THE GREENHOUSE CHALLENGE         (Part a)

Report of the Senate Environment, Communications, Information Technology and the Arts References Committee
The Heat Is On: Australia's Greenhouse Future
Table of Contents

Chapter 8

THE GREENHOUSE CHALLENGE         (Part a)

Proper evaluation of the Program's effectiveness must be based on a clear assessment of the extent to which the participating companies actually reduce their emissions below the levels they would reach without the Program. [1]

Introduction

8.1 The Greenhouse Challenge Program was first announced in 1995 as a joint government-industry initiative for working toward the reduction of greenhouse gas emissions by industry. [2] The Program is a key plank of the Government's strategy for demonstrating Australia's early response to the challenge of global warming. [3] `Early action' policies and programs are broadly aimed at capturing the potential for reductions in emissions through voluntary and cost-neutral steps. They are likely to remain a dominant feature of the Government's greenhouse policy in the absence of binding domestic or international targets. [4]

8.2 This chapter critically evaluates the effectiveness of the Greenhouse Challenge Program as a major Government policy for meeting Australia's Kyoto target. The Committee believes that integrated and strategically managed programs for industry emissions abatement are a critical component of the Commonwealth's overall response to global warming.

8.3 A number of industry witnesses argued that the Greenhouse Challenge should be the basis of national greenhouse policies. Its voluntary approach was clearly preferred to more binding measures by most industry members. The Pulp and Paper Manufacturers Federation of Australia (PPMFA) expressed a typical view:

8.4 The weight of evidence presented to the Committee suggests, however, that the Greenhouse Challenge principle of `no regrets' will severely constrain the capacity of the Government to achieve significant emissions abatement over the longer term. Indeed, there is also some question as to whether the Greenhouse Challenge has achieved significant emissions reductions over and above what would have been achieved through a business as usual approach with normal productivity and efficiency improvements. The level of emissions reduction that it is likely to be required of Australia in meeting our Kyoto commitments, and potentially more stringent commitments beyond 2012, points to the need for a more comprehensive approach.

8.5 Senator Robert Hill, Minister for Environment and Heritage, has stated that: `The Kyoto outcome has given Australia the breathing space required to make the structural changes in our economy'. [6] The Greenhouse Challenge Program is potentially a key mechanism for engaging industry on the political, social and economic implications of climate change. The Committee believes that the Program has so far failed to exercise a clear strategic role in influencing industry toward an acceptance of the environmental drivers of the `new economy'. The Committee holds that this needs to be an essential aspect of Australia's practical industry programs, if Australia's economic standing in a global economy is to be preserved over the longer term.

8.6 The Committee is of the view that the Greenhouse Challenge Program can be a useful vehicle for raising industry awareness of climate change and expertise in emissions accounting and emissions abatement. These features of the Program could potentially contribute to preparing industry for the introduction of an emissions-trading system, either internationally or domestically. The Committee concludes that the Program should be viewed as a transitional strategy until a more comprehensive framework for industry emissions abatement beyond `no regrets' is implemented.

8.7 This chapter also assesses a number of concerns raised with the Committee about the current administrative framework of the Greenhouse Challenge Program, the effectiveness of the Program in delivering additional emissions reduction and the extent to which the Government's relations with industry under the Program are accountable and transparent.

The Scope of the Greenhouse Challenge Program

8.8 The Greenhouse Challenge Program was first initiated in 1995 under the Keating Labor Government's Greenhouse 21C package. Cooperative agreements with industry were expected to yield in the order of 15 Mt CO2-e by 2000 and include inventories of baseline greenhouse gas emissions, energy and greenhouse gas audits, specific greenhouse action plans and regular objective assessment and reporting.

8.9 In 1997 the Coalition Government continued support for the Program and allocated $27.1m over five years to promote industry involvement in the Greenhouse Challenge Program, [7] (the budget for 1999 to 2000 was $6.431m). [8] It has widespread support among participating businesses. The main focus of the Program's activities has been to build capacity for the accurate measurement and reporting of emissions, and to encourage industry to improve its efficiency in energy use and processing. It has also promoted other greenhouse gas emissions strategies, for example, the use of carbon sinks.

8.10 The Greenhouse Challenge Program targets 55 per cent of Australia's total emissions and aims to cover most sectors of industry. Program members currently account for 47 per cent of emissions from the resource, mining, manufacturing, transport and services sectors and approximately 90 per cent of emissions from the electricity generation sector. [9]

8.11 The Program aims to register 500 organisations by the end of 2000 and 1,000 by 2005. So far, the Australian Greenhouse Office (AGO) has concluded 366 agreements and a further 238 businesses have indicated their `intent to sign' formal agreements. [10]

8.12 The Greenhouse Challenge Program has deliberately targeted large emitters first and, more recently, developed specific strategies to harness the potential for small- to medium-sized businesses to contribute to emissions reduction. This segment of the market could prove more difficult to capture than big business. There are a very large number of small and medium-sized businesses in Australia with an uncertain capacity to make significant savings. [11] Notwithstanding this, a commitment by all parts of industry to sustained reductions in greenhouse gas emissions could play a significant role in meeting Australia's commitments under the Kyoto Protocol.

