Safeguarding energy from extreme Green demands
At the heart of bargaining by the Greens and independents over the mechanics of a strengthened safeguard mechanism is a trap that the federal government and taxpayers cannot afford to indulge. Either the carbon credits that are sold on the basis that they negate one tonne of carbon dioxide emissions are real and do what they say, or the system should be scrapped and we should start again. If the permits are real, it should not matter where the tonne of carbon dioxide they cover comes from. In net environmental terms, the impact of that one tonne of carbon dioxide is zero. Done well, it is possible for there to be a positive environmental benefit because of the co-benefits associated with enhancing the productive capacity of nature. Businesses will decide whether they are better off buying a carbon offset or looking for other ways to deal with the excess carbon dioxide emissions they produce. The market should be left to decide what is the most cost-effective way to proceed.
The Greens and independent senator David Pocock are starting from a different position. That is the standpoint that fossil fuel producers and industries they don’t like should not be allowed to buy permits to grow their business. Greens leader Adam Bandt has made it clear that an end to new gas and coal production is the price he wants from government for the Greens to support the strengthened safeguard mechanism. He claims his arm has been strengthened by a report by company RepuTex undertaken for the anti-fossil-fuel Climate Council and the Australian Conservation Foundation. Ironically, RepuTex was the same company used by the federal government to model its climate change plans before the federal election. About half of all emissions covered by the safeguard mechanism are derived from coalmining and liquefied natural gas facilities. According to RepuTex, higher-than-expected emissions from expanded coal and LNG production and new projects would require higher annual cuts than the 4.9 per cent a year proposed by government. RepuTex modelling indicates that higher coal and LNG production could result in the emissions budget being exceeded by 13 to 35 million tonnes of carbon dioxide equivalent by 2030 because of only modest increases in coal and LNG production.
RepuTex said should LNG and coal production be higher than the central case, baseline decline rates of up to 5.8 per cent might be required between 2024 and 2030, or up to 8.9 per cent if implemented after the 2026-27 review.
The Greens have teamed up with the Coalition to demand the government release its own modelling on the issue. It has been portrayed as an additional reason future coal and gas projects should be stopped. But left unsaid by the Greens is that the RepuTex report suggested how to fix the problem. New entrants, rather than existing facilities, could be made more accountable for emissions that potentially come into the scheme. Mr Bandt is maintaining his demand that future coal and gas developments be banned. Alternatively, he says, a climate trigger could be inserted into a revised Environment Protection and Biodiversity Conservation Act to achieve much the same end.
For their part, oil and coal companies have their own targets to be carbon neutral and will be among the biggest participants in a cap-and-trade system of the sort being proposed under the safeguard mechanism. There is a big economic opportunity for Australia to develop a credible and robust trading system that involves genuine savings. Once again, the Greens are on the wrong side of the debate on how to proceed. Unfortunately, as well, the federal government has been busy alienating energy producers that both deliver the nation’s current prosperity and hold the key to the development of a nature-based climate solution at scale.