At the heart of yesterday’s amendments to the Government’s ETS lies a calculation — partly policy-based, but mostly political — that an international agreement is the key to addressing climate change and a fight over the design of a unilateral scheme is not one the Government is prepared to spend political capital on.

From the Government’s point of view, in the event there is no worthwhile international agreement, it doesn’t particularly matter whether Australia runs a joke of a scheme to achieve its unilateral 5% reduction by 2020, because nothing is going to help much anyway. And if there is an effective global scheme, it will dump the handouts to polluters.

Thus the apparent trade-off between a significant increase in its international agreement target, from 15% to 25% by 2020, and even more handouts to the biggest polluters and a delay.

I say “apparent” because there is much in the way of sleight-of-hand and outright deception in yesterday’s package.

Most importantly, the conditions for the 25% target are almost impossible to fulfil. To be strictly fair, there’s no deception here: Government sources yesterday stressed the heavy conditionality of the 25% commitment. Australia will only move to a 25% target if the following conditions are met:

Comprehensive global action capable of stabilising CO 2-e concentrations at 450ppm CO2-e or lower. This requires a clear pathway to achieving an early global peak in total emissions, with major developing economies slowing the growth and then reducing their emissions, advanced economies taking on reductions and commitments comparable to Australia, and access to the full range of international abatement opportunities through a broad and functioning international market in carbon credits.

This would involve:

  • comprehensive coverage of gases, sources and sectors, with inclusion of forests (REDD) and the land sector (including soil carbon initiatives (e.g. bio char) if scientifically demonstrated) in the agreement;
  • clear global trajectory, where the sum of all economies’ commitments is consistent with 450ppm CO2-e or lower, and with a nominated early deadline year for peak global emissions not later than 2020;
  • advanced economy reductions, in aggregate, of at least 25% below 1990 levels by 2020;
  • major developing economy commitments to slow growth and to then reduce their absolute level of emissions over time, with a collective reduction of at least 20% below business-as-usual by 2020 and a nomination of a peaking year for individual major developing economies;
  • global action which mobilises greater financial resources, including from major developing economies, and results in fully functional global carbon markets.

Which is a lot like “pensioners free if accompanied by both grandparents”.

Otherwise, it’s the same deal as before: 5% if there’s no agreement, 15% if there’s an international deal short of the stuff above.

So don’t be too distracted by the “new” target. It won’t happen.

There’s plenty of deception elsewhere though. As Greg Hunt pointed out this morning — much to the discombobulation of Greg Combet — the scheme will operate as a carbon tax during its first year, despite the Government repeatedly rejecting a carbon tax. And yesterday the Prime Minister was insisting that the scheme had been strengthened when it had been demonstrably and obviously weakened by additional handouts to large polluters, as well as delayed. As the Government correctly noted last year, the longer you delay action on climate change, the greater the costs. As of yesterday, delay was a virtue.

This wasn’t just about making life easier for polluters. The complaint that household action would not contribute to reducing emissions came from nowhere earlier this year and bit the Government on the backside, despite being entirely meaningless. In response, the Government has achieved the remarkable feat of simultaneously over-compensating for it and yet not appearing to do anything about it. Now changes will be made to the ETS target range-setting process to somehow recognise the efforts households are making, including through the purchase of Green Power. There’ll also be a new “Energy Efficiency Savings Pledge Fund” which will, inexplicably, cost $25m to establish and which will pool contributions from individuals for the purchase and retirement of carbon permits.

“Individuals will be able to calculate their energy use and establish the savings they could achieve with a more energy efficient home,” the Prime Minister said yesterday.

“A household or individual could then make a tax deductible donation to the pledge fund, which the pledge fund would use to buy and cancel carbon pollution permits equivalent to that level of energy use.”

Get that? So, you spend the money on a solar panel or suchlike, and THEN if you want to make really sure you have made a difference, you can spend more money contributing to buying permits. Or you can skip the panel bit and just go straight to making a pledge. Or, if you’re a multinational mining company, you can just bitch and moan while being handed hundreds of millions of dollars in free permits.

Except, theoretically, the Government is going to be adjusting its target to take account of your solar panel anyway. So it’s like double-counting. Except, if there’s an international agreement, the price of carbon permits won’t vary unless you buy billions of them, because it will reflect international levels of demand, not Australian demand. So there’s no point contributing to the pledge fund…

I don’t think I’ve ever seen a policy with such a high ratio of needless complexity to real-world consequence.

The Government has also ramped up complementary measures, another area where they’ve been criticised. One of the few good ideas in the package is an Energy Efficiency Trust to fund building energy efficiency HECS-style, with businesses repaying the investment from cost savings. And reforestation credits can be obtained from 2010, on an opt-in basis. There’ll be sundry other measures for business, amounting to $200m. Wayne Swan attended yesterday’s press conference and said nothing, presumably standing there wondering what the holy hell these people were doing to his budget.

The increase in assistance to big polluters will also move the entire scheme closer to the point where it stops being self-funding and starts needing budget assistance, although that’s likely to be a problem for a future Treasurer.

In short, the Government has tried to fix all the presentational problems of its scheme, making it even less effective, more complicated and entirely at odds with its rhetoric right up until a couple of days ago.

It has also given up entirely on the idea that our biggest polluters should contribute to the task of reducing emissions. Between 94.5% of free permits, and exemption from the Renewable Energy Target handed out last week, big polluters will not be required to make any effort to operate more efficiently or move to lower-emissions technology. During the first, carbon tax stage of the scheme, the biggest polluters will only pay an initial carbon price of 55 cents per tonne.

The heavy lifting of meeting even a 5% target will be left to households and more energy-efficient businesses. But the inequity of that approach has been entirely lost in the special pleading and apocalyptic threats of the rentseekers, some of whom, like Mitch Hooke and Don Voelte, are still continuing their whingeing today.

But for the Government, that’s a price it is happy to pay to manoeuvre the climate change debate back within its control. And by its reckoning, if no global deal emerges later this year, it doesn’t matter whether Australia has a good or a bad scheme anyway.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey