Direct Action is often perceived as an exercise in keeping up appearances: a fig-leaf policy from a government that has expressed little enthusiasm for serious action on climate change. But with the possible neutering of the Renewable Energy Target, Direct Action subsidies are set to be the main pillar of Australia’s climate change mitigation effort as well as a new drain on our scarce fiscal resources.
The cornerstone of Direct Action is a system of subsidies for emissions-reducing projects, channelled through an Emissions Reduction Fund. In a nutshell, government will pay companies to implement specific projects that are thought to reduce emissions. It will “buy up the cost curve”, purchasing the lowest-cost emissions reductions first.