CEO Bans Politics in Review of Australia’s Climate Ambitions

Australia’s first review of its emission-reduction targets will try to sidestep the political questions surrounding carbon markets, according to the head of the newly formed Climate Change Authority.

“It’s been a long time since we’ve had a national discussion on what Australia’s target should be,” Anthea Harris, chief executive officer of the climate authority, said in an interview from Melbourne. “We’ve lost sight of what is most important. It’s time to refocus the national debate.”

Prime Minister Julia Gillard’s legislation to make emitters pay for their greenhouse gases has been disrupted by opposition leader Tony Abbott’s pledge to repeal her 2011 Clean Energy Act. Plunging prices for carbon allowances in the European Union, which were linked to Australia’s planned cap-and-trade system in 2012, will force Gillard’s Labour government to cut estimated revenue from the sale of carbon permits, Climate Change Minister Greg Combet said April 17.

Harris, head of the climate authority since its start in July 2012, has until Feb. 28, 2014, to deliver a final report on the implications and tradeoffs of achieving longer-term climate objectives. A separate review of the Carbon Price Mechanism, which imposes a fixed price on about 350 of Australia’s largest emitters and shifts to market-based trading in 2015, is scheduled for 2016, Harris said.

Climate Science

Harris must present preliminary recommendations by October on whether Australia’s 2020 target of cutting emissions by at least 5 percent from 2000 levels is sufficient. She will delve into the science of global climate change, how Australia can share its emission-reduction burden with other nations, the role of imported carbon credits and the economic and social implications for Australia’s climate approach.

The timing of the first draft, following a general election in September, is coincidental, she said. The election and politics of carbon pricing in Australia can’t stand in the way, Harris said. The latest Newspoll shows Abbott with a 10 percentage-point lead over Gillard.

“We are definitely proceeding, regardless of the election,” she said. “We have a legal obligation. We don’t have a choice. We are obliged to keep going.”

Abbott said he will introduce a so-called Direct Action Plan that would commit as much as A$750 million ($772 million) a year to reward entities that demonstrate the most cost-effective spending to cut emissions. Harris’s draft report won’t address Abbott’s proposals, she said.

‘Highly Unusual’

“It’s highly unusual, and indeed, inappropriate, for any government agency to model in an alternative government’s policy while they are still in office,” Harris said. “Regardless of who is in government, the whole point of the Climate Change Authority is to provide policy advice on these essential, large issues.”

The low price of EU carbon allowances may come up, Harris said. If Australia moves to a cap-and-trade system as planned in 2015, the price of permits is forecast to track the EU price, according to Bloomberg New Energy Finance. The contract fell to a record low of 2.46 euros ($3.20) on April 17 after European lawmakers failed to win support for a plan to reduce an oversupply of allowances. It closed yesterday at 2.97 euros on the ICE Europe Futures Exchange in London.

Australia’s previous modeling has been based on higher carbon prices, Harris said. The nation began charging a fixed rate of A$23 a ton in July 2012, and the Treasury had estimated that prices would be A$29 in 2015. Those assumptions will be revised in next months’ budget, according to Climate Change Minister Combet.

Foolish Assumptions

“The lower the price, the lower the impact” of charging for emissions, Harris said. “We might take that into account.”

Low carbon prices may not last, she said. “2015/2016 is a long way away. It’s very foolish to assume that today’s low prices will necessarily apply in the future. It’s just uncertain.”

Australia’s emission reduction target can’t be raised unless “the level of global ambition becomes sufficiently clear, including both the specific targets of advanced economies, and the verifiable emission reduction action of China and India,” according to the Climate Change Authority reported released yesterday.

Raising the target to 15 percent would require, among other things, “an international agreement where major developing economies commit to restraining emissions substantially,” according to the report.

It also raises the possibility of a 25 percent cut by 2020, as well as what Australia should do to curb emissions in subsequent decades. The nation has a goal of reducing greenhouse gases by 80 percent as of 2050.

While Abbott has promised to dismantle the Climate Change Authority, Australia’s 2011 climate law established that if Parliament vetoes emissions cap legislation, a “default limit” may take effect, according to New Energy Finance.

Harris said the default provision would ensure “the show will go on,” regardless of political disagreements.

To contact the reporter on this story: Mike Anderson in Singapore at manderson34@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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