Is direct action enough?

If Treasurer Scott Morrison really believes Australia is faced with an expenditure problem, rather than a revenue shortfall, he need look no further than the Emissions Reduction Fund (ERF) to reduce government expenditure by $1.4 billion. The fund was established to pay greenhouse gas emitters to reduce their emissions, replacing Labor legislation which taxed the worst emitters for their emissions.

The ERF has been funded with $2.55 billion. Prime Minister Tony Abbot made it clear that these funds were capped, irrespective of their adequacy in reducing emissions to 5% below 2000 levels by 2020 and 26-28% below 2005 levels by 2030. The first auction of bids from industry to reduce emissions resulted in the fund purchasing 47.3 million tonnes of carbon for $659,835, putting a price of $13.95/tonne of carbon.

Paying people not to emit greenhouse gasses rather than taxing them if they do is a legitimate though extravagant approach. In our present circumstances of burgeoning public debt, The Prime Minister and his Treasurer must ask … 'is it affordable, is it the most cost effective means of reducing emissions and realistically, what are the risks of it failing to achieve reduction targets?'

Cost of Carbon

The Direct Action approach has many problems, not least being that the initial reverse auction attracted the cheapest carbon available at that time -the lowest of the low hanging fruit. It is very likely that among the lowest bidders were those who had approval for tree clearances which they did not intend to fully implement and willingly accepted payment from the ERF for not doing so, neither cost-effective or efficient.

The next auction will be less propitious. It will attract those less willing to reduce their emissions - those who can only do so at greater cost. On their part, they will demand higher compensation, resulting in higher bids. The initial market price of carbon will rise significantly without achieving greater bidding competition and subsequent auctions will achieve the same results, costing the taxpayer more and more to achieve less and less.

Yet Environment Minister Hunt assures us that Direct Action has got off to a marvelous start and will easily achieve announced 2020 and 2030 targets with available funds. This might be so were it not for a number of complicating factors apparently not fully taken into account by the scheme, particularly loss of carbon dioxide absorbing vegetation.

Vegetation Loss

Land clearance resulting in total loss of natural vegetation includes significant tree loss. Loss of trees and vegetation reduces their capacity to absorb carbon dioxide from the atmosphere. Worse, it results in carbon already stored in trees and other vegetation being released back to the atmosphere when they die and decompose. Yet major land clearance is a continuing feature in rural Australia. It results from human activity and from bushfires.

Around 700,000 ha. of natural bush land is being cleared every year in Australia. During the tenure of the Newman government in Queensland land clearance was made a far easier process, a problem which the Palaszczuk government has yet to address. In Queensland alone more than 250,000 ha of tree covered land has been cleared in 2015 and is ongoing. This rate of attrition far exceeds the capacity of new tree plantings to absorb carbon dioxide from the atmosphere.

As global warming continues, it is likely to increase the number and severity of El Nino and La Nina events. El Nino's affect the east coast of Australia, intensifying drought conditions, increasing the incidence of bushfires and reducing the capacity of the land to produce food. They are followed by La Nina events which bring flooding rains which are often destructive and likely to initially constrain food production and distribution.

Industry Emissions

Direct Action does constrain the level of carbon emissions by a 'safeguard mechanism' but this is so lax that it enables industry, including the largest and dirtiest electricity generators, to increase emission by at least 150 million tones per annum. There is no indication government intends to prevent this by tightening the mechanism in any way which might increase the cost of electricity – or diminish the role of coal.

Apparently the safeguard mechanism does not apply to newly establishing businesses which are free to emit carbon to any level, rather than impede their development. This indicates a policy of placing business expansion ahead of increased emissions. This is further evidenced by bi-partisan support for new and expanded coal mining.

Promoting Coal

Federal and State Governments continue to approve development of new open cut coalmines and extension of existing ones. These mines are notorious for unavoidable methane emissions when overburden is removed and coal deposits are broken-up. Further, the product of these mines is almost entirely exported to countries where the mining industry promotes their use by industries which burn coal and in doing so produce major new increases in carbon emissions. This suggests Australian government rejection of any responsibility for promoting global emissions reduction.

