Australia Puts Off Penalties in Proposed Fund to Cut Emissions

Photographer: Carla Gottgens/Bloomberg

A coal-fired power station behind a disused coal dredger in the town center in Morwell, Australia. Close

A coal-fired power station behind a disused coal dredger in the town center in Morwell, Australia.

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Photographer: Carla Gottgens/Bloomberg

A coal-fired power station behind a disused coal dredger in the town center in Morwell, Australia.

Australia will focus on rewards rather than penalties to slow greenhouse-gas emissions, according to a government blueprint for a new climate policy proposed to start this year.

Prime Minister Tony Abbott’s government, vowing to throw out the existing levy on emitters, unveiled final details today for an Emissions Reduction Fund with as much as $2.6 billion to help firms lower Australia’s emissions, the highest per capita in the developed world. The government will wait until next year to consider consequences for emitters going over their historical baselines, and no more than 130 of the largest polluters would be bound by this “safeguard mechanism.”

The new policy will contribute to “global action on climate change, but without a costly and ineffective carbon tax,” Australian Environment Minister Greg Hunt told reporters today in Canberra. “What the Emissions Reduction Fund will do is help drive private-sector investment into practical actions, such as cleaning up waste coal-mine gas.”

Rio Tinto Plc (RIO) and Chevron Corp. are among companies backing the view that Australia can cut emissions without resorting to penalties. The government still has to win over political opponents and demonstrate the plan is an adequate response to climate change, which poses “an immediate threat to Australia’s society and economy,” the United Nations said in a report last month.

Hardest Question

“The government has pushed the hardest and most important question of how to stop emissions growing ever higher to next year,” Kobad Bhavnagri, head of Australia research at Bloomberg New Energy Finance in Sydney, said in an interview today. “The Emissions Reduction Fund is unlikely to be robust enough to achieve Australia’s commitment of a 5 percent reduction in emissions.”

Abbott’s victory in last year’s election with the biggest margin in nine years has yet to settle a national debate over how to cut Australia’s emissions. He called the election a mandate to eliminate the Carbon Price Mechanism that Labor enacted in 2011. The policy imposed the world’s highest carbon levy on Australia’s largest emitters.

Abbott’s Liberal-National coalition has budgeted funds to start its Emissions Reduction Fund as part of the Direct Action policy on July 1. That means the program could start regardless of whether the opposition Labor or Palmer United parties try to block legislation in the Senate.

“We would prefer to have legislation,” Hunt said in an e-mail this week. “But our goal is very clear, and we won’t stop until the carbon tax is repealed and Direct Action is implemented.”

Safeguard Mechanism

The government selected more than a dozen industry and academic officials to help finalize policy details. They received more than 600 submissions in response to initial papers in October and December. It will wait until July 2015 to establish baselines to help determine which emitters are exceeding industry averages, according to the paper.

Without referring to penalties, the paper said the safeguard mechanism will apply only to about 130 of the largest emitters and new entrants reporting under the National Greenhouse and Energy Reporting Scheme. The existing Carbon Price Mechanism, by comparison, requires more than 300 Australian companies to pay more than $20 a ton for their emissions.

“All but the largest emitting business will be exempt,” according to the paper. “This will enable the safeguard mechanism to be implemented without any new mandatory reporting obligations.”

The government received submissions from Rio (RIO), the world’s second-biggest mining company, and Chevron, the world’s third-largest oil company. Officials with the companies declined to expand on their submissions filed in November when contacted by e-mail this week.

Business First

The government is putting business interests ahead of community concerns about climate change, Bernie Fraser, chairman of the Climate Change Authority, said in March 13 speech in Canberra.

“With the current alignment of business and government interests, the debate on climate change in Australia seems destined to be lopsided for some time to come,” he said.

The authority, which would be eliminated in the government’s proposed climate plan, said Australia is already seeing the predicted increases in severe bushfires and coastal erosion. The nation should triple its 2020 emissions reduction target to 15 percent to minimize the need for future increases and match what countries such as the U.S. are doing, he said.

To contact the reporters on this story: Mike Anderson in Singapore at manderson34@bloomberg.net; Jason Scott in Canberra at jscott14@bloomberg.net

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

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