8.13 The Greenhouse Challenge Program operates on the principle that market-based solutions offer the maximum scope for achieving Australia's greenhouse objectives at the least cost to the economy as a whole. The Program reflects the Government's view that Australia's policy response to global warming should not undermine the competitiveness of our domestic industries. The Prime Minister has consistently argued that Australia's interests:

8.14 This is the basis of the AGO's promotion of `no regrets' strategies, which are designed to avoid imposing unnecessary costs on Australian industry, whilst still allowing the Government to achieve its international policy objectives. First advanced by the Labor Government in 1990, the `no regrets' policy stated that Australia would not undertake emissions abatement without comparable action by other countries. Australia would only commit to actions which delivered benefits in addition to greenhouse gas abatement. [13]

8.15 The Coalition Government has since broadly applied `no regrets' principles to domestic abatement programs, such as the Greenhouse Challenge. A key objective of the Program implies that progress in emissions abatement is conditional on protecting industry interests:

8.16 The Greenhouse Challenge Program does not require a business to adopt any strategy or set of practices aimed at emissions reduction which might impact on its profitability over the short or longer term. Industry currently enjoys a maximum degree of control and flexibility in deciding how and when it will reduce its emissions. This flexibility allows companies to make adjustments to suit their individual business circumstances. The Program allows companies to determine what actions they consider `no-regrets' (or cost-effective) without any independent measure of what actions may be economic. In the Committee's view, this approach complicates any assessment of the Program because it effectively blurs the distinction between reductions which may have resulted from normal business efficiency measures and those which are attributable to the Program.

8.17 Australia won concessions from the international community at the 1997 Kyoto Conference by arguing that, unlike most other developed countries, Australia's economy was heavily reliant on energy-intensive industries. However, a consensus may now be emerging among developed nations that the economic impact of introducing emissions controls may not be as great as originally thought. [15] This is largely due to the increasing availability of new, efficient and cost-effective energy technologies and the creation of new forms of wealth through the information economy.

8.18 In an address to a US forum on climate change in April 2000, Senator Robert Hill, stated that:

8.19 Coupled with 1998 National Greenhouse Gas Inventory (NGGI) data indicating Australia's relatively poor performance in emissions abatement, these developments renew pressure on Australia to make a credible contribution to the global effort to mitigating the impact of human activity on the climate.

8.20 More recently, Senator Hill hinted at the prospect of Australia being isolated by international trends in climate change policy:

8.21 Australia's national approach of primarily `no regrets' has allowed the Government to place primary emphasis on the interests of Australian industry in its negotiations in the international arena. It does not automatically follow that, when applied at the level of individual businesses, a `no-regrets' approach is capable of delivering the best outcome for Australia as a whole. In evidence to the Committee, AGO representatives acknowledged the limitations of voluntary action:

and

8.22 The Australian Government is engaged in a balancing act. The current policy framework seeks to avoid unnecessary costs in adjustment, whilst recognising the potentially significant costs to future generations of not taking serious action until we are compelled to do so. Senator Hill has indicated his support for the `precautionary principle' in managing climate change, `which dictates that we act now to reduce our impact', describing it as `nothing more than the sort of commonsense approach that Australians take to a range of everyday issues'. [20]

8.23 Pacific Power was one of many contributors to the Committee's inquiry who emphasised the critical role of Government in putting in place the policy frameworks for managing a fundamental shift to new paradigms of economic production:

8.24 The central question posed by the Committee in this chapter is whether Australia's current approach of `no regrets' greenhouse emissions abatement fully captures the potential for industry to support Australia's long term interests in a sustainable economy, a healthy environment and the preservation of our basic living conditions.

How Should the Greenhouse Challenge Program be Evaluated?

8.25 According to the National Greenhouse Strategy (NGS), the engagement of industry through partnership arrangements is an essential component of the Government's practical response to managing Australia's emissions profile. [22] As international pressure increases for Australia to demonstrate credible emissions savings, enhancing the capacity of industry to contribute to Australia's national greenhouse goals is a matter of urgency.

