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Tag Archives: Emissions Reduction Fund

Fiddling the figures while the planet burns – Fact-checking Frydenberg

In an interview on ABC radio last Thursday, Josh Frydenberg was eventually forced to admit that emissions rose again last year as they have every year since the repeal of the carbon price.

He then went on his usual obfuscation rant of cherry picking data and making dubious claims.

“If you look at the last quarter [emissions] went down, if you look at the trend it is improving”.

Actually, whilst the seasonally adjusted emissions decreased 0.6% in the June quarter 2017, trend emissions increased 0.3% when compared to the March quarter 2017.

Annual emissions increased 0.7%. If you include Land Use, Land Use Change and Forestry (LULUCF), emissions rose 1.3% over the year.

Mr Frydenberg then stated that emissions on a per capita and GDP basis were at “their lowest in 28 years”.

Whilst these may be useful comparative measurements, they make absolutely no sense in the grand scheme of things because the atmosphere doesn’t really care how many of us there are. It is our absolute emissions that make the difference, not any per capita or GDP comparisons.

“What you need to focus on here is what is happening in different aspects of the economy as a result of policies we are putting in place,” he said. “What we are seeing is real improvements in various aspects of the economy.”

Mr Frydenberg pointed to the national energy productivity plan (NEEP) which aims to boost energy efficiency in the built environment by 40 per cent by 2030.

Except when you read the NEEP annual report it says “2015–16 saw Australia’s primary energy consumption increase sharply, slowing the rate of improvement in energy productivity to 0.4 per cent (compared to a 15-year average of 1.7 per cent a year).”

Frydenberg also referred to the emissions reduction fund, focused on agriculture and the land sector, which he claimed has abated up to 190 million tonnes of carbon dioxide at an average cost of $12 a tonne.

Except it hasn’t yet and probably won’t.

Some of the contracts last to 2025, the money is all but spent, and no new funds have been allocated. The government’s own goal is a “projected abatement estimate for the Emissions Reduction Fund to 2020 of 92 Mt CO2-e”.

A well-researched, well-sourced paper released in December shows how dubious the process for verifying and certifying emissions reductions under the ERF is, how it has led to “rent-seeking” from existing projects, and how the accounting is being fudged.

“Government claims regarding abatement of greenhouse gas emissions so far achieved under the scheme should be discounted. We are counting as new benefit steps that have either never occurred, or that happened in the past.”

According to the government’s latest quarterly update, in 2016-17, Australia’s annual greenhouse gas emissions were “0.8% below emissions in 2000 and 9.1% below emissions in 2005”.

Except the emissions projection report states the following emissions by year (Table 3 p12):

2000 551

2005 597

2017 554

2020 551

2030 570

We committed to a 5% reduction on 2000 levels by 2020 yet the projections are for no decrease at all. We then dodgily changed the base year and committed to a 26-28% decrease on 2005 levels by 2030 but the projections instead show a 4.5% decrease (or a 3.4% increase on 2000 levels).

The projections report states that “The 2030 target will require between 868 and 934 Mt CO2-e in cumulative emissions reductions between 2021 and 2030 to meet the 26 per cent and 28 per cent targets respectively.”

Not to worry.

Reminiscent of Nero, this government will continue to fiddle the figures while the planet burns, pretending they are doing something other than commissioning and ignoring reports.

 

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Does a successful ERF auction bid really help an Australian company to remain competitive?

By Dr Anthony Horton

Now that the results of the second Emissions Reduction Fund (ERF) auction have been released, I think it is reasonable (and important) to reflect on how being successful in an auction could assist an Australian company to remain competitive (and enhance their competitiveness) on the world stage.

In analysing the auction results, Climate Institute CEO John Connor pointed to the need for a policy focus that will show the world that Australia has a clean and modern economy. He also put the results into context in terms of the first two auctions contributing 3.5% of Australia’s total emissions to 2030, representing 8% of a 2030 abatement target commensurate with Australia making its rightful contribution to the 2°C warming cap and representing 15% of the Government’s current 2030 target.

