Having witnessed the damage that politics has caused to the now abandoned Carbon Pollution Reduction Scheme, and to the current debate over its successor, Professor Ross Garnaut has concluded the only safe way to manage a carbon price going forward is to keep politicians as far away from the process as possible.

The government’s principal climate change adviser has recommended that not one, but three separate institutions be created to establish and implement Australia’s carbon price arrangements: an independent committee to advise on future emissions reduction targets and revisions to Australia’s emissions cap; a separate independent agency to advise on assistance to emissions-intensive trade-exposed industries (EITEIs); and an independent “carbon bank” to administer the emissions trading scheme. It could be quite an empire.

He also re-inforced the need for a broad coverage of the economy under a carbon price, contrary to some recent industry submissions that have argued that EITEIs effectively be quarantined from the scheme.

Garnaut is, on Tuesday, releasing the completed updated of his 2008 Garnaut Climate Change Review, along with two supplementary papers. One of them, on governance issues, was released ahead of time, presumably to help the popular press digest the import and substance of the documents.

As he mentioned in his recently published updates, Garnaut wants the government to establish a UK-style Climate Change Commission that would provide advice on national targets and scheme caps; how to progress towards meeting those targets, and to manage the switch to a floating price; as well as expanding coverage of the scheme.

Like the UK model it would make recommendations to the government, which would have 60 days to accept or reject that advice; although, unlike recommendations made by the Foreign Investment Review Board, it would have to explain to parliament if it didn’t agree.

Regular reviews of the scheme would also be conducted. The first one would need to take place no longer than two years after the scheme’s proposed start in July next year, so that the government could consider its recommendations before the switch from a fixed price to a market-based scheme, and subsequent reviews would need to take place at least every five years.

Garnaut presumably looks at the situation in the UK with some envy. The climate commission’s work is taken seriously by both sides of politics, to the extent that the recently announced target of a 50% reduction by 2027 was made with bipartisan support and with nary a politician seen ferreting about in a fish market looking for an overpriced fillet, or an inflated door handle. Although it’s not entirely clear whether the Climate Commission was a cause or the result of bipartisan support in the UK.

The second independent agency recommended by Garnaut would advise on assistance to EITEIs, framing them in the light of costs imposed by other countries. He sees this having similar features to the Productivity Commission — and could, in fact, be that commission which, coincidentally, presents to the government on Tuesday its own investigation into the implicit price of carbon in other major economies.

Garnaut suggests, however, that it develop a “principled approach” to emissions-intensive, trade-exposed industry assistance beyond the interim period, which means ditching the CPRS-style mechanisms that will be in force during the fixed price period. Industry, nevertheless, wants the CPRS-style measures extended through to the market-based system.

Finally, Garnaut recommends an independent carbon bank — similar in purpose to the Australian Prudential Regulation Authority — as he did in his 2008 review. He says the carbon bank should have a high degree of independence in the administration of the ETS, which would include monitoring, reporting and verification systems, enforcing compliance, determining obligations to surrender permits, and managing the national registry of emissions units, and hopefully avoiding some of the mismanagement and fraud that has blighted the European ETS.

Garnaut is also resubmitting his proposal of an Energy Security Council, which could manage financial and contract market instability and contagion risks, and would be armed with instruments such as loan guarantees that could  be used as a “last resort” in the case of financial stress, but not as a means to provide compensation.

And he repeats his call for a “low emissions innovation council” that would oversee and direct Australia’s research, development and commercialisation effort in low-emissions technologies, which would have links with existing initiatives such as the Australian Research Council Linkage Grants program, Commercialisation Australia and the Australian Centre for Renewable Energy. He suggests ACRE, currently under the tutelage of the Department of Resources and Energy, should have greater independence and its role should be expanded to include all low-emission energy technologies.

*This article first appeared on Climate Spectator

Peter Fray

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