8.26 It is against this background that the effectiveness of the Greenhouse Challenge Program, as an instrument of national policy, must be assessed. It is the Committee's view that the primary purpose of evaluating the Program should be to determine its success in harnessing the capacity of industry to make a significant contribution to our national emissions abatement target. This means that emissions by Australian industry need to reduce over time relative to the levels that would have occurred without policy controls. [23] In assessing the performance of the Greenhouse Challenge Program against this benchmark the Committee has considered whether:

8.27 The Greenhouse Challenge Program offers a range of incentives which directly and indirectly benefit business competitiveness. Improvements in energy efficiency and consequent reductions in energy costs are obvious benefits of participating in the Program. The Program also provides significant public relations benefits, with Government endorsement of participants' actions and publicly funded advertisements promoting emission abatement activities. Beyond this, the Greenhouse Challenge Program has a potentially significant role to play in facilitating the transfer of expertise between businesses and fostering innovative and flexible approaches to reducing greenhouse gas emissions. For the Government, the Program should also be a key mechanism for deepening industry understanding of the evolving science of climate change and for initiating broad-based discussion on strategies for managing the implications of global warming.

8.28 As a voluntary program, the Greenhouse Challenge Program relies critically on winning the confidence of industry and the broader public in the integrity of the Program and its processes. If the public is to be assured that the Program is making the most effective use of its resources, the Program must aim for a high degree of transparency in all aspects of its management. This chapter will give attention to the AGO's mechanisms for ensuring that the claims made by industry accurately reflect its achievements.

8.29 At the most basic level, the Program needs to demonstrate that it has the capacity to accurately and reliably measure the performance of individual participants. The Government has an important role to play in setting the standards by which the Program's results will be measured, and ensuring that sufficient scientific and technical expertise exists to support the implementation of those standards.

8.30 Measuring the results of the Program is only one, albeit critical, aspect of the Program's activities. Of equal significance for the integrity of the Program are the mechanisms for ensuring that individual participants of the Greenhouse Challenge Program are held to account, if it becomes apparent that they have not made credible efforts to comply with agreed standards. Ensuring that the Program adheres to basic principles of accountability also supports the interests of industry as it considers the design of a future emissions trading system.

8.31 This chapter will examine:

8.32 Two independent evaluations of the Greenhouse Challenge Program have been commissioned by the AGO. The first report was prepared by George Wilkenfeld and Associates with Economic and Energy Analysis (`the Wilkenfeld Report') in 1996. The most recent report commissioned by the AGO was completed in 1999 by the `Greenhouse Challenge Evaluation Steering Group', chaired by Professor Stuart Harris (`the Harris Report'). [24] The findings and recommendations of those evaluations are incorporated into the main discussion of this chapter.

Voluntary Features of the Greenhouse Challenge Program

8.33 The Greenhouse Challenge Program was welcomed by most parts of industry because it gave recognition to the capacity of business to determine how and when it would make emissions savings. The Program offers business a range of market-related incentives to join (for example, reduced energy costs and `green credentials') whilst placing the onus on business to demonstrate that more interventionist instruments are unnecessary. A number of industry representatives emphasised the practical advantages of the Government's voluntary approach. The following comments were typical:

8.34 There are two essential components to industry's practical involvement in the Greenhouse Challenge Program. Participants in the Program are firstly required to set a target for emissions abatement and secondly, to meet that target within an agreed timeframe. Only the first component appears to be enforced, with the second seemingly subject to on going revision.

8.35 The following discussion explores whether the flexibilities afforded Greenhouse Challenge participants, in meeting their targets, genuinely promote greater emissions abatement than might be the case under a regime with mandatory performance criteria. The discussion will also address whether the voluntary nature of the Program has lessened standards of accountability in the use of public money.

How It Works

8.36 A key feature of the Greenhouse Challenge Program is the emphasis placed on voluntary Cooperative Agreements. A Cooperative Agreement is the practical vehicle for capturing the potential of a company to reduce emissions.

Cooperative Agreements

8.37 On becoming a member of the Greenhouse Challenge Program, a company or industry association commits to the development of a Cooperative Agreement which sets out the company's plan and preferred approach to reducing its level of greenhouse gas emissions within a given timeframe. In the case of an industry association, a Cooperative Agreement would outline strategies for achieving a net reduction in emissions by association members as a whole.

8.38 The typical elements of a Cooperative Agreement are:

Setting targets

8.39 In the Committee's view, it is important to assess the value of emissions savings achieved by industry in relation to Australia's overall greenhouse gas reduction objectives. The NGGI figures released in 1998 indicate that total greenhouse gas emissions increased by 16.9 per cent between 1990 and 1998, from 389.8 Mt to 455.9 Mt. Australia has already exceeded the 421 Mt level which would enable it to meet our international commitment of 108 per cent of 1990 levels (excluding estimates for land clearing which will affect Australia's 1990 baseline). [29]

8.40 Although the first seven Cooperative Agreements under the Greenhouse Challenge Program were concluded in June 1996, it is unlikely that emissions savings as a result of these and subsequent agreements would have had any significant impact on national emissions levels to 1998. [30] If it is assumed that the achievements of the Program and all other abatement programs will come to bear in the NGGI figures for 2000, Australia would need to achieve an annual net decrease of at least 34.9 million tonnes from 1998 figures to reach an average annual target of 421 million tonnes (Mt) for the commitment period of 2004 to 2008. [31] In evidence given to the Committee before the release of the 1998 Inventory figures, the AGO explained that:

8.41 These figures have led the Committee to question whether the level of savings expected from industry under the Greenhouse Challenge Program will allow Australia to meet its international obligations.

