Essay by Eric Worrall
Carbon tax round 2 – After claiming in 2020 a carbon tax is no longer needed, Australia’s Prime Minister Albanese has decided to offer top emitters an “opportunity” to pay a $75 / ton carbon price, with the aim of bringing down emissions 5% every year, to achieve the government’s 43% reduction by 2030 target.
Carbon price capped at $75, but will rise with inflation
John Kehoe Economics editor
Updated Jan 10, 2023 – 3.40pm,first published at 2.07pmSaveShare
Big industrial emitters have been offered a carbon price cap starting at $75 a tonne that will rise with inflation to give business certainty about the maximum compliance costs of the Albanese government’s decarbonisation plan.
More than 200 of the country’s biggest industrial emitters will need to cut emissions by an average of almost 5 per cent each year to 2030, to help the government meet its 43 per cent reduction target.
The reformed carbon plan for industrial emitters, proposed by Energy and Climate Minister Chris Bowen on Tuesday, provides support to trade-exposed businesses and regions for decarbonisation via $600 million earmarked from the $1.9 billion Powering the Regions Fund.
The government has compromised between setting site-specific emission caps and industry-average benchmarks, settling on a hybrid approach.
“Baselines would be heavily weighted towards site-specific levels at scheme commencement, and transition to industry average benchmarks by 2030,” the government’s position paper says.
…Read more (paywalled): https://www.afr.com/policy/energy-and-climate/emission-targets-for-big-polluters-released-20230110-p5cbh6
Back in 2020, in the leadup to the 2022 election, Albanese claimed a carbon price is no longer needed.
I guess he changed his mind.
Carbon price no longer needed: Albanese
By Katie Burgess
Updated June 24 2020 – 5:06pm, first published 4:15pm
However Mr Albanese told the Press Club a price on carbon was no longer necessary.
“The thing about where we were in 2007 … is that renewables at that time needed support in terms of a market-based mechanism. The fact is that the cheapest form of new energy in this country [today] is renewables. It’s solar and wind. The circumstances have changed.
“Renewables today are looking for a different framework. So if you ask are we going back to the old system, the answer to that is no. We’re looking forward, not backwards. And we’re looking forward at a mechanism that will drive that change through the economy.”
…Read more: https://www.canberratimes.com.au/story/6804384/carbon-price-no-longer-needed-albanese/
A recent government commissioned report upheld the integrity of the nation’s carbon credit market.
Carbon credit scheme review rejects criticisms it is flawed, recommends changes to improve transparency
By political reporter Georgia Hitch
An independent review into the government’s carbon credit scheme has rejected suggestions it is fundamentally flawed, but has made a series of recommendations to improve its transparency and integrity.
- The review found the scheme was “fundamentally” well designed when it was first introduced
- The panel has recommended data on credits should be made public
- Critics says it is confusing that the report thinks the scheme is working but has recommended significant governance changes
The scheme works by giving a carbon credit, officially called an Australian Carbon Credit Unit (ACCU) for every tonne of greenhouse gases avoided or stored by registered projects.
These credits are purchased by the government and go toward meeting emissions reduction targets, but a growing number are sold into a private marketplace to businesses wanting to offset their own emissions.
Last year a number of criticisms were made of the scheme, including by ex-industry insiders who claimed it had become a “rort” and some industry players who argued the rules did not incentivise any additional emissions reductions.
The review panel, chaired by former chief scientist Ian Chubb, noted the integrity of the scheme had been called into question.
“It has been argued that the level of abatement has been overstated, that ACCUs are therefore not what they are meant to be, so the policy is not effective,” the report said.
“The Panel does not share this view.
“Notwithstanding the criticisms advanced, the Panel concludes that the ACCU scheme was fundamentally well designed when introduced.”
…Read more: https://www.abc.net.au/news/2023-01-09/australian-carbon-credit-units-review-report/101836478
Funny how the cheapest form of energy needs so much government help to get on its feet.
I doubt the Chubb Report into carbon credit integrity solves or changes anything. The stench of fraud will always hang over carbon credit schemes, because unlike other forms of fraud, there is no financial incentive to report carbon credit fraud when it occurs.
Both the seller and buyer benefit financially when a fraudulent carbon credit is sold.
The criminal who sells the carbon credit makes money for nothing. The purchaser who turns a blind eye to the crime gets to burnish their green credentials, or satisfy mandatory carbon credit purchase requirements, at a steep discount to the price of purchasing real carbon credits.
Simple market forces create an overwhelming financial incentive to produce, buy and sell fake carbon credits.
Keeping carbon credit markets honest is like trying to balance an egg on its point – the slightest relaxation of vigilance, and everything topples over. Fraudulent credits undercut and drive out genuine credits, and in an eye blink everyone still participating is in on the game.
Even if we accept the in my opinion dubious claim that existing carbon credit schemes are honest, I doubt this alleged integrity will last, once real money enters the system.
As for the impact of the carbon tax on the Australian economy, I suspect the re-introduction of a carbon tax has already been priced into market expectations. Many Aussie dispatchable energy providers are already closing shop as rapidly as they can organise an orderly retreat from Australia’s energy market. Confirming their worst fears, by introducing an “opportunity” to purchase carbon credits, simply increases the incentive to pack up and leave.
Even parts salvaged from the decrepit coal plants will be welcome in poor countries which are struggling to industrialise.