A Laymans View of Carbon Reduction Policies A

A Layman’s View of Carbon Reduction Policies

A Layman’s View of Carbon Reduction Policies Overview • History of climate change policy debate • Projected impacts • Australian Government’s response • Opposition proposal • Implications for agricultural sector

A Layman’s View of Carbon Reduction Policies The Development of Australia’s Climate Change Policy

A Layman’s View of Carbon Reduction Policies Intergovernmental Panel on Climate Change • The IPCC is acknowledged by Governments around the world, including the Australian Government, as the leading authority on climate change science

A Layman’s View of Carbon Reduction Policies Intergovernmental Panel on Climate Change It states: • Warming of the climate system is unequivocal • Humans are very likely to be causing most of the warming that has been experienced since 1950 • It is very likely that changes in the global climate system will continue well into the future, and that they will be larger than those seen in the recent past

A Layman’s View of Carbon Reduction Policies Since the 1950’s our climate has changed • 0. 9°C warming since 1950 • More rain in NW Australia • More heat waves • Less rain in S & E Australia • Fewer frosts • Sea level rise 70 mm Source: BOM

A Layman’s View of Carbon Reduction Policies Local changes – NSW By 2030 Canberra’s climate could be similar to Dubbo: • Warming of 0. 6 to 1°C • 2 to 5% decrease in rainfall This is a moderate climate scenario. Source: CSIRO

A Layman’s View of Carbon Reduction Policies Potential impacts on agriculture • • • More heatwaves likely Fewer cold and frosty days More intense and sporadic rainfall More frequent or intense droughts Exceptional circumstances declarations likely twice as often and over twice the area by mid century

A Layman’s View of Carbon Reduction Policies Australia’s policy response • Both the Australian Government and Opposition parties have agreed to reduce 2000 emissions by at least 5% by 2020 and possibly by up to 25% depending on what the rest of the world does

A Layman’s View of Carbon Reduction Policies Government’s key policy response • An Emissions Trading Scheme (ETS) or Carbon Pollutions Reduction Scheme (CPRS) • Market based solution • Sets targets (cap) and issues permits (trade) • Makes big polluters pay (ultimately consumer funded) • Uses money collected from big polluters to compensate households

A Layman’s View of Carbon Reduction Policies Cap and trade • An ETS places a price on carbon emissions • CPRS is a ‘cap and trade’ system – It works by putting a ‘cap’ – or annual limit on emissions – Permits or Australian emissions units (AEUs) will be allocated or auctioned up to the total annual cap – Over time the scheme cap will reduce in line with Australia’s international obligations – Long-term certainty for investment

A Layman’s View of Carbon Reduction Policies Government’s key policy response is CPRS How does it work?

A Layman’s View of Carbon Reduction Policies Cap and trade • The second aspect of the scheme, is that businesses will be able to ‘trade’ permits • Businesses have a choice: – reduce emissions – buy more permits • Market draws out the least cost abatement

A Layman’s View of Carbon Reduction Policies Why an ETS? • Climate change is a global problem – Guaranteed emission reductions – International linkages – Least cost abatement, at least in theory

A Layman’s View of Carbon Reduction Policies Why not an ETS? • If not introduced across the globe – Make Australian production relatively more expensive – Shift production and pollution to countries that do not price carbon – Reduces our employment and shrinks our economy without addressing global warming – Political reality is that an ETS is unlikely to be consistent across industries nor across national borders

A Layman’s View of Carbon Reduction Policies Opposition’s key policy response • Direct action to reduce emissions – command control • Driven by regulation and subsidies • Offers a quick fix and arguably easier to adjust to economic changes • Works for small reductions but not able to be scaled up • Government to try and pick winners • Public purse (taxpayer) funded • Emissions Reduction Fund is the key vehicle used

A Layman’s View of Carbon Reduction Policies Emissions Reduction Fund • Funded by the Government • Invest annual average $1. 2 billion in CO 2 emission reduction activities • Businesses that reduce emissions below their baseline able to sell abatement to the government • Businesses that emit above baseline penalised • Small businesses able to opt-in

A Layman’s View of Carbon Reduction Policies Agricultural emissions • Agricultural emissions have been excluded from CPRS indefinitely – Therefore, farmers will be excluded from liabilities by not having to buy permits

A Layman’s View of Carbon Reduction Policies Agricultural offsets • CPRS offsets will apply to agriculture – Offsets are rewards for reductions in emissions from sources not covered by CPRS such as agriculture – Offsets are sold into the covered sector (high emitters such as power stations) for use against CPRS liabilities – Therefore, farmers will be able to generate income from reducing emissions, earning offsets and selling them

A Layman’s View of Carbon Reduction Policies What are offsets? Source: DCC

A Layman’s View of Carbon Reduction Policies Two types of offsets • CPRS offsets – Uncovered sources that are counted towards Australia’s international commitments, such as agricultural emissions including livestock, fertiliser use and burning of agricultural residues

A Layman’s View of Carbon Reduction Policies Two types of offsets • Voluntary market offsets – not CPRS permits – Uncovered sources not counted towards Australia’s international commitments, including through soil carbon and biochar – Transition to CPRS once abatement internationally recognised • International rules satisfied and CPRS requirements met

A Layman’s View of Carbon Reduction Policies Agricultural opportunities under Opposition proposal • Like CPRS, no direct costs or liabilities • Potential income through: – replenishment of soil carbons – tree planting and forestry activities

A Layman’s View of Carbon Reduction Policies In summary CPRS • Market based solution • • Emissions certainty Provides target flexibility Scalable Market draws out least cost abatement in theory • International linkages • Costs passed to consumer vs Direct action • • • Regulation and subsidies No emissions certainty Less flexible Not scalable Government to try and pick winners • No international linkages • Taxpayer funded

A Layman’s View of Carbon Reduction Policies Questions ?