Climate pitch risky as Albanese opens the door for scare campaign

Australian Opposition Leader Anthony Albanese (right) speaks to former Australian Opposition Leader Bill Shorten. Picture: AAP

Labor has declared itself the party of business on climate with a policy that green groups have welcomed as an opening offer but not a deal.

Ironically, to satisfy demands from business, Anthony Albanese has reached for policy introduced by Greg Hunt in the Abbott government.

With a target to cut emissions by 43 per cent from 2005 levels by 2030, Labor’s plan is to turbocharge the government’s emissions-trading scheme that dare not speak its name.

The safeguards mechanism of the emissions-reduction fund has been a sleeper carbon-trading market ready to awake.

Poisoned by the politics of the carbon tax, the safeguards mechanism covers the nation’s biggest greenhouse gas emitters from across a range of industries. But it has not required them to do very much at all.

Businesses are given a baseline amount of emissions to meet. If they exceed this level they must buy permits to cover the excess. If they produce less emissions they can sell the excess.

Labor’s plan is to progressively cut the amount of allowable permits to eventually meet the target of net zero by 2050.

Peak business groups, including the Business Council of Australia have been calling for this change. Facing pressure from investor groups and financiers, two-thirds of the companies covered by the existing safeguards mechanism scheme have set their own target to be net-zero emissions by 2050.

The view from business is that government pressure will help them meet their own targets, and force others to follow.

In theory, forcing cuts to emissions from companies will result in more investment in new ­technologies. It will also help develop new industries that can benefit agriculture and biodiversity.  There is no escaping, however, that a cap and trade system is a tax on carbon dioxide emissions, opening the way for a scare campaign from the Morrison government.

It is the topsy-turvy world of ­climate politics where Labor wants a market mechanism and the conservative forces favour direct ­government action by way of publicly funded purchases through the Emissions Reduction Fund.  Energy Minister Angus Taylor says Labor’s policy will force businesses to buy 40 million tonnes or $1.66bn of offsets by 2030. Labor argues that forcing companies to act on climate will ­improve efficiencies as well as emissions.

The devil for Labor will be how it can separate building market ­efficiency from rewarding rent seekers with public funds. Along with changes to the safeguards mechanism, Albanese is promising to upgrade the electricity grid to assist renewable energy producers, subsidise electric vehicles and invest $3bn in green metals and hydrogen.

The ALP will provide direct ­financial support for measures that improve energy efficiency within existing industries and ­develop new industries in regional Australia through a new Powering the Regions Fund.

Albanese can be expected to cop it from both directions. Green groups had a singular response to Labor’s plans. They said it was a good first start that must be ­improved. By comparison, the Greens are promising cuts of 75 per cent by 2030. And business can be a fickle bunch. The investor group on climate change said Labor’s plan was more closely aligned with investor and global capital market expectations. But it called on all governments to adopt a bipartisan approach and commit to at least 45 per cent below 2030 to join the global investment boom that is under way this decade.