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Federal

Feb 26, 2013

The evolution of 'Direct Action': soil magic to magic pudding

The Coalition's absurd Direct Action climate policy, always grossly underfunded, will now have to provide compensation for firms after the repeal of the carbon price as well. It's not affordable.

For the first three years of its life, the Coalition’s climate action policy, “Direct Action”, merely didn’t add up. Now it has turned into a magic pudding.

“Direct Action” was released in early 2010 after being cobbled together by Greg Hunt over the previous summer following the Abbott putsch that knocked off Malcolm Turnbull. Structured around a massive grants program for big polluters and farmers, the proposal relied heavily on biosequestration via soil carbon, or what Lenore Taylor — who has played a lone hand in comprehensively demonstrating the absurdities of the policy — called “soil magic”.

Now, after Joe Hockey said the program would also be the source of compensation funds for companies out of pocket after the repeal of the carbon price, it’s become the magic pudding.

The policy itself is grossly underfunded for what it is proposed to achieve — a 5% cut in emissions by 2020. Originally costed at $1.2 billion per annum or around $10 billion to 2020, it relies, according to the Coalition’s own policy document, on 60% of its carbon abatement task being achieved via soil magic for $8-10 a tonne, and the rest delivered at higher prices, for an average cost of around $11 a tonne.

As Crikey pointed out, when the policy was released, independent experts estimated soil carbon at more like $20-40 a tonne. Hunt has gamely held out against reality since releasing the policy, but in 2011 he admitted the average price of abatement would be $15 a tonne, not $11, although where the additional 30% cost of the program was coming from wasn’t explained. Then, in August 2011, Hunt was humiliated when, on a visit to a Woorndoo farm to promote the policy, the farm owner, who had already undertaken soil carbon initiatives off his own bat, said that the Coalition’s scheme wouldn’t provide enough incentive for farmers.

As Malcolm Turnbull pointed out in 2011, Direct Action was the sort of policy that climate denialists could embrace because it could be dumped quickly. And, as Turnbull added, it would become a very significant cost to the budget in the future. As Treasury explained in its election briefing on the policy, the policy was unlikely to be able to deliver the target level of abatement without a significant increase in costs. Experience of Direct Action-style carbon abatement grants programs under the Howard and Rudd governments was that they delivered abatement for an average of $168 a tonne.

The government later released a costing suggesting Direct Action would need three times its forecast funding out to 2020, or around $30 billion. The Australia Institute suggested the cost would be more like $11 billion per annum, and noted the policy had no provision for the large number of public servants who would be needed to administer a multibillion-dollar grants program.

Now Joe Hockey has loaded another cost onto the program, saying it would be used to provide compensation for companies caught short by the repeal of the carbon price. That’s the compensation Hunt said in 2011 simply wouldn’t exist: “There is no need for or risk of compensation by abolishing the tax.”

Oops.

Hockey’s problem is that, once he’s treasurer, all this Monopoly money stuff becomes a real problem. Direct Action is a fiscal or environmental disaster waiting to happen; either the Coalition pretends that it is on track to achieve 5% emissions reductions as long as it can and then hopes voters don’t care when the reality of Australia’s rising emissions is demonstrated, or Hockey has to find at least a couple of billion dollars a year to get the program working in a way that stands a chance of reaching the 5% target.

The “case-by-case” compensation will only make that problem more acute, by at least hundreds of millions of dollars and possibly by billions.

In short, Hockey has to either admit the 5% emissions reduction target is unobtainable, or admit he needs a couple of billion a year from somewhere to fix a manifestly flawed program. He can pretend everything is fine only until he’s in office. All the magic in the world won’t help.

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21 comments

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21 thoughts on “The evolution of ‘Direct Action’: soil magic to magic pudding

  1. Terrence John Snedden

    Tony Abbott intends to repeal taxes on polluting industries and handover funds drawn from the pay checks of hardworking Australians to those very same companies. Is blaming everything on Julia blinding us to our own interests and opening the door again to the merchants of greed?

  2. Holden Back

    As much as it fills me with horror that this undeserving rabble are about to be elected, there’s a deep, anticipatory Schadenfreude waiting to see what happens when this program becomes ‘too difficult’ and the boats fail to cease coming.

    Of course they will be held to account by the News Ltd papers. What?

  3. z craig

    Perhaps there should be a media-initiated campaign to hold the greens in the senate, by which the parliament would be truly locked against say removing a carbon tax, but not say an emmissions trading scheme, which is conceivable under a coalition, although difficult to perceive now. Wny? Because the People rule in democracies. Corporate ideas about what is useful or othewise (for example removing carbon pricing) to them are not really the majority of people’s views, and parties should govern for voters, not companies.

  4. GLJ

    Come on guys. Lighten up. Its a great name. DIRECT ACTION. Its a product of DIRECT ACTION MAN himself. And youse have to go and wreck it by asking all those petty questions and doing all those dumb sums and things and quoting Joe and Hunty. Man give us a break and just dig the headlines . DIRECT ACTION. You gotta love that. Its soooo direct and action like.

  5. Milanion20

    Z Craig, the only media-initiated campaign going around is the one that supports the Coalition’s plan to remove the carbon price and pay compensation.

  6. Milanion20

    Anyway it doesn’t matter what any of the politicians do. The carbon price/tax/loading/duty/contribution will be determined by actuaries who will cause it to be loaded into premiums and asset purchasers who will demand discounts for anything that isn’t coloured green and/or safely above the high-water mark.

  7. klewso

    This is the sought of syants that appeels to Limited Gnus.

  8. Electric Lardyland

    I’ve always thought that the coalition’s ‘direct action’ plan, was modelled on their ‘direct election model’ for the republic. That is, it’s an issue that most of them have no intention of acting on, but they need an alternative proposal, to con the electorate with, until the heat dies down.
    Unfortunately, with climate change, the heat is unlikely to die down.
    And I do think that Abbott is still a climate change denier at heart, but no longer has the courage, or honesty, to say so. Which makes his carbon tax schtick of, ‘she lied, she lied, she lied to all of us!’ even more obnoxious.

  9. Andybob

    Complaining that Joe hasn’t clarified the circumstances under which compensation could be claimed and for how much feels like complaining that the top curl of a particularly pungent dog turd is a bit smelly.

  10. CHRISTOPHER DUNNE

    The very same media that went feral over “pink batts” and the BER will no doubt point out the flaws in this “Direct Action” stunt?

    No?

    Oh well…

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