8.42 In 1997, the Prime Minister, Mr Howard, indicated his expectations for the Greenhouse Challenge Program by announcing that `participants have committed themselves to reduce their forecast growth in emissions by about 22 Mt of carbon dioxide equivalent by the year 2000'. [33]

8.43 The 1999 Harris Report states that participants of the Greenhouse Challenge Program `have exceeded the 22 Mt CO2-e of abatement expectation for 2000'. [34] The Report continues:

8.44 In its submission to the Committee the AGO noted that:

8.45 Given that independent verification of most Greenhouse Challenge Agreements is still to be completed, these figures appear to be derived from estimates provided by Program participants themselves. Whilst the Committee does not necessarily call into question that savings in emissions have been made by companies, it cannot accept as given that the figures presented are in fact accurate. To date, the Greenhouse Challenge Program appears to have primarily relied on members to abide by the spirit of the Program in recording their achievements. Recently verification has been completed of 31 participants, but the results have not yet been made public.

8.46 The voluntary nature of the Cooperative Agreements means that individual industry members or associations are able to determine their own target for emissions abatement. Currently, this target does not need to be expressed in terms that would make its relationship to Australia's overall abatement objective clear. The Wilkenfeld Report noted that New Zealand has implemented such a measure:

8.47 The Committee believes that, if companies are to be granted the flexibility to determine their own targets, these should be related to the level of savings that particular sectors of industry or, industry as a whole, could be expected to make toward Australia's national objectives.

Recommendation 84

The Committee recommends that the Greenhouse Challenge Program:

Recommendation 85

The Committee recommends that the Australian Greenhouse Office develop its capacity to verify and compare the emissions output of individual enterprises to sectoral benchmarks and make these sectoral benchmarks publicly available.

Forecasting future emissions

8.48 Each Greenhouse Challenge participant is required to monitor its level of emissions relative to either a 1990 or 1995 baseline. The baseline is calculated by developing an inventory of the volume and type of emissions a company most probably generated in 1990 or 1995. [38] This baseline forms the basis for setting the company's target for reducing emissions and verifying the extent to which progress is being made under the Greenhouse Challenge Program. Companies are responsible for assessing their own baselines and for setting targets for emissions abatement.

8.49 There are two main methodologies which companies can use to forecast future emissions. The first rests on an assumption that a business would not increase its efficiency in energy usage up to the target date without the intervention of targeted programs to achieve this effect. This is known as the `frozen' or `static' efficiency assumption' (FE) and appears to be the mostly commonly used methodology by companies participating in the Greenhouse Challenge Program. [39]

8.50 The Committee heard a number of criticisms of this approach centring on the fact that businesses regularly introduce new technologies and management systems as part of normal business development which, over time, generally yield efficiencies in the order of between 1 and 1.5 per cent. [40] In explaining to the Committee the assumptions underlying its economic modelling, ABARE drew a distinction between the normal trajectory of technical change and `induced technological change' brought about by specific policy measures:

8.51 By assuming that the only changes in the emissions profile of a company are brought about by measures prompted by the Greenhouse Challenge Program, the level of abatement in emissions attributable to the Program is likely to be at least equal to the normal trend-line of business development, ie 1 to 1.5 per cent.

8.52 The 1996 evaluation of the Greenhouse Challenge Program by George Wilkenfeld and Associates points out that that the FE approach `is an entirely artificial concept and does not reflect what would have been likely to occur even in the absence of the GCP'. [42] This is because the frozen efficiency approach discounts energy efficiencies achieved as a matter of course in the life of a business. In this scenario, emissions savings can be wholly attributed to the Program without explicitly acknowledging what might have been achieved without specific greenhouse gas measures.

8.53 In evidence to the Committee, the Australia Institute argued against the use of the FE method in forecasting emissions:

8.54 It is likely that in forecasting future emissions, a number of companies may have underestimated average rates of improvement in business efficiency for their industry and may also have overestimated the level of emissions likely to be produced under normal business conditions.

Business as usual

8.55 The second methodology for forecasting emissions is referred to as the `business as usual' (BAU) scenario. Under this approach the calculation of the forecast incorporates improvements that would occur as a result of normal business development and in the absence of the Greenhouse Challenge Program. Forecasts calculated using the BAU approach would most probably reveal significant differences in progress when compared to achievements calculated using a frozen efficiency methodology. This is because companies are currently able to claim that BAU improvements to the operations of their business are the result of Program strategies for emissions abatement.

