Net-zero target of 62-70pc by 2035 will be costly and ineffective

Anthony Albanese and Energy Minister Chris Bowen. Picture: Gaye Gerard

Setting a national emissions reduction target is akin to making a New Year’s resolution. Many of us do it – lose weight, drink less – and some of us get numerical. Lose 10kg, only one bottle of wine per week and the like.

The sad reality is that most New Year’s resolutions are not met but, hey, there’s always next year.

I’ve always thought there was something deeply suspicious about a government setting a national emissions target like the 62-70 per cent range announced on Thursday. Even for a centrally planned economy, this is a big ask, but for a market-based one, it looks like a strange beast indeed.

To be sure, the government can regulate, ban, tax and spend to achieve certain outcomes in the carbon space. But as we will see when we get to 2030, the 43 per cent reduction from 2005 will be missed by “that much”. It’s a simple case of arithmetic.

The annual emissions reductions would have to triple from what has been achieved thus far to make that magic figure. In other words, it ain’t going to happen. The transition of the grid is going much more slowly than expected – and costing a great deal more – and EV take-up is sluggish. (Hybrid demand, by contrast, has been going like the clappers.)

So, what should we make of the pledge of Climate Change and Energy Minister Chris Bowen to commit Australia to reducing our carbon emissions by between 62 and 70 per cent by 2035?

Let’s face it, he thinks he’s on a roll with the Coalition at sixes and sevens on the matter.

He wants to curry favour with the left, so a biggish number is called for – you never know, he could be PM one day. But he doesn’t want to make it so big that the economic players who are responsible for delivering the target dismiss the figure from day one. The range idea – which Labor heavily criticised when the Coalition ran with one in the 2010s – is a compromise.

It’s important to correctly interpret the response of business to this announcement. Many CEOs will be seeking special deals and government funding. Best not to upset those in charge here, as we head further down the path of crony capitalism.

A critical issue will be the mechanisms needed to achieve this announced target. Of course, Bowen will be off somewhere else by 2035, perhaps holding down some important international climate role. But he is unlikely to fall into the trap of legislating this target; he did so for the 2030 one essentially to wedge the Coalition. (The Coalition voted against that bill.)

So, here’s the list:

• Even more subsidies for renewable energy and batteries;

• An extension of the Safeguard Mechanism on big emitters from the current 200-odd operations to a much larger number (The SM is a cap-and-trade scheme that forces lower emissions on those operations covered.);

• A ramping up of the required annual emissions reduction under the SM;

• A carbon adjustment border mechanism – green tariffs, like the delayed European scheme – to offset the loss of international competitiveness of the operations covered by the SM;

• A range of investment credits to any project that can demonstrate a contribution to achieving the target, including through an expanded National Reconstruction Scheme;

• More subsidies for electric vehicles, and;

• Specific policies directed to agriculture, including reducing herd sizes.

If this sounds like a lot of expensive meddling, you are not wrong. The irony is that many developments – green hydrogen, offshore wind – are essentially dead in the water (excuse the pun) and so Bowen is more limited in his options than he thought would be the case.

To be sure, there is the distinct prospect that rapid deindustrialisation in Australia might do a great deal of the heavy lifting in reaching the new target. If most of the refineries, smelters and other heavy industry operations, as well as the coal-fired electricity plants, exit the scene, then voila – “success”.

But in the meantime, the federal and state governments are shovelling out money to keep these operations going. You know it makes sense – or does it?

It’s also not clear how the Trump administration would react to the imposition of green tariffs by Australia when we are arguing the case for special treatment in respect of the tariffs the US imposes on our exports. Somehow the argument that there are good tariffs and bad tariffs is unlikely to wash with The Donald.

Both the Prime Minister and Chris Bowen repeat on high rotation the myth that the cost of inaction is greater than the cost of action. This is simply not true in respect of reducing emissions. After all, Australia contributes just above 1 per cent of global emissions; anything we do won’t affect the climate one jot.

Let’s not forget that between 60 and 70 per cent of global emissions are not subject to targeted reductions, including the US. Inaction costs nothing; action is very costly. It’s only when it comes to adaptation – and not just for climate change reasons – that action is called for, but emissions reduction targets are a different beast altogether.

The immediate future looks clear: even more meddling in the economy in the name of emissions reduction; much higher government spending to attempt to achieve this outcome; higher electricity prices; deindustrialisation, as the big players simply give up, and; more trampling of the rights of people in rural and regional areas.

The Coalition needs to step up to the plate and state that enough is enough.