Slam carbon scams

“Businesses that set out to dupe consumers [about the carbon price] - and to do it deliberately - are firmly in our sights. They're the ones we'll be putting our energy on”, said Australian Competition and Consumer Commission acting chairman, Dr Michael Schaper on ABC’s Radio National on 4 July 2012.

The nation entered the House of Count Carbon last month. Fear not, the Australasian Consumer Fraud Task Force is only a telephone call away. Persons, companies or counts trying to take you for a “carbon” ride will be asking for trouble.

The Australian Competition and Consumer Commission (ACCC) SCAMwatch website lists the usual suspects: credit card scams, pyramid scams, miracle cures, “unexpected” prizes, upfront payment scams, charity scams, romance scams, psychic and clairvoyant scams. A new one recently joined the list. We are urged to be “on the look-out for carbon [dioxide] price scams”.

Businesses should know their rights and obligationswhen making claims about carbon (dioxide) price impacts. Misleading, deceptive or false claims are prohibited under the Competition and Consumer Act 2010 (Cth). Conduct likely to create a misleading impression is verboten too, and failure to disclose relevant information.

It is also an offenceto make representations about “a future matter with no reasonable grounds for making it.” An offer of guaranteed winnings can be misleading too, “as it is not possible to predict accurately the outcome of an event based on chance.” Political promises - such as delivering a “cleaner, smarter, richer future” – seem to be in an exempt category.

Two cases were recently in the news. The head of one of Australia's largest bakery chains, Brumby’s Bakery, quit after suggesting in a company newsletter that franchisees could increase prices and "let the carbon tax take the blame".

In the second case, the ACCC took action against related companies, Polaris Solar and ACT Renewable Energy, over leaflets promoting solar panels distributed to households in Canberra and W.A. Based on data in a newspaper advertisement produced by The Australian Trade and Industry Alliance (ATI), they claimed the carbon (dioxide) price would increase annual electricity costs by 20 per cent and, if continued, by 400 per cent by 2019.

ATI’s other text escaped criticism, presumably because it was not about pricing: “The Government is hitting Australians with the world’s biggest carbon tax, which will hurt the long-term future of Australian families, businesses and exports, but achieve no environmental benefit. They must get carbon policy right, before it’s too late.”

Both companies promised not to engage in similar conduct and to attend practical training on consumer laws. “They co-operated with us fully,” said Dr Schaper, “and we don’t see any evidence of consumers having lost money.”

There are, however, bigger buns in the national carbon (dioxide) oven than what Brumby’s Bakery later admitted were “foolish and ill-considered remarks”.

What is the ACCC’s role?

The ACCC focuses on “carbon price scams”. It does not concern itself with the veracity of statements about allegedly “dangerous” climate change, even if made by related parties or groups with a financial incentive to promote certain policy outcomes; nor with the misleading images of “carbon pollution” that have proliferated in cyber-space.

The Prime Minister suggested in a recent speech to the centre-left McKell Institute a “carbon price” was justified because “our world faces real and urgent threats from climate change like rising sea levels. Our country faces very direct threats too: worse bushfire conditions and droughts, more days of extreme heat, increased cyclone intensity, bleaching of coral reefs.”

Similar claims, half-truths and exaggerations - especially by the Climate Commission, “clean energy” promoters and players in domestic and international climate politics - ironically attract little or no regulatory interest because they are considered outside agency jurisdiction.

When Brumbies franchisees reportedly were told to remove Liberal Party placards on the carbon tax from their stores, the government urged all shop owners to do likewise.

This was not an ACCC issue, however, according to Dr Schaper. “The carbon tax has attracted all manner of debate. We are not buying into that one way or the other. We are simply focussed on enforcing the law about misleading and deceptive conduct” (12July ABC RN AM interview).

The ACCC successfully prosecuted Prime Carbon Pty Ltd in early 2010 over a soil carbon and sequestration program it was selling to farmers to extract atmospheric carbon (dioxide) and store it in agricultural land.

The Federal Court found it made false or misleading representations concerning its services in relation to the sale of carbon credits. ACCC’s then chairman, Graeme Samuel, said this outcome signalled vigorous pursuit of any company making misleading statements in the carbon credit market.

What is ASIC’s role?