8.56 The 1996 Wilkenfeld Report stated that:

8.57 After reviewing the actions companies were intending to undertake to reduce emissions, the Report concluded that `about 83 per cent of the emissions reduction would most likely be realised in a business as usual scenario'. [45] The Australia Institute has commented that this means that `only 17 per cent of emissions reductions claimed by companies were a result of that Program and 83 per cent of the claimed reductions would have happened anyway.' [46] The 1999 Harris Report acknowledged that `some of the actions reported under the Greenhouse Challenge Program would have occurred in any event'; and concedes that `precise quantification of abatement against business as usual is problematic due to data and methodological difficulties'. [47]

8.58 In evidence to the Committee, a number of company representatives indicated that many investments in energy efficiency were not primarily driven by greenhouse gas considerations. According to Pacific Power this was because `the Greenhouse Challenge is largely limited to no regrets actions that may have been economic in any case'. Normandy Mining Ltd similarly argued that `reducing greenhouse gases is often good business in its own right as it means reducing energy usage and hence costs'. [48]

8.59 Orica explained that a particular project to convert its Botany chemical from liquid feedstock to ethane was part of a broader strategy of positioning the company for the future:

8.60 In a similar vein, Wesfarmers CSBP Limited explained that:

8.61 These testimonies highlight the practical difficulties of reliably distinguishing between those actions which would have occurred in the absence of the Greenhouse Challenge Program and those which can be attributed to the Program. [51]

8.62 The 1999 Harris Report notes however that, `measured against a business as usual scenario, the forecast of 10 Mt CO2-e of abatement… seems achievable'. [52] This estimate assumes that only 35 per cent of the total estimated savings resulting from the Greenhouse Challenge Program can be counted towards reducing national BAU emissions growth. [53]

8.63 A number of industry representatives asserted that there was little point in trying to identify the specific contribution of the Program in achieving an abatement target:

8.64 However, a number of witnesses argued that a net reduction in emissions is, in itself, an insufficient measure of the effectiveness of the Greenhouse Challenge Program. The impact of the Program would be more accurately captured by assessing the difference the Program has made to the volume of greenhouse gases emitted by a company or association since joining the Program. The Australia Institute expressed the view of many critics of the Program that:

8.65 Greenpeace Australia similarly argued that:

8.66 The Committee considers that the AGO has a clear obligation to demonstrate that public money is being used to full benefit. If a Greenhouse Challenge participant cannot demonstrate progress in saving emissions beyond BAU projections, then the Committee questions whether the resources and benefits of the Program should accrue to it.

Recommendation 86

The Committee recommends that the Greenhouse Challenge Program require participants to develop their emissions forecasts using business as usual methodologies.

Transparency

The verification process

8.67 Each Greenhouse Challenge participant must agree to independent verification of their progress in emissions reduction. Both Government and industry recognise that the credibility of the Program depends to a significant extent on whether the claims made by industry in reducing greenhouse gas emissions can be verified by independent, formal processes. The Australia Institute expressed a common view put to the Committee that `independent opinion is essential if the public is to have confidence that tax payers' funds are being spent effectively'. [58]

8.68 The verification guidelines developed by the AGO attempt to find a pathway between ensuring transparency in reporting and heeding the concerns of industry about releasing information it may regard as confidential. Verification guidelines developed by the AGO state:

8.69 The AGO clearly recognises the important role of verification reporting in building public confidence. The draft guidelines subtly warn companies to match their public assertions with sufficient evidence of performance:

8.70 The Guidelines indicate that companies selected for verification will be required to make public a report on whether the reported inventory, baseline and actions were accurate within an acceptable range. [61] They also foreshadow the need for a more detailed in-confidence report recording the actual results of the verification process. [62] These guidelines point to the minimum level of public reporting the AGO appears to believe is necessary to demonstrate the integrity of Greenhouse Challenge members and of the Program itself. The Committee is not convinced, however, that the current boundaries drawn between public and private reporting are justified or support the longer term interests of the Program.

Recommendation 87

The Committee recommends that all companies be required to verify assessments of Greenhouse Challenge Program emissions savings and to publicly disclose details.

