Senate may kill carbon market

EMISSIONS reduction projects will be rendered effectively worthless if the Senate votes down the direct action scheme.

HUNDREDS  of millions of ­dollars of emissions reduction projects will be rendered effectively worthless if Labor, the Greens and crossbench senators vote down the Coalition’s direct action scheme.

At risk will be 153 projects around Australia which include efforts to harness waste gas from landfills run by councils, tree planting and deforestation prevention schemes, and the prevention of emissions from piggeries.

They are run under the existing Carbon Farming Initiative which was part of Labor’s carbon pricing scheme.

It could create a dilemma for Labor, the Greens and the crossbench senators who have criticised the Coalition’s direct action scheme for not doing enough to cut emissions.

With the carbon tax scrapped, the projects need the emissions reduction fund to be passed to create a market for their emissions reduction units.

Industry sources have told The Australian blocking the CFI amendment bill could create a massive problem for the industry.

Amendments to the CFI to set up the $2.55 billion Emissions Reduction Fund — the centrepiece of direct action — will be introduced into the Senate during the spring session.

Environment Minister Greg Hunt said he was inviting Labor, the Greens and the crossbench senators to work with the government to ensure that the CFI “is not just maintained but extended”.

“This is a practical way to ­reduce emissions using a mechanism which has universal support among the different parliamentary parties,’’ Mr Hunt said.

It would be “irresponsible and utterly perverse’’ to stand in the way of emissions reductions and to hurt companies that had invested in emissions reduction activities. Under the legislation to be debated in the Senate existing projects would automatically transferred into the emissions ­reduction fund and be able to sell their permits to the government as part of its auction process.

The emissions reduction fund if passed will be expanded to include energy efficiency projects and other emissions reduction ­activities.

Under the previous carbon pricing regime CFI projects created more than 3 million emissions reduction units in the past financial year that could be sold to major polluters to offset their carbon liabilities. The fund would create a market worth about $600m a year for four years.

Labor, the Greens and the Palmer United Party have vowed to oppose direct action, but now face lobbying from proponents of the emissions reduction projects to pass the fund to maintain a market for their projects.

Otherwise the only remaining domestic market will be that for voluntary carbon offsets which has been depressed by a glut of international permits.

Chris Mitchell, managing ­director of advisory CO2 Australia said if the legislation failed to pass the Senate by net February there would be a “massive gap’’ and the country would effectively be left without a program to reduce greenhouse gas emissions.

Dr Mitchell said given the abolition of the emissions trading scheme “there is no incentive to reduce emissions at all without the emissions reduction fund’’.