The Australian Securities and Investments Commission (ASIC) is another agency responsible for national consumer protection, but only in relation to financial products and services.

ASIC’s role is to supervise “activity in the carbon markets” and to regulate “entities and individuals providing financial services and operating financial markets in regulated [designated greenhouse gas] emissions units”.

It presumably also monitors public statements and activities of ASX-listed and unlisted “carbon” farmers, traders, alternative energy companies and other entities with similar vigilance to the ACCC.

One hopes so, for the surreal game of human (and animal) emissions monetisation now underway has sufficient sub-prime seeds for a future Carbon Crash. Will ASIC ensure the investing public is fully informed about all the risk factors in the new products?

At the 2July 2012 deadline, there were 175 entities on ASIC’s “carbon registrant register” keen “to provide financial services in relation to regulated emissions units”. They include the Canberra Carbon Cargo Cult Club’s (CCCCC) biggest fans: “carbon” bankers, verifiers, accountants, “aggregators”, traders, asset managers, offset providers and so on.

From 1 July 2012, ‘regulated emissions units’ are deemed to be “financial products” under the Corporations Act 2001, namely: carbon units, Australian carbon credit units and eligible international emissions units.

One challenge for ASIC is licensing. Many carbon market participants do not have a traditional financial services background. As a Carbon Market Institute executive explained to it in early April, developing this new market was “a journey for regulators and the participants.” Giving “financial instrument status over carbon credits creates a number of operational challenges” as participants “do not, nor like will have the necessary systems, financial wherewithal and processes” to meet ASIC licensing requirements. ASIC subsequently established an early registration system to assist transition to its licensing regime.

How are emissions units created?

Akey driver of emissions permit prices will be the legislated volume of supplied permits. So signing off on the integrity of the government’s unit creation process – and all the assumptions underpinning it - is another big challenge for ASIC.

Consider the ‘Carbon Farming Initiative’ (CFI) it passed on 23 August last year. It established a voluntary scheme to credit greenhouse gas abatement in the land sector and from “legacy waste emissions”.

“Abatement”, by definition, can be achieved by (i) reducing or avoiding emissions, for example, through capture and destruction of methane emissions from landfill or livestock manure; or (ii) removing carbon from the atmosphere and storing it in soil or trees, for example, by growing a forest or farming in a way that increases soil carbon.

“Australian carbon credit units (ACCUs) will be issued in respect of each tonne of abatement generated by such activities. These units can then be sold to people and businesses wishing to offset their emissions.”

How will this be done in practice? Issuance depends on a new bureaucratic black art, “methodology determination”. It is meant to act as gatekeeper to the government’s Positive List.

The Commonwealth, incidentally, “does not accept responsibility for the accuracy or completeness of the contents or any inferences, and expressly disclaims liability for any loss, however caused and whether due to negligence or otherwise, arising directly or indirectly from the use of, inferences drawn, deductions made, or acts done in reliance on, this document [Positive List] or the information contained in it, by any person.”

A sum of $19.6 million is funding development of CFI methodologies, with $7.2 million “available as grants for methodology development projects.”

The government has established a six-person Domestic Offsets Integrity Committee (DOIC) “supporting the “environmental integrity of (CFI) carbon offsets”. Its role is to assess proposals for the Minister for Climate Change and Energy Efficiency, who decides whether they qualify for the Positive List.

There is no ASIC representative on the Committee. Yet from a consumer protection and investment perspective, the process surely could benefit from ASIC’s presence and due diligence?

Should creation of a controversial new class of financial products be left to the discretion of a minister and a committee of government-selected agricultural alchemists and other experts?  Should this group decide whether a methodology measures up against the nebulous concept of “environmental integrity”, and whether it will have any measurable impact on the climate? Should a minister alone determine whether, for example, manure can be transmuted into money, into carbon-cash?

Minister Combet has approved four methodologies: destruction of methane generated from manure in piggeries; capture and combustion of landfill gas; environmental planting and savannah burning.

Exhibit A: Pig Dreaming

On 21 September last year, DOIC endorsed a Methodology for the Destruction of Methane Generated from Manure in Piggeries, ruling it complied with Section 112 (3) of the Carbon Credits (Carbon Farming Initiative) Act 2011.

