able to generate credits that could then be sold to other
businesses wanting to offset their own carbon
pollution. In particular, The
Carbon Farming Initiative enables land managers to earn credits for actions
including:
Liable entities covered by
the carbon price scheme were allowed to surrender Kyoto-compliant CFI credits
for up to five per cent of
their liability in the fixed price period and, during
the flexible price period there would be no quantitative restrictions on
surrender
of Kyoto-compliant CFI credits. Kyoto compliant CFI credits were
tradable between entities.
Overall, the broad architecture of the Clean
Energy Future regime, and in particular the carbon pricing scheme, seemed to
resemble
in some aspects the design of the proposed
ACPRS.[85] However, the carbon
price, in some respects, was a substantial improvement on the heavily
compromised ACPRS. Generous compensation
for affected industry was a temporary
measure and based on historic emissions levels: thus the incentive to reduce
emissions was
not eroded. The assistance package for households was designed to
compensate low and medium income earners rather than high income
earners.
Raising the income tax threshold removed about a million low income taxpayers
from the income tax system.[86]
Further, the range of supporting measures designed to encourage carbon farming,
energy efficiency and green innovation provided a
significant improvement over
the ACPRS.
Abbot Government (September 2013 – September
2015)
In September 2013, the Coalition, led by Tony Abbott, won the
federal election. The attitude to climate change was quite different
from that
of the previous two prime ministers. The Gillard Government’s carbon
pricing legislation was repealed by the Abbott
Government in July 2014 and
replaced by the Direct Action Plan by the end of that year.
The Abbott
Government indicated the Direct Action Plan was introduced to ‘efficiently
and effectively source low cost emissions
reductions that will contribute
towards our 2020 target.’[87]
The Direct Action Plan includes as a centerpiece the Emissions Reduction Fund
(ERF) designed to provide incentives for GHG reduction
activities across the
entire Australian economy. Under the ERF the Government pays for projects that
will reduce CO2 emissions at
minimal cost. Funding from the ERF is allocated
through auctions. A range of possible projects for CO2 reduction include:
energy
efficiency, cleaning up power stations, reafforestation and revegetation
and/or improvement of soil
carbon.[88]
There has been
very little detailed public or economic analysis of the Emissions Reduction Fund
and its design.[89] However, there
are numerous in-built design problems with the Emissions Reduction Fund.
According to various commentators the major
design issues which will impact on
the ERF's ability to reduce Australia's greenhouse gas emissions, include:
Evidently,
any policy to reduce Australia's GHG emissions requires a limit or 'cap' on
overall emissions, and mechanisms preventing
polluters from exceeding emissions
limits.[92] However, at present
there are no emissions caps or instruments that would insure that the polluters
are limiting their GHG emissions.
The Government issued a consultation paper on
a Safeguard Mechanism that will apply to facilities with direct emissions in
excess
of 100,000 tonnes of CO2-e per
year.[93] According to the
Consultation Paper, the Safeguard Mechanism would cover around 140 businesses
(emissions-intensive generators) which
emit around 57 percent GHG from the
electricity sector.[94] The
Safeguard Mechanism obliges polluters to avoid net emissions from their facility
from exceeding the baseline emissions levels
throughout a monitoring period (a
financial year).
Nevertheless, the Consultation Paper does not present
details on how individual baselines will be designated or how
emissions-intensive
generators will be identified. It is also unclear whether
all generators, irrespective of fuel source, will be treated similarly
or if
there will be allowances for businesses which are expected to produce higher
emissions. The Consultation Paper proposes a number
of enforcement options for
entities that exceed an emissions limit, including: infringement notices;
enforceable undertakings; injunctions
to rectify an emissions exceedance; and
civil penalties to be imposed by a court. The amount of civil penalty for an
emissions exceedance
is not specified. The Government indicated that the
safeguard mechanism, which is absolutely critical to the scheme, will not be
in
place until July 2016 at the
earliest.[95]
The important
feature of the Direct Action Plan is its voluntary nature. Numerous commentators
argue that a voluntary carbon mechanism
does not provide an incentive for
businesses to participate and compete for participation in the
ERF.[96] The Australian Senate
inquiry on the Direct Action Plan provided the following comment: ‘The
committee is persuaded that the
Government's Direct Action Plan and the proposed
Emissions Reduction Fund are fundamentally flawed. They ignore the
well-established
principle of 'polluter pays', and instead propose that the
Australian taxpayer should effectively subsidise big
polluters.’[97] Overall, the
Direct Action Plan has been significantly criticised and it is labeled as a step
backwards for Australian climate change
policy.
The Abbott Government
also sought to abolish the Climate Change Authority which was established by the
previous government to provide
independent assessment and advice on carbon
policy. Should the Authority be abolished, there will be no independent
assessment of
policy and targets and no requirement for the Government to
respond to independent review, which would further reduce transparency
and
accountability of carbon policy-making. In this light, it is difficult to
consider the climate change law-making process of
the present Government (now
led by Malcom Turnbull after Tony Abbott’s leadership as Prime Minister
was successfully challenged
in October 2015) as adequate and comprehensive.
Thus, the Abbott Government’s policy-making practice raised even more
questions,
and as one may note, the climate change policy-making process in
Australia deteriorated over the last two years, falling far short
of that of the
previous Coalition Government in 2007.
Analysis
From the
discussion above it is noteworthy that, starting from the Howard Government,
Federal governments considered climate change
and acted on it. Conversely, the
efforts of the governments vary significantly with markedly different resultant
policies. The obvious
explanation for such a different approach is complex
political games of the leading Australian political parties. This analysis
attempts
to shed some light on what is influencing climate related policies in
Australia and how specific climate change polices are developed.
As
highlighted above the Howard Government started to act on climate change soon
after the election in 1996. The range of packages
and programs introduced by the
Howard Government arguably provided some basis for future GHG reduction efforts.
Nevertheless, if
we will look closer at the reasons behind some of the
introduced policies, for example, the $400m GHG abatement programme that
reinforced
largescale costeffective abatement focusing on the first commitment
period of the Kyoto Protocol (20082012), was, according to the
former treasurer
Peter Costello, a tradeoff for the support of the Australian Democrats (who held
the balance of powers in the Senate
at time) in relation to the introduction of
Goods and Services Tax.[98] A
further statement by Peter Costello illustrates the ‘concerns’ of
the Howard Government about climate change at that
time: 'This was 1999. Neither
Howard nor I had much of an idea of what a greenhouse gas was, let alone how to
abate it...’[99]
In
June 2002, despite international pressure especially from European countries,
the Howard Government announced that Australia would
not ratify the Kyoto
Protocol.[100] The justification
for this was that: the treaty covers less than 70% of global emissions;
developing countries were excluded from
emission limitations; and the then
largest GHG emitter, the US, did not ratified the treaty. Nonetheless, the
Howard Government declared
that Australia would meet its Kyoto target, but
without ratification.[101]
The Howard government undeniably introduced some of the most innovative
climate change policies such as the establishment of the first
in the world
national agency to tackle GHG emissions. However, the Howard Government has been
considered to have acted rather erratically
on environmental issues. Some
commentators argue that John Howard ‘has misread the trend - witness the
rising concern about
climate
change.’[102] Realistically,
it appears that Prime Minister Howard had no specific vision and/or ideas
regarding the environment and as a result,
his government’s actions in
prioritising issues and/or allocating expenditure in relation to climate change
was not considered
the most
effective.[103] This point is
better expressed by John Howard himself: ‘I have always been something of
an agnostic on global warming. I have
never rejected, totally, the multiple
expressions of concern from many eminent scientists but the history of mankind
has told me
of his infinite capacity to adapt to the changing circumstances of
the environment in which he
lives’[104]
The
ACPRS scheme introduced by the Rudd Government was a significant improvement in
terms of policy development in comparison with
the Howard Government approach to
climate change policy. The ACPRS legislation took into consideration work of the
Prime Minister
Howard’s Task Group on Emissions Trading, National
Emissions Trading Taskforce, the Garnaut Climate Change Review and Treasury
modelling.[105] As a result of
this methodical approach the proposed legislation provided a number of measures
addressing various issues associated
with carbon market instruments. One of the
key considerations was the competitiveness issue. The ACPRS provided that
internationally
exposed industries receive free permits to diminish this
concern. Additionally, the ACPRS extensively addressed distributional issues
associated with it.
As mentioned above there was an intensive industry
pressure that forced the Rudd Government to adjust the initial design of the
scheme.
Specifically, restricted international linkage of the scheme was changed
to unrestricted linkage and even more free permits were
to be allocated to
industries. As one of the commentators notes:
‘the carbon lobby and EITEI put significant pressures on the newly
elected Labor government to delay the CPRS and pursue a scheme
as favourable to
industry as the one proposed by the Howard
government.’[106]
The
concessions provided by the Rudd Government to polluting industries did not help
to achieve passage of the legislation but considerably
influenced the ACPRS
design to the point where the scheme’s capacity to combat climate change
was greatly corrupted. [107] As a
result, as noted above, the start of the scheme was delayed and later the
Government put the ACPRS on hold.
The Gillard Government continued the
efforts of the Rudd Government regarding the introduction of emissions trading
but chose a different
approach. Instead of introducing a straightforward
emission trading scheme, the Government, supported by The Greens, introduced the
Clean Energy Future regime which included an initial temporary carbon pricing
scheme to be followed by an ETS from 2015. This designed
was as a result of the
deliberation of the Multi-Party Climate Change Committee (the
Committee)[108] established by the
Gillard Government soon after forming government in September 2010. The
Committee added extra strength to the
policy development process by utilizing
explicit policy principles designed to provide a consistent basis for the
considerations
of a carbon price. This process was also a departure from the
usual approach to policy development led by the relevant government
department.
It is arguable that by charging the Committee (consisting of Labor, Greens and
Independent members of the Federal Government
and senators) with the task of
developing a climate change policy is what led to successfully introducing the
Clean Energy Future
regime. Even though the architecture of the carbon price
scheme resembled in some aspects the design of the ACPRS, some features
of the
Gillard carbon pricing scheme provided significant enhancements compared to the
ACPRS. Further, the Clean Energy Future package
as a whole provided a number of
novel and advanced policies and measures in addition to the carbon pricing
component.
Although the Rudd Government was unable to resist the
industry lobby, the Gillard Government utilised the vehicle of the Committee,
with the support of The Greens, and effectively overcame industry pressure.
Overall, that resulted in a successful introduction of
the Clean Energy Future
climate change policy by the Gillard Government, even though it was short-lived.
The Abbott Government’s attitudes towards climate change were
radically different from the past two Labor governments as demonstrated
above.
After the federal election in September 2013, there was some skepticism
concerning the election promise by Tony Abbott to
repeal the carbon pricing
scheme.[109] Nonetheless, the
carbon pricing legislation was indeed repealed by the Abbott Government soon
after the election. According to some
commentators Abbott ‘reinstate(d)
industry influence over
policy’.[110] The Direct
Action Plan proposed by the Government instead of carbon pricing was heavily
criticised from the start. The Abbott Government
stated that the Direct Action
Plan was introduced to ‘efficiently and effectively source low cost
emissions reductions.’[111]
Unfortunately, the Abbott Government did not provide details concerning the
development of the Direct Action Plan. It is not clear
what the basis for the
introduced policy was. Successive Australian governments attempting to introduce
climate change related policies
took into consideration policy developments and
proposals of previous Governments. However, the policy introduced by the Abbott
Government
is strikingly different to carbon pricing and/or emissions trading
mechanisms favoured by former Australian governments. In the same
vein, the
Abbott Government neither disclosed which criteria were used to develop the
Direct Action Plan, if any, nor which criteria
or principles were prioritised to
establish the new regime. Now that Australia have a new Coalition Prime
Minister, Malcolm Turnbull,
there is an expectation that climate change policy
will be addressed in the new term if he is successful in retaining government.
And even if Turnbull and the Coalition lose the upcoming election, the Labor
Opposition has vowed to reintroduce carbon pricing in
that next term should they
form
government.[112]
Conclusion
What
this paper demonstrates is the significance of political influence on the
development of policy and design of market based instruments
in the quest to
deal with the issue of climate change. Whether the motivation is to placate the
business and industry sectors, as
did the Howard, Rudd and Abbott governments,
or to ensure the Gillard government remained in power by placating parliamentary
power
brokers who hold the balance of power, it is clear that actually dealing
with climate change has been a secondary consideration.
The Howard Government
engaged with climate change in exchange for support of the Goods and Services
Tax. The Rudd Government tried
to satisfy all the players and thereby satisfied
none. The Gillard Government was trying to form a government after having gone
into
an election promising no carbon tax. However, her approach to climate
change policy was the most successful, having engaged with
the relevant
political power brokers to create a regime by consensus. And even though the
carbon pricing mechanism was repealed by
the Abbott Government, not all aspects
of the Clean Energy Future regime have been dismantled. Although there has been
no change
to the current government’s climate change policy since the
ascension of the new Coalition Prime Minister, Malcom Turnbull,
there is hope
that the use of market based instruments to tackle climate change will have
their time again in the near future.
[1] Sustainable Development
Knowledge Platform. Agenda 21, Available:
http://www.un.org/esa/dsd/agenda21/
[2]
In particular, Scandinavian and some other European countries have implemented
policies to reduce GHG emissions since 1990.
[3] With Australia having signed
the Convention on 04 June 1992, ratified it on 30 December 1992 with entry into
force being 21 March
1994.
[4] With
Australia having signed the Protocol on 29 April 1998, but not ratifying it
until 12 December 2007 with entry into force being
11 March
2008.
[5] Staples, J. (2009),
‘Australian Government Action in the 1980s’, in Sykes, H. (ed),
Climate Change on for Young and Old, Future Leaders,
Melbourne.
[6]
Ibid.
[7] Ibid.
[8] Wilder M. and Fitz-Gerald L.
(2009), ‘Review of policy and regulatory emissions trading frameworks in
Australia’. AERLJ,
vol. 27, pp.
1-22.
[9] IPART, NSW Greenhouse Gas
Reduction Scheme Strengths, weaknesses and lessons learned Greenhouse Gas
Reduction Scheme, July 2013,
p.
1.
[10] IPART, Greenhouse Gas
Reduction Scheme, at
<http://www.ipart.nsw.gov.au/Home/Industries/Electricity/Greenhouse_Gas_Reduction_Scheme>
accessed 28 January
2015.
[11] Senator Birmingham
speech in the Australian senate Thursday, 20 September 2007
<http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansards%2F2007-09-20%2F0379%22>
[12]
Ibid.
[13] Zahar A, Peel J and
Godden L, (2013), Australian Climate Law in Global Context. Cambridge
University Press, p 156.
[14]
Howard J. One Religion Is Enough, The Global Warming Policy Foundation Annual
Lecture, The Institution of Mechanical Engineers 5th November 2013.
London.
[15] Staples, above note
5.
[16] Howard, above note
14.
[17] Staples, above note
5.
[18] Ibid. Note, however, that
in 2005, the Australian State and Territories issued a discussion paper
concerning a national emissions
trading scheme which would cover the power
generation sector.
[19] Howard,
J. Prime Ministerial Task Group on Emissions Trading, Press release, 10 December
2006.
[20] Prime Ministerial Task
Group on Emissions Trading, Report of the task group on emissions trading,
2007, Commonwealth Australia,
at
<http://pandora.nla.gov.au/pan/72614/20070601-0000/www.pmc.gov.au/publications/emissions/docs/emissions_trading_report.pdf>
accessed 28 December 2015, p.
6.
[21]
Ibid.
[22] Report of the task
group on emissions trading, (2007), Commonwealth
Australia.
[23] Gumley, W. &
Stoianoff, N., Carbon Pricing Options For A Post-Kyoto Response To Climate
Change In Australia, Federal Law Review, Vol 39(1), (2011) 131,
132-135.
[24] Prime Ministerial
Task Group on Emissions Trading, above note
20.
[25] Australian Government,
Department of the Environment, National Greenhouse and Energy Reporting, at <
https://www.environment.gov.au/climate-change/greenhouse-gas-measurement/nger>
accessed 20 January 2016.
[26]
Ibid.
[27] National Greenhouse
and Energy Reporting Act 2007, Section
2.
[28] ABC Elections (2007)
<http://www.abc.net.au/elections/federal/2007/>
accessed 28 December
2015.
[29] Gartrell, T. (2007),
‘Labor won the campaign outright, speech to the National Press
Club’, Canberra, 4 December [Online],
Available:
http://www.alp.org.au/media/1207/spe040.php [2008 July
29].
[30] In Australia, the
Coalition is an alliance of centre-right political parties. The partners in
the alliance are the Liberal Party,
the National Party and
others.
[31] The Garnaut Climate
Change Review, was commissioned in 2007 and the final report was released on 30
September 2008.
[32] Gartrell,
above note 29
[33] 12 December
2007
[34] Parliament of
Australia, Carbon Pollution Reduction Scheme. at
<http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Browse_by_Topic/ClimateChange/Governance/Domestic/national/cprs>
accessed 20 January 2016
[35]
Carbon Pollution Reduction Scheme, above note
34.
[36] Carbon Pollution
Reduction Scheme, above note
34.
[37]
Ibid.
[38]
Ibid.
[39]
Ibid.
[40] Beder, S. 2009. Token
Environmental Policy Continues in Australia. Pacific Ecologist, 18,
45-48.
[41] Carbon Pollution
Reduction Scheme, above note
34.
[42] Beder, above note
40.
[43] Carbon Pollution
Reduction Scheme, above note
34.
[44] Carbon Pollution
Reduction Scheme, above note
34.
[45] Carbon Pollution
Reduction Scheme, above note
34.
[46] See, Carbon Pollution
Reduction Scheme Green Paper and Carbon Pollution Reduction Scheme Bill 2010 at
<http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Browse_by_Topic/ClimateChange/Governance/Domestic/national/cprs>
accessed 20 January 2016.
[47]
Kyoto units are the units that were created by means of the Kyoto Protocol
mechanisms.
[48] Carbon Pollution
Reduction Scheme, above note
34.
[49] Carbon Pollution
Reduction Scheme, above note
34.
[50] Carbon Pollution
Reduction Scheme, above note
34.
[51] Carbon Pollution
Reduction Scheme, above note
34.
[52] Parry, I. W. &
Pizer, W. (2007). ‘Emissions Trading Versus CO2 Taxes Versus
Standards’. Resources for the future, Issue brief 5. Washington
DC.
[53] Beder, above note
40.
[54] Beder, above note
40.
[55] Carbon Pollution
Reduction Scheme, above note
34.
[56] Carbon Pollution
Reduction Scheme, above note
34.
[57] Department of Climate
Change, Carbon Pollution Reduction Scheme - Australia’s Low Pollution
Future, Australian Government,
15 December 2008, at
<http://apo.org.au/node/3477>
accessed 19 January
2016.
[58] Green, K. P., Hayward,
S. F. & Hassett, K. A. (2007). ‘Climate Change: Caps vs. Taxes’
<www.aei.org/publication26286>
accessed 12 January 2015; Garnaut, R.
(2008). ‘Garnaut Climate Change
Review”.
<http://www.garnautreview.org.au/domino/Web_Notes/Garnaut/garnautweb.nsf>
accessed 5 January 2016.