The integrity of the Greenhouse Challenge Program verification processes

8.71 According to the Australia Institute, the policy of self-assessment provides companies with an incentive `to overstate their `business as usual' emissions, and therefore to exaggerate the cuts due to the Program'. The Australia Institute contends that this has led to the Program being `plagued with systematic overstatement of emissions reductions'. [63]

8.72 The AGO appears to have gone some way to ensuring that the Greenhouse Challenge Program does not rely exclusively on results reported by its members. The AGO's Guidelines for Greenhouse Challenge Independent Verification, produced in March 2000, provide details on how emissions savings by Program participants will be verified. [64]

8.73 At the time of the writing of the Harris Report in 1999, only pilot evaluations had been completed of the first four companies to have joined the Greenhouse Challenge Program: BHP, Shell, CRA and ICI. [65] The Report determined that `verification revealed that the reported data and the processes for identifying emissions and collecting data were robust'. [66]

8.74 The confident results of the initial evaluation of the Greenhouse Challenge Program do not, however, appear to have been sustained. In Senate Estimates Committee Hearings conducted on 3 May 2000, the AGO revealed that 76 Program participants had submitted progress reports and that of these a number had amended their reports to reduce the amount of emissions they had originally forecast:

8.75 The AGO stated that, of 76 participants, only `8 have met their original forecasts'. [68]

8.76 These results are disappointing, but do not technically breach the terms of a Cooperative Agreement. The Verification Guidelines suggest that there a number of options available to Greenhouse Challenge members that do not achieve their targets for emissions reduction:

8.77 The guidelines further indicate that `participants are also able to withdraw from the Program without penalty'. [70]

8.78 The Committee acknowledges that there is a need to build expertise in estimating and verifying industry emissions, and that this will come from experience. It is, however, a matter of concern to the Committee that information on revisions made by companies to their Cooperative Agreements is not easily accessible to the public.

8.79 The AGO has recently contracted Det Norske Veritas (DNV) to manage the verification of another 31 Greenhouse Challenge participants. [71] According to its website, DNV is an independent Norwegian `foundation' specialising in certification and quality assurance services.

8.80 An October 2000 media release from the Minister for Industry, Science and Resources, Senator Minchin, reported that 31 Greenhouse Challenge members were independently verified in 2000. The release stated that `the verification process cleared all but 5 of the firms taking part and the Greenhouse Office is now working with 5 companies to correct some minor reporting errors'. [72]

8.81 However, no information about the performance of the verified members has been released. The Committee is concerned that these verification results are not open to scrutiny and that such secrecy only perpetuates the problems involved in accurately assessing the effectiveness of the Greenhouse Challenge Program in stimulating emissions reduction. [73]

Recommendation 88

The Committee recommends that any changes to the level of forecast emissions savings by Greenhouse Challenge Program members made after the signing of Cooperative Agreements be publicly disclosed.

Have enough resources been allocated to verification?

8.82 The importance of verification to the overall credibility of the Greenhouse Challenge Program cannot be overstated.

8.83 The AGO has clearly applied risk management principles to verification, recognising that, as the Program increases its membership, the total cost of verification will escalate. According to the Draft Verification Guidelines:

8.84 It is likely that an increase in the number of small and medium-sized businesses would require the Government to significantly increase its allocation of resources to verification. However, a sufficient number of verifications need to be carried out to support the claims of the Program. The Committee doubts whether a 10 per cent to 20 per cent selection of members would ensure the Greenhouse Challenge Program is regarded as credible.

8.85 A question also arises whether the costs of verification should in fact be borne by Government, when there are such significant benefits of Greenhouse Challenge membership for industry.

Recommendation 89

The Committee recommends that verification be funded by industry, while remaining independent of industry.

(Chapter 8 - Part b)

 

Footnotes

[1] The Australia Institute, Submission 79d, p 2298.

[2] The Australian Greenhouse Office, Submission 169, p 1690.

[3] It contributes to the major priority of the National Greenhouse Strategy of `limiting greenhouse emissions', Australian Greenhouse Office, The National Greenhouse Strategy: Strategic Framework for Advancing Australia's Greenhouse Response, 1998; and see The Australian Greenhouse Office, Submission 169, p 1680.

[4] This definition is taken from a US report by the President's Council On Sustainable Development Climate Task Force, http://www.whitehouse.gov/PCSD/tforce/cctf/cprinc.html. It appears to be a widely accepted explanation of `early action' policy and fairly describes the approach taken by the AGO.

[5] Pulp and Paper Manufacturers Federation of Australia, Submission 190, p 2006.

[6] Senator the Hon Robert Hill, Opening Address to the Insurance Council of Australia's Canberra Conference, 10 August 2000, Department of Environment and Heritage, Media Release and Speeches, http://www.environment.gov.au/minister/env/2000/sp10aug00.html (13/08/00), p 3.

[7] Statement by the Prime Minister of Australia, the Hon John Howard, Safeguarding the Future: Australia's response to climate change, 20 November 1997, http://www.greenhouse.gov.au/ago/safeguarding.html (17/07/00), p 1.

[8] Email to the Committee from Linda Powell, Executive Manager, Partnerships Group, Australian Greenhouse Office, 26 July 2000.

[9] Quoted from Greenhouse Challenge: Evaluation Report 1999, p 19. See also, The National Greenhouse Strategy, 1998, p 34.

[10] Letter to the Committee from Linda Powell, Executive Manager, Partnership Group, Australian Greenhouse Office, 23 August 2000.

[11] According to the Annual Report of the Department of Employment, Workplace Relations and Small Business for 1998-99, there are approximately 948,000 private sector non-agricultural small businesses in Australia. These businesses produce more than one third of Gross Domestic Product and account for about 40 per cent of total public and private sector employment (p 38).

[12] Statement by the Prime Minister of Australia, the Hon John Howard, Safeguarding the Future: Australia's response to climate change, 20 November 1997, http://www.greenhouse.gov.au/ago/safeguarding.html (17/07/00).

[13] Australia and Greenhouse Policy - A Chronology, Background Paper No.4 1997-98, Parliamentary Library Information and Research Services, p 6.

[14] http://www.greenhouse.gov.au/challenge/.

[15] President Clinton's State of the Union Address (27 January 2000), discounted industry concerns about the economic impact of introducing emissions controls: `Many people still believe you cannot cut greenhouse gas emissions without slowing economic growth. In the Industrial Age that may well have been true. But in this digital economy, it is not true anymore. New technologies make it possible to cut harmful emissions and provide even more growth', http://www.whitehouse.gov/Initiatives/Climate/main.html.

[16] Department of Environment and Heritage, Hill Addresses Key Global Warming Forum', 26 April 2000, Media Release, http://www.environment.gov.au/minister/env/2000/mr26apr00.html.

[17] Senator the Hon Robert Hill, Opening Address to the Insurance Council of Australia's Canberra Conference, 10 August 2000, Department of Environment and Heritage, Media Release and Speeches, http://www.environment.gov.au/minister/env/2000/sp10aug00.html (13/08/00), p 3.

[18] Proof Committee Hansard, Canberra, 9 March 2000, p 17.

[19] Proof Committee Hansard, Canberra, 9 March 2000, p 4.

[20] Department of Environment and Heritage, `Opening Address by Senator Robert Hill to the Insurance Council of Australia's Canberra Conference', 10 August 2000, p 2, http://www.environment.gov.au/minister/env/2000/sp10aug00.html.

[21] Pacific Power, Submission 98, p 803.

[22] National Greenhouse Strategy, 1998, p 34.

[23] The original objective of the Greenhouse Challenge Program was to `capture the capacity of industry to abate its greenhouse emissions.' The Wilkenfeld evaluation of the Greenhouse Challenge Program in 1996 noted that `capture in this context can be taken to imply two meanings: to prompt actions that may not otherwise have occurred, and to document actions, whether or not they would have occurred.' This Committee has placed a clear emphasis on determining the extent to which actions have been undertaken as a result of Government policy and more specifically, the Greenhouse Challenge Program.

[24] The membership of the Greenhouse Challenge Evaluation Steering Group was drawn from senior levels of the Australian Greenhouse Office, the Department of Industry, Science and Resources, Agriculture, Fisheries and Forestry - Australia, the Australian Industry Greenhouse Network, the Australian Petroleum Production & Exploration Association and the Cement Industry Federation. Professor Stuart Harris is appointed at the Research School of Pacific and Asian Studies at the Australian National University, (from the Greenhouse Challenge Evaluation Report, p 81).

[25] Cooperative Agreement, A Report on the Greenhouse Challenge 1998-99, Tabled document, 10 March 2000, Canberra, p 2.

[26] Woodside Energy Ltd , Submission 129, p 1289.

[27] Southern Pacific Petroleum, Submission 172, p 1751.

[28] See Guidelines for the Cooperative Agreements Program, p 2, http://www.greenhouse.gov.au/challenge/guidelines.html.

[29] Australian Greenhouse Office, NGGI, p A-3.

[30] Australian Greenhouse Office, National Greenhouse Gas Inventory: Analysis of Trends and Greenhouse Indicators 1990-1988, `It is difficult to detect any effects of the National Greenhouse Response Strategy (NGRS), the National Greenhouse Strategy (NGS) or of programs such as the Greenhouse Challenge from these indicators alone. The NGRS was adopted in December 1992, and its successor the NGS in December 1998, so one or the other was in place for about two thirds of the period covered by this analysis (July 1990 to June 1998). The Greenhouse Challenge Program was in operation for less than half of the period' (pp 59-60).

[31] These figures are approximate only as Australia's baseline in terms of actual tonnes of emissions is yet to be firmly established, largely due to the uncertainty of emissions from the land use change and forestry sector, in particular land clearing (see chapter 7).

[32] Proof Committee Hansard, Canberra, 9 March 2000, p 8. (While the changes from 1990 to 1994 were relatively small, total emissions have increased significantly between 1994 and 1998, NGGI, p A-3).

[33] Statement by the Prime Minister of Australia, the Hon John Howard, Safeguarding the Future: Australia's response to climate change, 20 November 1997, http://www.greenhouse.gov.au/ago/safeguarding.html (17/07/00).

