Without details, Labor’s emissions target is just hot air

The government has a clear plan while Labor is coy when it comes to specifics.

There is no doubt that climate change is a vexed and tricky policy area for the Coalition. The majority view within the government is that the public wants “action on climate change” — precise meaning unclear — and so action must be delivered.

The Morrison government has now landed on a collection of actions to tackle climate change. Under the heading Climate Solutions Package, there will be taxpayer money for new electricity interconnectors, the go-ahead and taxpayer money for Snowy 2.0, more taxpayer money for new reliable generators, more taxpayer money for an extension of the direct action scheme and other bits and pieces.

In this way, the government will seek to demonstrate the feasibility of achieving its emissions reduction commitment under the Paris climate agreement — between 26 and 28 per cent by 2030 over 2005 — without doing too much economic harm.

While all the attention has been on the Coalition and its suite of policies, the reality is that Labor’s energy policies are vague and ill-defined: they are an emperor with no clothes.

All we know is that Labor wants to reduce emissions by 45 per cent with a renewable energy target for electricity of 50 per cent. There is very little information on how such a substantial emissions cut can be achieved and what the economic consequences will be.

So let’s go through some of the figures. In 2005, Australia emitted around 600 megatonnes of CO2-equivalent. Using the Coalition’s emissions target of 26 per cent, the annual emissions level will need to be 450Mt CO2-e by 2030. By contrast, Labor’s more ambitious target involves annual emissions of 335Mt CO2-e by 2030. In order to achieve these lower emission levels, a trajectory is plotted between 2021 and 2030 (after the second Kyoto period ends) which produces an abatement budget for the two scenarios. In the case of the Coalition’s pledge, the budget is around 700Mt; for Labor, it’s close to 1200Mt.

Here is where it gets a bit tricky. The Coalition has announced its intention to use the carry-over associated with the overachievement of the Kyoto agreement and this shaves close to 300Mt off the abatement budget. This significantly reduces the task for the Coalition. To be sure, there is some controversy around the use of the Kyoto carry-over, but it would appear to be within the Paris Agreement rules. Some other countries are also likely to take up this option when calculating their emissions reduction efforts.

What we don’t know is whether Labor will use the carry-over in its calculations. Assuming it doesn’t — the Greens would go crazy — this leaves a carbon abatement budget about three times larger than the Coalition’s. It’s equivalent to nearly two years of zero emissions in the 2020s.

We also don’t know whether Labor will be prepared to allow the purchase of (cheap) international carbon credits to meet its target — again the Greens would go crazy. It is interesting to note that New Zealand has decided that it will mainly meet its own emissions reduction pledge under Paris through recourse to international carbon credits.

The key question is how Labor proposes to meet it carbon abatement budget of around 1200Mt by 2030. It is worth recalling here contributions that various sectors make to total emissions: electricity is just over one-third; stationary energy excluding electricity is 19 per cent; transport is 19 per cent and agriculture is 13 per cent. Land use, land-use change and forestry is 4 per cent.

Let’s be clear. Labor’s ambitious emissions reduction target can’t be met simply by forcing a rapid and radical transformation of the electricity sector even if some version of the national electricity guarantee were introduced. If electricity were to be completely decarbonised by 2030, this would still leave a significant part of the abatement budget (at least around 500Mt) to be sourced from other sectors. And let’s face it, the electricity sector won’t be completely decarbonised by 2030, notwithstanding the dreams of the Greens.

So where does Labor go? It must concentrate on the other big emitting sectors. But bear this in mind, Labor energy spokesman Mark Butler has indicated that emissions-intensive, trade exposed firms — the so-called EITEs — will continue to be quarantined from the emissions reduction requirement under a Labor government. Think: aluminium smelters, fertiliser factories, cement plants and the like. Now this all very well, but if protection is afforded to this sector, then deeper cuts will need to be made elsewhere.

This brings us to transport. Labor has flagged the option of imposing tighter emissions standards on smaller vehicles, suggesting that trucks will be exempt. These new standards will only apply to new vehicles. But if the Toyota HiLux is going to cost between $5000 and $10,000 more, then many owners will delay the purchase of new vehicles.

The obvious option for Labor is to impose much higher fuel taxes to discourage the use of all vehicles and drive down emissions in this way. However, we have seen how unpalatable this initiative was in France, with the initial protests of the “yellow vests” prompted by higher fuel prices resulting from a new green tax.

What will happen to agriculture and land use? Labor has talked about reviewing native vegetation laws that will affect the ability to clear land. But as we noted above, LULUCF accounts for only 4 per cent of emissions. What Labor will need to do is more directly hit farming activities by trying to control herd sizes and possibly banning clearing of vegetation regrowth on private farms. Needless to say, such proposals would be met with stiff opposition in many rural areas.

The point is this and it comes down to the arithmetic. Labor has set itself a carbon abatement budget of 1200Mt of CO2-e based on its ambitious target of a 45 per cent reduction in emissions by 2030. What it needs to do now is to demonstrate how it can meet this budget while not using any Kyoto carry-over or international carbon credits.

Note Labor has also declared it has no intention of retaining the Coalition’s direct action arrangements — the Emissions Reduction Fund, to be rebadged the Climate Solutions Fund.

The ball is now in Labor’s court: put up or shut up. Show us how its emission reduction target can be achieved and the sectors that will be affected.

Otherwise, we should dismiss the 45 per cent target as simply a case of deceptive wishful thinking.