The DOIC assures us that: “appropriate equations are specified for the calculation of emissions for both the baseline and project cases and appropriate means of data collection, monitoring and reporting are specified to enable verification of the estimations.” But who regulates the DOIC?

Exhibit B: Savannah Dreaming

The Commonwealth is distributing the spoils of its multi-billion dollar “carbon price” regime in what, according to the Minister, is a “socially fair and responsible way”. Novel ways are being proposed to legitimise carbon-cash transfers to the nation’s underclass.

A sum of $5.2 million is committed to an Indigenous Carbon Farming Fund (ICFF) to develop “low-cost methodologies” that “help to create real and lasting opportunities for Indigenous Australians”. The ICFF includes $17.1 million to “help Indigenous communities establish or participate in carbon farming projects”.

Indigenous Australians reportedly “manage” around 20 per cent of Australia, by “drawing on traditional knowledge of the landscape and its response to fire, flooding and drought.”

Mabel Creek, a 5,000 square kilometre South Australian cattle station, is keen to be one of the first indigenous-owned “carbon farming projects”. John Kite from Watarru, in the Anangu Pitjantjatjara Yankunytjatjara Lands, is in charge of it.

According to University of Melbourne carbon farming expert, Richard Eckard, the owners could receive carbon-dollars from “strategic” savannah burning. “One of the traditional forms of treating the land, repairing the land, was savannah burning and the management of that also reduces greenhouse emissions.”

Another proposal recently released for public comment estimates greenhouse gas abatement achieved by “human-induced native forest re-growth”. “The principal carbon pools estimated are in the tissues of woody plants, and include coarse woody debris on the forest floor.” 

Other intriguing methodologies under DOIC evaluation include methane reduction from piggeries by using “engineered bio-digesters” and feeding supplements to dairy cows.

But how many carbon foot soldiers will be required to ensure compliance with the approval, accounting, auditing and management regulations now legislated to govern such projects?

All grandiose schemes come to bad end. Administrative complexity, flawed assumptions, arbitrary rules, perverse outcomes and rising costs eventually make them dysfunctional.  Caveat emptor.

Who protects you from “carbon” double-speak?

If water, which is liquid H2O, is never called “hydrogen” or “oxygen”, why has carbon dioxide (CO2) – an atmospheric trace gas vital to all life - been branded as nasty “carbon” or “carbon pollution” by the government and most of the media?

Most government agencies, including ASIC and the ACCC, have now adopted this misleading convention, generally without clarification or qualification.

Double-speak, n. 1. Language that deliberately disguises, distorts, or reverses the meaning of words. It may take the form of euphemisms; eg:”carbon reforms”, “compensation”; “transitional assistance”, “progressive politics”, “positive list”, etc., making the truth less unpleasant. It also may mislead with intentional ambiguity or by meaning reversal; eg: describing carbon dioxide - an invisible gas vital to all life - as black “carbon pollution”, or implying it by using inappropriate images; also describing more expensive forms of “renewable” power as “clean energy”; service providers as “big polluters,” etc. In such cases, doublespeak disguises the truth.

Are emissions units a de facto currency?

By monetising an invisible trace gas, carbon dioxide, a pseudo-currency – the Carbon Con Credit (CCC) – has been created, literally out of thin air. Permission-to-pollute an anthropogenic tonne of the stuff (or its GHG equivalent) is now deemed by government fiat to be legal tender “worth” $23 a tonne, with a guaranteed floor price of $15 a tonne.

Not so long ago, currencies were backed by gold bars. They had a weight and purity stamp on them from an authorised refinery and were stored in a secure vault. Today the public is being forced by legislation to accept there is real value in a virtual government-certified piece of paper backed by trace gases “stored” in – or in some cases, not emitted into - the Earth’s atmosphere; or by pig manure, burnt savannah and so on.

Ingenious academicians on Jonathan Swift’s island of Balnibarbi obsessed over extracting sunbeams from cucumbers, reducing human excrement to its original food and inventing a device for ploughing with hogs. Today the Department of Climate Change is approving similar curious schemes, with one big difference. In Warmerland, they also generate carbon-cash - if they are on the Minister’s Positive List.

Quis custodiet ipsos custodes?

Who regulates the (“carbon”) regulators?