Friday 28 February 2014

RESEARCH: Emissions Reduction Fund Green Paper

In December of 2013 the federal Coalition Government released its Green Paper on the proposed Emissions Reduction Fund, the key program within the 'Direct Action' policy, established to replace the carbon pricing mechanism by the former Labor Government.  The Government sought stakeholder feedback on proposed elements of the Emissions Reduction Fund.  I provided a submission during the consultation period.

Direct Action has been developed to enable Australia to meet its international commitment to reduce greenhouse gas emissions by 5% from 2000 levels by 2020.  The scheme is quite different from the Labor Government's carbon pricing mechanism.  Under the Labor Government scheme, polluters were forced to pay, with changes in price for carbon permits/taxes acting as a market signal to encourage a reduction in emissions.  Alternatively, the Coalition Government's 'Direct Action' policy will have a user-pays (i.e. tax-payer pays) format, providing funds as an incentive for industry to reduce emissions, although there will be no penalty for industry to maintain (but not increase) its current emissions levels. 

The main issue I see with the proposed Emissions Reduction Fund is that it does not identify a mechanism to measure industry's 'business as usual' emissions, and therefore can't penalise industry players for increasing their emissions.  It will also be difficult to administer, especially in terms of assuring cost-effectiveness, with funds only going to programs that would be financially infeasible without assistance, something called 'additionality'.