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'You can't offset your way out of emissions' - for once a Teal gets it right.

By Tom Biegler - posted Tuesday, 7 March 2023


Imminent changes to the pricing rules for carbon offsets are reminders of a serious weakness in policies to encourage the exit from fossil fuels.

Sometimes there may be no substitutes.

That possibility is simply ignored in present climate policy.

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The current changes concern the so-called "safeguard mechanism", a harmless-sounding name for a policy that requires the 215 biggest-polluting (i.e. CO2-emitting) facilities to cut their emissions below a progressively declining baseload level.

One way those businesses can comply is to buy carbon offsets available on both local and international markets. Offsets are created when other businesses manage to remove extra CO2 from circulation either by specific means like growing vegetation or raising soil carbon content, or by surpassing their own emission reduction targets.

The proposed safeguard reform would involve government compensation for the big emitters when they have to pay a carbon offset market price above $75 per tonne. The Grattan Institute warns that this policy creates the potential to cost in the "$billions". The government is confident that won't happen.

But the proposal faces another problem. Some crossbenchers are threatening to defeat it in Parliament.

This could all be seen as a relatively trivial matter in the broader scheme of things. The trouble is that it exposes the very foundations of climate/energy policy. It's not a pleasant sight. Here's why.

Those big emitters include companies like BHP, Orica, Newcrest, Ampol, Shell, Qantas, Origin, AGL, and Incitec Pivot. They all provide essential products and services like mining, fertilisers and aviation transport. And all 215 depend on using fossil fuels, in huge quantities. That has to stop, eventually. Climate/energy policy is meant to help or enforce that objective. Economic incentives are part of the policy arsenals of governments worldwide.

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The basic problem is that all those economic measures to discourage fossil fuel use, like carbon pricing, are predicated on the assumption that ultimately there will be substitutes. There are other measures available, like fostering cooperative attitudes to climate policy and supporting innovation. But heaviest reliance is placed on economic measures for encouraging businesses to find the best and cheapest substitute technologies for reducing emissions.

In the meantime industries are allowed to buy offsets or credits. On that path emissions at a company's operations don't physically disappear. This inconvenient truth now seems to have been recognised by Teal independent, Wentworth MP Allegra Spender. "You can't offset your way out of a climate crisis and so we shouldn't be allowing unlimited access to offsets for our biggest polluters" she says. Accordingly she is putting an amendment to the House of Representatives that would remove, by means of aproposed subsidy, the effective capping of a carbon offset market price at $75. This, she says, would "ensure the cost of carbon is reflected in investment decisions".

"You can't offset your way out". Indeed. It neatly recognises that an offset subsidy might hit a dead end, never to be removed, never rendered superfluous by technical progress. Or even worse, offsets might discourage a business in its quest for alternatives to fossil fuels. Unintentionally perhaps, Spender has hit on the single most important question in emissions policy. Will elimination of fossil fuel usage by industry always be feasible?

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About the Author

Dr Tom Biegler was a research electrochemist before becoming Chief of CSIRO Division of Mineral Chemistry. He is a Fellow of the Australian Academy of Technology and Engineering.

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