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'.