Coal mining ventures result in massive consumption and risk contamination of ground water on which Australian agriculture depends. The justification for new coal mining activity is that it provides new employment opportunities and additional sources of public revenue, both being deemed more important than risk posed by increased carbon emissions contributing to dangerous global warming and the irreversible damage this will cause to the environment.

The willingness of governments to continue subsidizing the coal mining industry (eg. for fuel and rehabilitation) and State government approval of new and expanded coal mining, ignores the fact that the industry is very capital intensive, endeavors to employ as few people as possible. At present, it employs around 45,000 people, less than 0.5% of the Australian workforce.

It should be remembered that construction/operation of solar power stations and local distribution networks also creates new employment opportunities, produces emissions free electricity and promotes its wider, more inventive use. A long overdue declaration that no new fossil fuelled power stations will be built in Australia suggests on going over-dependence on coal as a revenue source.

Increasing dependence for public revenue on expanding coal mining is dangerous because:

1. It ignores the finding of climate scientists that at least 70% of all presently known fossil fuel deposits must be left in the ground if we are to avoid dangerous global warming, and
2. It ignores new and rapidly developing technologies enabling far more flexible solar power generation and storage and yet to be demonstrated, competitive power generation by Generation IV nuclear reactors.

Either of these could result in rapid global reduction or eventual abandonment of coal use as an energy source, causing rapid decline in public revenue derived from coal mining. Federal/State governments have not planned for this eventuality. They may experience a significant, possibly unmanageable revenue shortfall in the near future as demand for coal slumps. Simultaneously, coal mining will becomes an increasingly insecure employer.

Mitigation

Action to reduce consumption of electricity generated by coal fired power stations, known as mitigation, reduces the amount of carbon emitted by them. An example of mitigation is installation of solar hot water and photovoltaic panels on house roof-tops which reduces the amount of coal generated electricity consumed by each dwelling.

Australian Federal, State and Local Governments could have taken or supported mitigation far more seriously but have not done so. Consequently the efficiency with which electricity is used has shown far less improvement than it could have.

It remains open to government to use LED lights for all public sector lighting, including street lighting and lighting in all offices owned or occupied by government or government-owned enterprises and public housing. Such a move would reduce the impost placed on tax and rate payers and increase the profitability of public enterprises.

The use of solar hot water and photo voltaic panels on private sector house roofs is becoming commonplace, yet no State or Territory mandates their inclusion on the roofs of new dwellings in their building regulations. Amendment of the regulations to ensure their inclusion would marginally increase the cost of housing but it would also improve their value on sale and reduce the need for electricity supplied from the grid, largely produced by coal fired power stations.

All cities in Australia include infrastructure for the distribution of gas primarily used for heating, both domestic and industrial. Irrespective of age or location, that infrastructure leaks methane, a particularly potent greenhouse gas. These emissions have not been quantified and infrastructure owners are not required to prevent them.

Conclusion

Australia is at the cutting edge of advancing the efficiency of photovoltaic cells. It is a leader in research into development of high density, rapid charging storage devices. Rather than encouraging these developments, making Australia a leader in these areas and creating new industries, government actively works to ensure that the future is coal. It is very likely that the emissions described above displace the purchases made by Direct Action. This gives rise to the following questions:

• Why is public policy inimical to reducing carbon emissions, adoption of clean energy solutions and shoring-up the use of fossil fuels, particularly coal?
• Why spend $2.55 billion on Direct Action if it is unlikely to meet the very modest and totally inadequate carbon reduction targets set by the Australian government for 2020 and 2030?
• Can we really believe government assurances that Direct Action is the most cost-effective and efficient way of reducing the nations carbon emissions?

If Direct Action fails to adequately curb carbon emissions – as seems possible - it is open to States and Territories, acting individually or in concert, to introduce their own ETS schemes. They have previously done so. Their schemes generated useful revenue, now spurned by a debt-ridden Commonwealth government for ideological reasons. State schemes did reduce emissions. They were only abandoned when the Federal (Rudd) government determined that it would introduce a national scheme in 2007.

The Commonwealth may resist such moves but if they do one should ask why. Could it be that the ERF is being used inefficiently? Are its funds being disbursed in a way which amounts to little more than a hand-out (particularly for the farm sector) that achieves very little by way of new emissions reductions?