Productivity Commission: End renewable subsidies, target all emissions

A major expansion of Australia’s safeguard mechanism to cut emissions is needed to help the nation meet net zero goals, the Productivity Commission said.

The Productivity Commission has called for an end to clean-energy and electric-vehicle subsidies.

The Albanese government should consider a dramatic expansion of its carbon emissions crackdown and put an end to renewable ­energy subsidies to achieve the cheapest path to net zero, the Productivity Commission says.

Its report found climate change “looms large” over Australia’s productivity growth and the best way to meet the 2050 net-zero emissions goal was to broaden the ­existing safeguard mechanism to cover the entire economy.

The commission recommends expanding the scheme to include the electricity and transport sectors, and also calls for an end to clean-energy and electric-vehicle subsidies, saying it represents poor public policy.

The Albanese government’s signature climate change scheme, due to commence in July, requires heavy emitters to slash emissions by nearly 5 per cent each year to 2030. Under Climate Change Minister Chris Bowen’s draft plan, heavy industrial facilities will be brought in line with the government’s economy-wide target to lower emissions by 43 per cent from 2005 levels by 2030.

The mechanism is projected to lower net emissions from the 215 facilities responsible for 28 per cent of ­Australia’s carbon emissions, from 143 million tonnes in 2022-23 to “no more than 100 million tonnes by 2030”.

But the commission said the mechanism must be expanded.

The electricity sector, responsible for more than 30 per cent of emissions, is covered as a sector but not facility level, while transport, accounting for a fifth of pollution, is exempt given cars, trucks and buses are individually under limits.

Facility-level coverage under the mechanism could be boosted to 55 per cent if electricity were ­included while adding transport would take the total to 70 per cent overall, the report found.

Labor already faces hurdles with its scheme given the ­Coalition’s opposition, meaning the government must gain support of the Greens and two Senate crossbenchers to pass the legislation. Big business has also raised some concern.

The resources sector, linked to 58 per cent of the 215 ­biggest-emitting facilities, in January ­demanded more support from ­Anthony Albanese amid concerns companies will fail to electrify mines before the end of the ­decade.

The resources sector is linked to 58 per cent of the 215 biggest-emitting facilities in Australia. Picture: Cameron Laird

Under current government proposals, businesses that underperform on their reductions could offset emissions by buying carbon credits from industrial users ahead on their targets, or by purchasing Australian Carbon Credit Units ­issued by the government for ­carbon abatement projects.

The commission said tighter scrutiny was required of the carbon offsets industry.

“The degree to which the safeguard mechanism credibly and ­efficiently contributes to Australia’s emissions reduction commitments will partly depend on the integrity of the offsets recognised by the scheme,” the report says.

“Accordingly, Australian governments should take steps to ensure the integrity of ACCU offsets recognised by the safeguard mechanism by tightening standards to ensure the additionality, permanence and transparency of ACCU generating projects.”

The commission also pointed to a rethink on subsidies that have dramatically boosted the take-up of renewable energy across the Australian economy.

“The ongoing need for ­additional policy support for ­renewable energy generation is likely not required,” it says.