The Media Release from the Climate Institute yesterday afternoon gave a very good analysis of auction outcomes and prompted me to think about “what next” from the point of view of an Australian company. This is prudent given the way that many international Governments and large very well known brands are moving on the opportunities that climate change is already presenting and will continue to present going forward.

Those of you that have read my previous blog posts will know that I analyse and comment on the international policy landscape with respect to climate change and the response of the business community. As a result of following both of these closely, five points come to mind that the Australian Government and companies will need to grapple with (and rather quickly find workable solutions for) in order to both reduce their emissions and maintain (and over time increase) their international competitiveness.

1) Governments will need to implement innovative policies that empower companies to identify and pursue low carbon opportunities. By its very name, the ERF offers Australian companies opportunities to implement lower emission projects. This assumes they were successful in the bidding process and can comply with all of the contractual compliance conditions including delivery timelines of course.

These conditions (and others that successful bidders are required to agree to) are quite onerous, and given that taxpayers’ money has been put up for the fund, many Australians would say that such conditions are perfectly justified. If an Australian company wasn’t successful or did not bid, it is difficult to see where the incentive to identify and pursue such opportunities are in a domestic context given that keeping the doors open is challenging enough in Australia at present.

2) There is a clear signal that future policies need to mandate or incentivise the procurement of a large percentage of a companies’ energy needs from renewable sources. In previous blogs I have highlighted examples of Governments increasing their investment in renewable energy and multinational corporations factoring this into their procurement decisions-for either goods or services (or even for both). As a result of doing this, not only have cost savings been realised, their corporate social responsibility profile has (in some cases) been significantly transformed.

The corporations that are making such procurement decisions have realised the importance of continuous improvement in terms of their own business performance, and therefore it is justifiable that they ask this of suppliers. At present I don’t see how the ERF or the Direct Action Policy assists Australian companies with this. I am aware of Australian Renewable Energy Agency (ARENA) funding for renewable projects, however again that is a competitive process and if you aren’t successful where is the incentive then?

3) It is clear that science based emission reduction targets are gaining significant traction in both Government and business spheres. The We Mean Business Coalition has published detailed guidance information on how to do this-whether by the 3% solution, by cutting absolute emissions, using value added approaches or lastly the Sectoral Decarbonisation Approach (SDA). Again targets like this clearly demonstrate that corporations understand the challenges and opportunities that climate change presents. Being market based, those that adopt these could see their competitive advantage grow over time.

The ERF is predominantly designed for individual projects rather than a series of projects one after the other, and while companies can reduce their emissions over time for that project (above comments regarding contractual compliance notwithstanding) I find it difficult to see how it encourages Australian companies to set science based emission reduction targets.

4) Pricing carbon internally and 5) investing in renewable energies and low carbon assets are both fairly self explanatory. Given that there is no longer a carbon pricing mechanism in Australia, once again it is difficult to see where the incentives are for Australian companies to do this. Perhaps the best illustration of the worldwide hunger to invest in renewables is the divestment movement. The sheer scale of the divestment movement, and the range of sectors that are embracing divestment shows that corporations have essentially charted their future course, irrespective of future developments (including the United Nations Climate Change Conference in Paris). At the risk of sounding like a broken record, under the current Government policy settings I can’t see how Australian companies are assisted to price carbon internally or invest in renewable energies and low carbon assets (above ERF and ARENA comments not withstanding).

Overall, I think it is reasonably clear that, successful in an ERF auction or not, Australian companies have a lot to do in order to remain internationally competitive in a world that is clearly intent on reducing carbon emissions. Given that trillions of dollars will be required post Paris to maintain the current pledges, the Australian Government will have to play its part in that investment and examine how their policy settings may need to change to support Australia’s share and ensure that Australian companies remain competitive.

rWdMeee6_pe About the author: Anthony Horton holds a PhD in Environmental Science, a Bachelor of Environmental Science with Honours and a Diploma of Carbon Management. He has a track record of delivering customised solutions in Academia, Government, the Mining Industry and Consulting based on the latest wisdom and his scientific background and experience in Climate/Atmospheric Science and Air Quality. Anthony’s work has been published in internationally recognised scientific journals and presented at international and national conferences, and he is currently on the Editorial Board of the Journal Nature Environment and Pollution Technology. Anthony also blogs on his own site, The Climate Change Guy.

 

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Regaining goodwill

Joe Hockey said “We are going to give economic reform a red hot go in 2015.”

He went on to say “The taxation discussion with the Australian people next year will not be about increasing the revenue take for the Commonwealth, it needs to be how we can have a taxation system that makes us a more efficient and productive nation, and is fairer for all Australians.”

If we want to make revenue collection fairer, and we want to cut wasteful spending, then I have a few suggestions of where to start.

Corporate tax avoidance

Tackling corporate tax avoidance is an urgent priority; Australia does not have a spending problem, it has a revenue problem and it must be fixed.

Up to $80 billion was foregone by the taxman between 2004 and 2013.

Superannuation tax concessions

Superannuation tax concessions will cost the budget around $35 billion in 2013-14 projected to rise at a staggering 12 per cent annually to be $50.7 billion in 2016-17.

Capital Gains Tax and Negative gearing

Generous government tax breaks for property investors see them benefit from a 50% discount on capital gains tax (at a cost to the government’s budget of $4.4 billion per year) and negative gearing (costing $2.4 billion a year).

Fossil fuel subsidies

The Government will spend almost $14 billion in the next four years on fossil fuel subsidies to the big mining corporations.

Fighter jets

Tony Abbott said Australia will acquire another 58 Joint Strike Fighters at a cost of around $90 million per plane; $24 billion has been budgeted to purchase and operate the aircraft until 2024.

Submarines

A decision to spend more than $20 billion on up to 10 Japanese submarines will be announced before the end of the year (maybe?)

Offshore detention

The Commission of Audit’s report shows that in the past four years, the Australian government has increased spending on the detention and processing of asylum seekers who arrive by boat by 129 per cent each year. Costs have skyrocketed from $118.4 million in 2009–10 to $3.3 billion in 2013–14.

This is the fastest growing government program and projected costs over the forward estimates amount to more than $10 billion.

(It costs $400,000 a year to hold an asylum seeker in offshore detention, $239,000 to hold them in detention in Australia, and less than $100,000 for an asylum seeker to live in community detention. In contrast, it is around $40,000 for an asylum seeker to live in the community on a bridging visa while their claim is processed.)

Transfield

The Abbott government has given Transfield Services a $1.22 billion government contract to run immigration detention centres on Nauru and Manus Island.

(Tony Shepherd, who was the chairman of Transfield until he resigned in October to Head the Commission of Audit, left with more than 200,000 Transfield shares, allocated to his family superannuation fund, on top of his final salary of $380,000. Shares in Transfield soared 20.8 per cent on the news, lifting the company’s market capitalisation by about $80 million. He now heads the WestConnex Delivery Authority where money from the East-West link may be redirected)

Employment Service Providers

The Coalition Government has released its exposure draft of the purchasing arrangements for a new employment services model – a $5.1 billion investment over three years from July 1, 2015 – which includes the new Work for the Dole scheme.

Emissions Reduction Fund

Under the ERF the government will spend $2.55 billion to purchase emissions reductions through auctions.

Public Service redundancies

The federal government is on track to fork out $1 billion in redundancy payouts to public servants even before entitlements such as leave are paid.

School chaplains

School chaplaincy will be continued for another five years at a cost of $245.3 million. Under the program, 3700 schools are eligible for up to $72,000 funding to employ chaplains.

Marriage guidance vouchers

NEWLYWEDS across Australia will be given a $200 voucher for marriage counselling from July 1, as part of a $20 million trial to strengthen relationships and avoid family breakdowns.

Tim Wilson

TONY Abbott’s hand-picked human rights adviser has been given a $56,000 expenses package to top up his six-figure salary. Human Rights Commissioner Tim Wilson now has a total salary of $389,000 plus vehicle and telephone expenses following a recent decision by the Remuneration Tribunal.

Hope that gets you started Joe, or whoever is now doing the budget. (Cormann? Frydenberg? Thawley? Credlin? Rinehart?)

PS: In light of the above potential savings, you may want to read my plan to get half a million people employed at a cost of $8.8 billion

PPS: In South Africa, Boxing Day was renamed Day of Goodwill in 1994. May you use it to contemplate wisely.

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Words are cheap, but Direct Action sure isn’t.

In an interview on Lateline in October last year, Greg Hunt said that the carbon price “doesn’t work”, “doesn’t do the job” and is “a just hopeless means of achieving the outcome.”

In defending his move to disband the Climate Change Commission, the Climate Change Authority, the Energy Security Fund, the Clean Energy Finance Corporation and ARENA, Hunt said

“At the governmental level, the primary scientific agency is the Bureau of Meteorology. 1,700 staff. I spoke with the director of the Bureau this evening and invited them to provide a scientific briefing, reaffirmed a complete commitment to their independence, to their original research and to the extraordinary capacity that they give to Australia to look at meteorological questions and broader global questions.

The Bureau is the originating scientific agency for meteorological matters in Australia for matters relating to climate and matters relating to climate science. The CSIRO also backs those up. So, they are strong, deep, independent scientific agencies whose independence isn’t just guaranteed under us, but is welcomed.”

He then proceeded to cut $10 million from the BoM, with an anticipated loss of 80 jobs next year, and he cut CSIRO’s funding by $111 million over four years, which will result in 500 job cuts at the nation’s peak scientific organisation.

Hunt went on to say

“we have bipartisan support for the science. We have bipartisan support for the targets. The disagreement is about the carbon tax and the mechanism because emissions go up, not down under the carbon tax and because it does enormous damage to our cost of living and our economy by being an electricity tax. In short, it doesn’t work, but it does do damage.”

Figures released last week revealed that the annual growth of cost of living for all households slowed over the past three months (employee and age pensioner households increased by just 1.9%), largely due to the end of the carbon price in June.

But as Greg Jericho points out, any broadening of the GST base to include food, or an interest rate rise, or fuel indexation, will quickly wipe out any gains made by removing the carbon tax which was only slated to run for another year with a fixed price.

While the cost of living increase may have slowed, two new studies show that brown coal and black coal generation has jumped sharply in the four months since the carbon price was dumped by the Abbott government. The share of coal has gone up from 69.6% of sent out electricity in June to 76.4% in October.

And emissions have also jumped sharply, with one study from the Melbourne Energy Institute saying “emissions intensity’ has already jumped an “unprecedented” 10 per cent, and another saying that Australia’s aggregate emissions could rise more than 10 per cent over the year, after falling nearly that much while the carbon price was in place.

Danny Price, from Frontier Economics who helped the Government develop its direct action plan, was also interviewed on Lateline in November last year.

He insisted that penalties for industries that increase their emissions is a crucial part of the plan.

“The direction action policy has always had a penalty included in it. It’s been a consistent feature of direct action from the very first document, that’s been put out on direct action.

The Government, of course, hasn’t yet put anything out about how the penalties will work or the baselines will work which will be a challenge for the Government and they’re the two, you know, most difficult issues for the Government to deal with. But I guess we’ll get to see what the form of the penalty is going to be.”

But not for a while. Nick Xenophon insisted on a safeguards mechanism that will be negotiated in the next 12 months that will determine how tight emissions limits will be and the penalties for exceeding them. Strangely, the emissions reduction fund auctions will apparently begin before the baselines are determined.

“I can announce this today, that the first auctions under the Emissions Reduction Fund, after having spoken to the Clean Energy Regulator on Friday, will be held in the first quarter of next year,” Mr Hunt said on Sunday.

When asked how much Direct Action would cost to achieve the 5% reduction target by 2020, Mr Price, who is the government’s expert on this, said

“Well, I don’t know yet because it will depend very much on where the Government sets the baselines, the nature of the penalties that are applied, but in the order of between $7 billion to $10 billion but probably on the lower end of that range.

The now Government, but then Opposition, had said initially that they had funds available for up to $10.5 billion till 2020. My understanding is that there are funds beyond the forward estimates. And that would be the extra $4.5 billion plus the 2.55 would be very consistent with what I’ve just said I think the costs are likely to be.”

The budget text states that the government will provide an “initial” $2.55 billion to establish the Emissions Reduction Fund, which is consistent with what the Coalition had promised prior to the election over the first four years of the scheme.

Yet the table which accompanies this text listing the hard dollars provides a contradictory and highly confusing story. It outlines a total funding allocation over the next four years of just under $1.15 billion.

A spokesperson for Greg Hunt said that the Clean Energy Regulator is free to at least commit to abatement purchasing contracts up to $2.55 billion over the next four years. However, they expect that because the regulator will only pay for abatement once it is delivered, the expenditure of the $2.55 billion will be spaced out over a period beyond the forward estimates period to 2017-18.

Market analysts Reputex suggest the $2.5 billion fund may get Australia about a third of the way to our low 5% target, but not much more.

Price stressed that Direct Action requires investors who, in turn, need certainty about legislation and regulation.

“this has to be a policy orientated towards investors and I just can’t see that investors are going to invest in a scheme [carbon pricing] where the Government can and will change the price to suit the politics and it could render their investments completely stranded, redundant.”

I wonder how he feels about the Coalition’s backflip on the Renewable Energy Target leading to the decimation of the renewable energy industry and the loss of billions of dollars investment that would have contributed towards meeting our emission reduction target whilst creating new jobs.

Greg Hunt told Emma Alberici

“I’m the Environment Minister and my job is to make sure that we do two things: that we understand the challenge and we respond to the challenge. And then the third thing which goes beyond that is to make sure that our actions are sensible and prudent and real.”

Hunt said on Monday that cleaning up existing power stations was the “the best thing” thing the government could do to reduce emissions, and pointed to the CSIRO’s direct injection carbon engine (DICE) technology as a way to reduce emissions from brown coal.

But, as pointed out in Crikey, rather than being a “major CSIRO research project”, there is a small team of two to four well-intentioned scientists and engineers working out of the CSIRO’s energy labs in Newcastle, running a 4-litre, single-cylinder diesel engine on coal, on a shoestring budget, struggling to find industry partners. The technology is drastically underfunded, unavailable at scale, and has a colourful history of unsuccessful research sponsored for very many years by miner Travers Duncan who has been part of the ICAC investigation into White Coal and Eddie Obeid. Any significant commercial roll-out is decades away.

Hunt should also know that the recent apparent breakthrough in capture and storage of coal emissions – the Canadian Boundary Dam Project – was hideously expensive. They spent $US1.24 billion to retrofit an existing power station to produce 110 megawatts of power to the grid. Assuming 80 per cent utilisation that’s more than $US14 million per effective megawatt, and you’ve got fuel costs on top of that.

By comparison a wind farm assuming 40 per cent utilisation (what newly constructed wind farms in Australia can achieve) comes in at $US5 million or so per effective megawatt with no fuel cost. Also, it can be built in one year instead of four or five, with that saving in construction time adding up to lot of avoided bank loan interest which weighs on the clean coal project.

In the budget the government cut $459.3m over three years from its carbon capture and storage flagship program, leaving $191.7m to continue existing projects for the next seven years, so one wonders just how serious they are about it.

If the government sticks to its suggested (but not confirmed) budget of $4.95 billion up to 2020, they can only afford to spend an average of $11.75 per tonne of CO2. At that price they may achieve a few million tonnes of abatement, but leading carbon market analysts and brokers including Bloomberg New Energy Finance, SKM-MMA and RepuTex suggest that the government has Buckley’s chance of reaching its target of 421 million tonnes with the allocated budget.

At the start of his prime ministership Tony Abbott said, “We hope to be judged by what we have done rather than by what we have said we would do.”

Rest assured Tony, the whole world is judging these actions.

carbon tax repeal

 

 

 

 

 

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