[59]
Stavins, R. (2007). ‘Proposal for a U.S. Cap-and-Trade System to Address
Global Climate Change: A
Sensible and Practical Approach to Reduce Greenhouse
Gas Emissions’. The Brookings Institution.
Washington
DC.
[60] Department of Climate
Change, above note 57.
[61] For
detailed discussion see, Guglyuvatyy E. (2012) ‘Australia’s Carbon
Policy – a Retreat from Core Principles?’
eJournal of Tax
Research, Vol. 10, (3)
552-572.
[62] Beder, above note
40; Brook, B. (2009). ‘Carbon Tax or Cap-and-Trade? The Debate we never
had’
http://bravenewclimate.com/2009/02/14/carbon-tax-or-cap-and-trade-the-debate-we-never-had/
> accessed 19 January
2016.
[63] AAP and Mark Davis,
Dead ETS to rise again, Sydney Morning Herald, December 2, 2009, at
<http://www.smh.com.au/national/dead--ets-to-rise-again-20091201-k4c1.html>
accessed 18 January
2016.
[64] The Australian carbon
pricing scheme is often called a ‘tax’ because during the fixed
price period, the liable parties
are obliged to purchase fixed price carbon
units which is similar to paying tax. However, they cannot trade the units on
the market,
as under an emissions trading
scheme.
[65] Guglyuvatyy, above
note 61.
[66] The Committee
includes: the Prime Minister, the Hon Julia Gillard MP, the Deputy Prime
Minister, the Hon Wayne Swan MP and the Minister
for Climate Change and Energy
Efficiency, the Hon Greg Combet AM MP, joined by co-deputy chair of the
Committee, Australian Greens
Deputy Leader Senator Christine Milne, Australian
Greens Leader Senator Bob Brown, Mr Tony Windsor MP, and Mr Rob Oakeshott MP.
The
Committee is assisted by the Parliamentary Secretary for Climate Change and
Energy Efficiency, Mr Mark Dreyfus QC MP and Mr Adam
Bandt MP, and by expert
advisors Professor Ross Garnaut, Professor Will Steffen, and Mr Rod Sims.
[67] Zahar Zahar, A Peel, J and Godden L. (2012), Australian climate law in global context. Cambridge University Press.
[68] It is important to note that
the principles are not stated in any order of
priority.
[69] Zahar et al.above
note 67.
[70] Ibid.
[71] Hydrofluorocarbons and
sulphur hexafluoride will face an equivalent carbon price, which will be applied
through existing synthetic
greenhouse gas
legislation.
[72] Stationary
energy includes emissions from fuel consumption for electricity generation,
fuels consumed in the manufacturing, construction
and commercial sectors, and
other sources like domestic heating. Industrial processes emissions are
side-effects of production from
non-energy sources, for example, it includes
emissions from cement production, metal production, chemical production, and
consumption
of HFCs and SF6 gases. The fugitive emissions relates to the energy
sector and covers emissions that are linked with the production,
processing,
transport, storage, transmission and distribution of fossil fuels such as black
coal, oil and natural gas. The waste
emissions relate to waste dumped at
landfills.
[73] Zahar et al.,
above note 67.
[74] Department of
Climate Change, above note 57.
[75] The Commentary on the
provisions also states that international linking with the European Union scheme
and New Zealand Schemes are
desirable and if agreed, EU Allowances and NZ units
would be prescribed under the Clean Energy Bill. (Zahar et al., above note 67).
However, a detailed discussion of this international aspect is beyond the scope
of this paper.
[76] The Climate
Change Authority is an independent statutory body which was established in July
2012.
[77] The Australian
Government has been criticised for these low GHG reduction targets. For example,
Professor Garnaut (the federal government’s
climate change adviser)
recommended a 25 per cent reduction, while many other commentators suggest that
an even more ambitious GHG
reduction target is needed. See for example: Garnaut,
R. (2008). ‘Australia Counts Itself out.’
<http://www.theage.com.au/national/australia-counts-itself-out-20081219-72ei.html?page=-1>
accessed 17 January 2016; Brook, above note
62.
[78] Zahar et al., above note
67.
[79] However, the individual
income tax rates for higher income earners were raised. For example: 19% for
income over $18,200 (was 15%)
and 32.5% for income over $37,001 (was 30%).
<http://www.ato.gov.au/individuals/PrintFriendly.aspx?ms=individuals & doc=/content/00309813.htm>
accessed 18 January 2016.
[80]
Zahar et al., above note 67.
[81] For details see: Carbon
Pollution Reduction Scheme and Carbon Pricing Mechanism: comparison of selected
features.
<http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Browse_by_Topic/ClimateChange/cprs>
accessed 15 January 2016.
[82]
Ibid.
[83] Department of Climate
Change, above note 57.
[84]
Department of Climate Change, above note
57.
[85] For details see: Carbon
Pollution Reduction Scheme, above note 34.
[86] Department of Climate
Change, above note 57.
[87] The
Emissions Reduction Fund, available at:
<http://www.environment.gov.au/climate-change/emissions-reduction-fund/about>
accessed 20 January 2016.
[88]
Ibid.
[89] The Australian Senate,
Environment and Communications References Committee. (2014) ‘Direct
Action: Paying polluters to halt
global
warming?
[90] An additionality
assesses whether a project or activity creates
‘additional’ emissions reductions that would not have
occurred in
the absence of the
incentive.
[91]
Ibid.
[92]
Ibid.
[93] Emissions Reduction
Fund: Safeguard mechanism - Consultation paper, available at:
<http://www.environment.gov.au/climate-change/emissions-reduction-fund/about/safeguard-mechanism>
accessed 20 January 2016.
[94]
Ibid.
[95]
Ibid.
[96] See for example,
Australian Government Department of Environment, Emissions Reduction Fund,
public submission of Professor David
Karoly, Professor Ross Garnaut,
WWF-Australia and others, available at:
<http://www.environment.gov.au/climate-change/emissions-reduction-fund/green-paper>
accessed 20 January 2016.
[97]
The Australian Senate, above note
89.
[98] Hartcher P. (2011).
The Sweet Spot: How Australia Made Its Own Luck – And Could Now Throw
It All Away, Black Inc,
Melbourne.
[99]
Ibid.
[100] Bamsey H and Rowley
K. (2015). Australia and climate change negotiations: at the table, or on the
menu? Lowy Institute.
[101]
Staples, above note 5.
[102]
Kelly P, (2008). ‘The Howard Decade - Separating Fact From Fiction’.
Issue 7, May 2008.
<http://www.ias.uwa.edu.au/new-critic/seven/howarddecade>
accessed 18
January 2016.
[103]
Ibid.
[104] Howard, above note
14.
[105] Department of Climate
Change, above note 57.
[106]
Crowley, K. (2013). ‘Irresistible Force? Achieving Carbon Pricing in
Australia’. Australian Journal of Politics and History, Volume 59,
(3) 368-381.
[107] Beder, above
note 40 Brook, above note
62.
[108] Ecogeneration,
Multi-Party Climate Change Committee announced, Wed 29 September 2010, Great
Southern Press, at
<http://ecogeneration.com.au/news/multi-party_climate_change_committee_announced/043970/>
accessed 18 January
2016.
[109] Crowley, above note
106.
[110] Priest, M. Coalition
Eyes $20bn Carbon Cuts, Australian Financial Review, 9-10 March
2013.
[111] The Emissions
Reduction Fund, above note
87.
[112] Ellen Whinnett,
CARBON COPY: Labor leader Bill Shorten vows to bring back policy, The Mercury,
Tasmania, 17, July 2014, at
<http://www.themercury.com.au/news/tasmania/carbon-copy-labor-leader-bill-shorten-vows-to-bring-back-policy/news-story/93626d14e1a1a2b7b10c9e9215521582?nk=f69abe4548bcf4b5dcc95eb7a89f871e-1453092764>
accessed 18 January 2016.
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