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.

Peter Fray

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