While the political focus has been elsewhere this week, the Coalition’s “direct action” climate plan has been under sustained and highly damaging assault. Not so much from the Government (armed with its allegedly “independent” analysis from its own bureaucrats) but from rather less biased sources.

The Coalition’s plan – furiously crafted over the summer break by Greg Hunt and Simon Birmingham and signed off by the shadow Cabinet and joint party room early last week – didn’t get off to the best start with a confusing and detail-lite launch by Abbott, and things haven’t improved since then.

The first problem was Danny Price of Frontier Economics, whose “CPRS Intensive” modelling was commissioned by Andrew Robb and Nick Xenophon last year. Price had provided a letter to the Coalition portrayed as giving the stamp of approval to the new plan; in fact, Price made clear his firm wasn’t an expert in carbon abatement issues and could only confirm that third parties believed its targets were achievable – the third parties being likely recipient of funding under the plan. Price also said that he endorsed the costings of the plan – simply because the Coalition said that was the funding that would be allocated.

Price made things worse for the Coalition last week when he described the plan as a “stop-gap” (to Lenore Taylor, whose departure from The Australian means it no longer has a credible journalist covering the issue). Price even cast doubt on whether the plan would meet the 5% target supposedly more easily achieved under it than under the CPRS.  “It is probably the case that you can’t be as sure you will actually reduce emissions with the Coalition’s plan… if it turns out the price levels the Coalition sets are not enough to get the abatement they are seeking, they could offer more inducements, more money, and if people think they can make a buck they will apply.”

David Pearce from CIE, who also did climate change modeling work for the Coalition last year, was more succinct. ”I would much prefer to see a price mechanism in one way or another, be it a market mechanism, emissions trading or a tax.”

What’s been absent from most commentary on the plan is just how heavily it relies on soil carbon to get to the 5% emissions target, despite soil carbon still being at a developmental stage and not even claimable as an emissions abatement mechanism under any international agreement. Soil carbon provides 60% of the abatement under the Coalition plan, on the basis that it would pay farmers $10 a tonne of CO2-e sequestered.

This is where the most damaging criticisms were made. Peter Cosier pointed out that farmers would get more per tonne – possibly three times more per tonne – under the amendments to the CPRS sought and obtained by Malcolm Turnbull.

Turnbull himself, in his speech on the CPRS bills in Parliament this week that demolished the Coalition plan, noted that while biosequestration was an important option in addressing climate change, there was considerable work to be done on soil carbon and Government handouts were a poor way to drive it.

And Crikey revealed last week that one of Australia’s most eminent soil carbon experts, Sydney University’s Professor Alexander McBratney, believed the Coalition’s price of $10 a tonne was far too low for soil carbon measures to be viable.  He believes the price needs to be between $20-40 a tonne.

Even taking the most conservative of McBratney’s figures, this means the Coalition plan won’t even make 3.5% of the 5% emissions reduction target.

Another, altogether harsher critique arrived this week from overseas.  Greg Combet quoted it in Question Time on Tuesday, but it otherwise received only a modicum of press attention.  Bloomberg New Energy Finance is a UK-based financial analyst outfit specializing in nuclear energy, CCS and renewable energy investment. Its analysis was scathing about the plan, saying:

  • the CPRS would cost less than the Coalition plan;
  • the CPRS increased the number of low-cost abatement options by linking to international markets;
  • the Coalition plan may not exploit some low-cost abatement options;
  • the Coalition plan couldn’t be scaled up even for relatively modest targets above 5%; and
  • the Coalition plan relies too heavily on soil carbon, especially given it is not currently included in greenhouse accounting.  Worse, “by earmarking more than half of the ERF to farmers to increase soil carbon sequestration, the government has arguably already created a market distortion. While there is no doubt that carbon sequestration is an important and potentially low-cost abatement option, there are other low-cost options particularly in energy efficiency which would be excluded under this scheme.”

Greg Hunt told Crikey Bloomberg’s cost comparison between the Government and the Coalition’s proposals was “just plain wrong.  It halves the Government’s own Treasury estimates and quadruples the fact based and audited abatement prices – provided in writing to the Coalition – without any explanation.”

However, Bloomberg particularly homed in on the voluntary mechanism by which the Coalition plan would operate, saying it would only drive the exploitation of “low-hanging fruit” when it came to abatement options. “The semi-market approach suffers from being reliant on the subjective decisions of an expert body: with only the information submitted by applicants to go on, such a body can only hope to replicate the efficiency of decisions taken internally within companies.”

Bloomberg is particularly critical about the issue of scalability, dismissing the Coalition’s claims that the program will be flexible enough to accommodate higher targets.

“While there is some flexibility to scale up direct financing of abatement activity in the short term, it is probably unrealistic to expect that the government will continue to purchase emissions reductions after the majority of low-hanging fruit is exhausted and more costly abatement is required to achieve deep cuts in emissions through 2020 and beyond. A direct-action policy may thus be a 10-year policy at best.”

Given the Opposition’s admission that the action plan was only temporary and it might considering moving to an ETS (AKA great big tax) in the future, it’s hard to avoid the impression sounder minds in the Coalition agree.

In Bloomberg’s view, the conditions have almost been reached internationally that satisfy the Government’s own criteria for increasing its emissions reduction targets.

“If Australia is required to increase its commitment to 16%…  there are legitimate questions that need to be asked about the capacity of the Coalition’s scheme to deliver the requisite amount of emissions reductions.  Despite claims to its flexibility, the Coalition’s direct-action policy fails the criterion as it cannot be scaled up indefinitely. With no information about what would replace it, industry will face sustained policy uncertainty and investors in major infrastructure will continue to find Australia a complex and perhaps riskier investment environment.”

Bloomberg is independent, foreign and with no particular bias in its approach to renewables, especially given its interest in nuclear energy.  Its shredding of the Coalition plan means it’s not just the Government that might have to think about a climate action plan B.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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