With the Right, Left and most of the Centre now calling for Penny Wong’s Carbon Pollution Reduction Scheme (CPRS) to be abandoned or fundamentally altered, it looks increasingly likely the legislation will be defeated in the Senate. This has led some to express concern about what this means for reducing Australia’s emissions and whether the death of the CPRS is a recipe for no action at all.

Lenore Taylor of the Australian summed up this sentiment in an article in February, when she wrote that “if conservationists think sabotaging that scheme is going to lead to a tougher one anytime in the foreseeable future, they’re making a very risky judgment”. Is she right? If the Coalition and the Greens tear down the CPRS legislation, is the Rudd Government relieved of the obligation to reduce Australia’s emissions?

The short answer is no. Whether or not the CPRS legislation is passed by Parliament, the primary determinant of the trajectory of Australia’s emissions over the next decade is likely to be the international agreement that comes out of Copenhagen later this year.

The existing international climate regime established under the Kyoto Protocol is effectively a cap-and-trade scheme. It sets a limit on emissions amongst developed countries and allows trading of emission units between countries to encourage least cost abatement. This model looks like it will be carried forward into the second commitment period, which should start in 2012-13. The most contentious issues are which countries should be required to take on binding abatement targets and what form the targets should take.

Assuming the international negotiations do not collapse, under the Copenhagen agreement, Australia will be obliged to take on an emission reduction commitment (or abatement target). This target will determine what Australia’s net emissions must be for the second commitment period. In the event that Australia’s emissions exceed the target, it will be required to purchase assigned amount units (or other qualifying international units) from other countries to fulfill its international obligations.

The role of the CPRS under this framework is to ensure Australia meets its international obligations in a cost-effective way. The environmental impacts of the scheme and any complimentary government measures will effectively be set under the Copenhagen agreement. All that is left is to determine how Australia meets the emission targets.

We can cut emissions in an economically efficient manner by utilising market forces to find the cheapest abatement options, or we can do it inefficiently by trying to pick winners and shielding big polluters from the impetus for reform. The Government has opted for the latter. It has then compounded its problems by restricting Australia’s abatement targets for 2020 to between 5-15% below 2000 levels — light years away from a proportionate contribution to avoiding dangerous climate change.

This is explains why opposition to the CPRS does not equate to support for doing nothing. Australia will still be bound by the emission reduction commitment under the Copenhagen agreement. If the Government gets its way, the commitment will be weak, but that has nothing to do with whether the CPRS lives or dies in Parliament.

The Rudd Government’s proposed climate policy is both environmentally ineffective and economically inefficient. The Australian public has been offered the unappetising combination of weak targets and a high cost of achieving them. Given this, why would anyone support the CPRS? Blocking the CPRS will prevent the Government from ‘locking in’ these outcomes and leave the door open to more cost-effective climate solutions.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey