Additional Comments by the Australian Greens
1.1
The Australian Greens oppose in the strongest possible terms, the
replacement of the Clean Energy Act 2011 with the Carbon Farming Initiative
Amendment Bill 2014 (the Bill).
1.2
The greatest failure of the proposed legislation is that it is a
short-term fix and incapable of being scaled up to meet our emissions reduction
challenge without a massive burden on public expenditure. It would cost
taxpayers billions of dollars to meet even mildly higher aspirations under an
international agreement that will be negotiated up to the Paris Conference of
the Parties next year.
1.3
The world expects Australia to do its fair share in limiting global
warming to two degrees. The policy that is embodied in this legislation cannot
come anywhere near this requirement.
1.4
Huge commercial opportunities currently exist for countries that are
transitioning from a high pollution intensity economy into an efficient,
low-carbon and prosperous one. The Carbon Farming Initiative Amendment Bill
2014 takes away any competitive advantages that Australia is currently
developing and instead encourages businesses to be wasteful with its resources
or to rely on government subsidies for its profitability.
1.5
Instead of the marketplace driving the innovations and productivity
gains across multiple sectors of the economy, this bill will make government
decision-makers responsible for choosing those advances in very limited
sections of the economy.
1.6
It will not drive the transformational change necessary for Australia to
prosper in a carbon constrained world faced with a climate change emergency for
the following main reasons:
(a) It is narrow. To achieve the lowest cost emission reductions, the
bulk of the grant scheme will be focussed on energy efficiency. Despite the
Minister's assurances, energy generation, mining and transport will be cast
aside from Direct Action. Carbon farming will only be competitive if the
integrity of the scheme is completely abandoned by giving absolute discretion
to the Minister to vary the relevant methodologies.
(b) It is unfinanceable because the grants are so small, contracts
are limited to five years, payment is available only on completion and the
prices on offer are so low that it falls far short of being investment grade.
Finance institutions and banks will not waste their time to finance a project
under the emissions reduction fund.
(c) It is optional so there is no incentive for polluters to
participate. The scheme will be underutilised by all except those best placed
to receive easy subsidies. Low participation increases the cost of reducing
emissions because of less competitive pressure. Furthermore any reductions in
emissions in one area of the economy will be lost by gains in another
unregulated area.
(d) It is costly because it requires a huge bureaucracy to administer
the grant scheme. There will be very little emissions reductions for the amount
of public money required to administer these expensive tasks.
(e) It is economically illiterate because to achieve enough abatement
to achieve the government's paltry 5% reduction target would require a carbon
price of between $20-40 but under the existing budget, the scheme could only
pay $3.60 per tonne.
(f) It is pointless because those projects that are most likely to
succeed under a reverse auction will be low-cost and have a short payback
period, meaning they were the most likely to happen anyway, without the
government's corporate welfare on offer.
1.7
In addition to these fundamental design flaws are the significant weakening
of the methodologies that calculate how much carbon has been sequestered in the
land.
1.8
Like the entire Direct Action policy, the mechanical framework has been
painfully contorted in order to achieve superficial political objectives. In
this case, the government's political objective is to make funds for carbon
farming competitive against energy efficiency or capital upgrade projects. To
achieve this, carbon farming rules have to be massively weakened in order to
get public money out the door and into forestry projects similar to those
driven by managed investment schemes under the Howard government.
1.9
The wide discretion provided to the minister under the Bill to allow
projects to generate credits removes any guarantee that a tonne of carbon paid
for does not end up in the atmosphere. This would result in the worst of both
worlds, public money spent on abatement projects that have no identifiable
environmental benefit.
1.10
To meet the UNFCC Kyoto rules, Australia's policy framework must be
rigorous. By giving the Minister huge discretion to undermine methodologies
makes our compliance highly questionable and may make carbon credits ineligible
in international markets.
1.11
Another area of serious concern is the removal of the prohibition on a
project earning credits from the clearing of native forests or using material
obtained from clearing a forest under s. 27(4)(j) of the Carbon Farming
Initiative Act 2011 to be replaced with the requirement for the minister simply
'consider any adverse environmental impacts' would breach the Kyoto rules.
Again the intention of the bill is to offer desperately needed revenue streams
to the failing native forest logging industry.
1.12
Finally the Greens are concerned by the weakening of the additionality
rules, the changes to the permanency requirements in order to allow 25 years of
sequestration instead of 100 (25% of the time, but still 80% of the value) and
the delinking of projects from Natural Resource Management plans.
Senator Christine
Milne
Leader of the Australian Greens
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