Finance Finance News Alan Kohler: The climate spin can’t go on forever. Net zero must be our aim
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Alan Kohler: The climate spin can’t go on forever. Net zero must be our aim

Australia must tackle climate change head on and strengthen its emissions trading scheme, writes Alan Kohler. Photo: TND
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The Morrison government faces a big choice when it comes time to commit fully to net-zero carbon emissions by 2050.

Most other countries have already made that commitment, and just about every other Australian organisation and state government has done it as well, but Scott Morrison’s current wording is that he wants to achieve net-zero emissions “preferably” by 2050.

That means the government doesn’t have to announce any actual policies to achieve that, just talk about advances in technology and say it would be nice if they were to cut net emissions to zero by 2050.

Maybe they can keep that sophistry going for a while, but as the pandemic passes the pressure will resume.

When Mr Morrison is forced to lose the word “preferably” from his climate change incantation, a choice will have to be made between public and private spending. That is, between the American and European methods.

Biden’s spending big

Having got his $US1.9 trillion ($2.5 trillion) economic stimulus through Congress, US President Joe Biden is now working on a $US2.3 trillion ($3 trillion) infrastructure spending plan, some of which is to go on emissions reduction and renewable energy.

By contrast, Europe runs the first and still biggest emissions trading scheme, started in 2005.

Neither of them, it should be noted, is doing anywhere near enough yet to reach net zero by 2050, but at least they’ve made a start.

The great irony is that the headquarters of capitalism – the United States – is doing it with the socialism of government spending, while Europe is using the market.

The Australian government is using a bit of both, with the emphasis on “a bit”.

There’s the Snowy 2.0 pumped hydro storage scheme, which will cost up to $4.5 billion, the $1.3 billion Modern Manufacturing Initiative and the Low Emissions Technology Statement that talked about building a hydrogen industry without mentioning a dollar figure for government investment.

Mr Biden’s $US2.3 trillion ($3 trillion) “American Jobs Plan” now before Congress only contains about $US300 billion ($394 billion) in direct spending on emissions reduction, with the rest to be spent on things like a national broadband network, new water pipes, affordable housing, roads and bridges.

But since America’s GDP is 10 times Australia’s, that’s equivalent to $30 billion here.

Even if you count emissions reduction infrastructure spending by all Australian governments you only get to $7.4 billion (according to WWF Australia).

Joe Biden’s $3 trillion ‘American Jobs Plan’ contains about $394 billion in direct spending on emissions reduction. Photo: Getty

Australian system achieving little

Australia’s emissions trading scheme is likewise a pale shadow of Europe’s.

The government’s Clean Energy Regulator issues “Australian Carbon Credit Units” (ACCUs) to anyone who gets a project approved by the Emissions Reduction Fund.

In 2020, 158 projects were approved that cut emissions by 16 million tonnes, 8 per cent more than in 2019. The CER is predicting it will be 17 million tonnes in 2021.

That 16 million tonnes of abatement in 2020 was 3 per cent of Australia’s total emissions; Europe’s ETS apparently contributed to a 21 per cent reduction in 2020.

Another way to measure the difference is the carbon price: On the European market, it recently hit a record high of 43 euros, or $66 per tonne. The “spot price” in Australia is currently $16.55.

That’s because the caps in our cap-and-trade system are high, which means emitters don’t have to buy many ACCUs.

The way an ETS works is that the government puts a cap on how much carbon dioxide each company in the land can emit, and if they want to emit more, they have to buy (trade) credits from someone who is emitting less or has an approved emissions reduction project, like planting trees, and therefore gets credits issued to them.

The European Union has a low cap and then issues a lot of free allowances, as they’re called, (17.8 billion euros worth last year); Australia simply has a set of caps that are equal to what the companies are emitting now, so they don’t have to buy any ACCUs.

That’s because the Coalition doesn’t want anything that smells remotely like a carbon tax, having triumphantly repealed Labor’s ETS in 2013 after falsely describing it as a carbon tax.

But while repealing the Clean Energy Act, the Coalition only amended the Clean Energy Regulator Act. Not only was it retained, its funding was increased in last year’s budget.

Times have changed

Angus Taylor, who goes by the title of Minister for Energy and Emissions Reduction, now regularly emits press releases announcing the regulator’s marvellous achievements in reducing emissions.

But times have changed and Tony Abbott lost his seat to an independent promoting action on climate change.

Since then, the Coalition has been trying to appear to be doing something about climate change without being accused of actually doing anything serious – thus the word “preferably” inserted into its version of the net zero by 2050 commitment.

But the “preferably” can’t last, which means the loose caps in Australia’s ETS and/or the tiny spending on renewable infrastructure can’t last, either.

Alan Kohler writes for The New Daily twice a week. He is editor in chief of Eureka Report and finance presenter on ABC News

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