[34] Note that this estimate is taken from the report by Professor Stuart Harris, Greenhouse Challenge: Evaluation Report, 1999, p 3. This figure is higher than the 21 Mt CO2-e indicated in The National Greenhouse Strategy, 1998, p 34.

[35] Greenhouse Challenge: Evaluation Report, 1999, p 37.

[36] Australian Greenhouse Office, Submission 169, p 1690.

[37] George Wilkenfeld and Associates, 1996, p 12 (emphasis added).

[38] `The inventory is the `fixed point' and the baseline is the trend from which emission abatement performance is assessed… ' from the Greenhouse Challenge Independent Verification Program: Verification and Reporting Guidelines, March 2000, p 8.

[39] `A static efficiency measure of emission abatement is used by most participants', Greenhouse Challenge, Evaluation Report, 1999, p 23; and Ms Gwen Andrews, Chief Executive Officer, AGO, told the Committee that: `The Program was always based on a static efficiency baseline…', Official Committee Hansard, Canberra, 3 May 2000, p 4.

[40] `As energy efficiency is improving most of the time - large-scale economic models typically assume a rate of improvement of 1 per cent to 1.5 per cent per annum', The Australia Institute, Submission 79d, p 2300.

[41] Official Committee Hansard, Canberra, 16 August 2000, p 893.

[42] Wilkenfeld Report, 1996, p 27.

[43] Dr Clive Hamilton, Proof Committee Hansard, Canberra, 10 March, p 56.

[44] Wilkenfeld Report, 1996, p 20.

[45] Wilkenfeld Report, 1996, p 28.

[46] Dr Clive Hamilton, Submission 79d, p 2303.

[47] Greenhouse Challenge, Evaluation Report, 1999, p 46.

[48] Proof Committee Hansard, Perth, 17 April 2000, p 475.

[49] Proof Committee Hansard, Canberra, 10 March 2000, p 99.

[50] Proof Committee Hansard, Perth, 17 April 2000, p 520.

[51] Greenhouse Challenge, Evaluation Report, 1999, p 23.

[52] Greenhouse Challenge, Evaluation Report, 1999, p 46.

[53] Great Southern Energy, Submission 150, p 1559.

[54] Australian Aluminium Council, Proof Committee Hansard, Canberra, 10 March 2000, p 51.

[55] Minerals Council of Australia, Proof Committee Hansard, Canberra, 10 March 2000, p 72.

[56] The Australia Institute, Submission 79d, p 2298.

[57] Proof Committee Hansard, Canberra, 23 June 2000, p 752.

[58] The Australia Institute, Submission 79d, p 2300.

[59] Greenhouse Challenge Independent Verification Program: Verification and Reporting Guidelines, March 2000, pp 4, 15.

[60] Greenhouse Challenge Independent Verification Program, 2nd Discussion Paper (Draft), April 1999, p 30.

[61] `within 10% of the aggregate emissions of the firm', Greenhouse Challenge Independent Verification Program, p 3.

[62] Greenhouse Challenge Independent Verification Program: Verification and Reporting Guidelines, March 2000, p 15.

[63] Dr Clive Hamilton, Proof Committee Hansard, Canberra, 10 March 2000, p 56.

[64] The guidelines are intended to be used by independent verifiers to determine the accuracy of the self-reporting of baselines, emissions inventories and abatement progress under the Challenge. Greenhouse Challenge Independent Verification Program: Verification and Reporting Guidelines, 6 March 2000.

[65] ICI is now known as Orica Pty, Ltd.

[66] Greenhouse Challenge, Evaluation Report, 1999, p 61.

[67] Mr John McBride, Director Greenhouse Challenge, AGO, Senate ECITA Estimates Committee Hearings, Official Committee Hansard, Canberra, 3 May 2000, p 2.

[68] Mr John McBride, Director Greenhouse Challenge, AGO, Senate ECITA Estimates Committee Hearings, Official Committee Hansard, Canberra, 3 May 2000, p 2.

[69] Greenhouse Challenge Independent Verification Program, 2nd Discussion Paper (Draft), April 1999, p 16.

[70] Guidelines for the Cooperative Agreements Program, http://www.greenhouse.gov.au/challenge/guidelines.html.

[71] DNV has been given responsibility for managing 17 auditors selected by the AGO (Official Committee Hansard, Canberra, 25 June 2000, p 625). See also http://www.dnv.com/dnvabout/.

[72] Senator the Hon Nick Minchin, Media Release, Greenhouse Challenge Delivers Credibility, 11 October 2000.

[73] Senator the Hon Nick Minchin, Media Release, Greenhouse Challenge Delivers Credibility, 11 October 2000.

[74] Greenhouse Challenge Independent Verification Program, 2nd Discussion Paper (Draft), April 1999, p 30.

 

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