Australia Picks Panel to Help Set Emission Baselines, Penalties

Australia, the world’s second-biggest coal exporter, has picked more than a dozen industry representatives and academics to help set baselines, credits and possible penalties designed to reduce emissions.

The Emissions Reduction Fund is the “center piece” of the new government’s Direct Action plan to cut pollution to 5 percent below 2000 levels by 2020, Environment Minister Greg Hunt said today in Melbourne as he released a report known as a green paper. The fund will start July 1, 2014, Hunt said.

The Liberal National coalition led by Prime Minister Tony Abbott has pledged to spend A$1.55 billion ($1.37 billion) over three years on the fund and has introduced legislation to repeal programs set up by the previous government, including a fixed price on carbon through July 2015 and emissions trading after that. The coalition plan is for Australia to issue credits for greenhouse gas reductions and buy the lowest-cost abatement through so-called reverse auctions, Hunt said.

“The Green Paper raises complex issues around emissions baselines, crediting of abatement and the operation of the auction system,” said Innes Willox, chief executive of the Australian Industry Group and one of more than a dozen named to Hunt’s Emissions Reduction Fund Expert Reference Group.

“One important climate policy tool that we will continue to advocate for is the use of affordable overseas abatement credits,” Willox said in a statement.

Buying international carbon credits near record low would give Australia an insurance policy for meeting its pledge to cut emissions by 5 percent, Willox said in a submissions to the government last month. Certified Emission Reductions from the UN fell to a record low of 20 euro cents ($0.27) on April 17.

Carbon Advisers

Australia will take submissions on the green paper until Feb. 21, which will be used to help develop the next report, known as a White Paper, Hunt said. The group advising on the new plan include Neil Hereford, head of carbon solutions at Commonwealth Bank of Australia, and Brendan Pearson, CEO of the Minerals Council, according to a statement. Other members are Danny Price, managing director of Frontier Economics, and David Green, CEO of the Clean Energy Council.

Australia has yet to decide how to set emission baselines that would be the benchmarks for compliance or the penalties for non-compliance, according to the green paper.

The Emissions Reduction Fund would award credits to parties that cut pollution faster than their peers, Hunt said in an Oct. 24 paper. It would use data compiled by Australia’s National Greenhouse Gas Inventory Report as well as the Clean Energy Regulator, agencies that enforce the fixed carbon price in the current system.

‘Make Good’

The government is considering a recommendation that emitters exceeding their baseline be allowed to “make good” by purchasing emissions credits, according to the green paper.

“The Emissions Reduction Fund is designed to allow business to continue ordinary operations without penalty,” according to the paper.

“Penalties should not apply where business are clearly operating as usual,” according to a submission from the energy supply association led by Matthew Warren, one of Hunt’s panel of advisers. “If penalties are to apply, then the Energy Supply Association of Australia considers that a range of make good provisions could be used.”

The government intends to launch the emissions fund in July 2014 regardless of support from opposition parties, according to a note today from Bloomberg New Energy Finance.

“This may suggest an initial phase may be implemented through regulation instead of legislation, but no information has been provided to suggest this is possible,” BNEF said.