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Hazelwood Power Station and cooling pond in the Latrobe Valley.
The Hazelwood power station and cooling pond in the Latrobe Valley, Victoria Photograph: David Crosling/AAP
The Hazelwood power station and cooling pond in the Latrobe Valley, Victoria Photograph: David Crosling/AAP

Direct Action will force heavy polluters to cut back after 2020, Greg Hunt says

This article is more than 8 years old

Australia’s environment minister insists the ‘safeguard mechanism’ of $2.55bn fund was ‘designed to have its real impact in the post-2020 period’

Greg Hunt has said electricity generators and heavy industry would be forced to gradually reduce greenhouse emissions after 2020 under the Coalition’s Direct Action climate plan, a prospect the government had previously played down.

The government has always said the so-called safeguards mechanism in Direct Action was only to ensure that big emitters did not go “rogue” and dramatically increase emissions in a way that undoes the emission reductions being bought by the government’s $2.55bn fund.

But in an interview this week, the environment minister said “the safeguards mechanism is designed to have its real impact in the post-2020 period – and it’s flexible, it is designed and legislated so as it can be adjusted and it can be tightened in such a way so as to allow for progressive emissions reductions.

“It is a two-part system. An emissions reduction fund … [and] secondly, we have the safeguards mechanism which allows us to work with individual firms on a budget which can be adjusted and progressively tightened throughout the 2020s through to 2030 and 2040 and 2050.”

In internal government discussions the prime minister, Tony Abbott, and his office have been very concerned the safeguards mechanism could never turn into a de facto carbon price or a burden on emitting industries.

Analysts such as Reputex’s Hugh Grosmann have argued the safeguards mechanism would have to be given teeth if Direct Action was to meet tougher targets, but the government had given no indication it intended to do so.

And experts said the details of the mechanism revealed in an issues paper in March indicated it would at best mean major polluters continued business as usual and at worst could lead to significant increases in their greenhouse gas emissions.

Elaine Prior, a senior analyst at the global investment bank Citigroup, said: “It appears to us that the mechanism, as described in the consultation paper, is unlikely to impose any significant costs or constraints on companies … It also appears unlikely to make any significant positive contribution to Australia’s emissions reduction efforts.

“Progressive tightening” of their baselines is not what is anticipated by the 140 facilities with emissions of more than 100,000 tonnes of CO2 – electricity generators, mines, manufacturers – which will be covered by the safeguards mechanism.

In its submission about the safeguards, the Australian Industry Group said that it “meets the government’s objective that the mechanism will not be a driver of abatement towards the 2020 target” and would need “substantial amendment” if it was ever to help reduce greenhouse emissions.

And in its submission, the Business Council of Australia argued that “safeguard mechanism should not in effect impose an additional cost on new facilities that acts as a de facto carbon cost”.

But that is exactly what the mechanism could become if the “baselines” over which companies cannot increase their emissions are progressively tightened as Hunt suggests.

If baselines are exceeded, the offending companies can make up for it by “purchasing credits created by other accredited emissions reduction projects”.

Hunt and the foreign affairs minister, Julie Bishop, held a meeting with industry and environmental groups in Sydney on Thursday about what post-2020 emissions reduction target Australia should agree to.

When the details of the safeguards mechanism were released, the independent senator Nick Xenophon, who provided one of the six votes the government needed to get Direct Action through the Senate last July, said it had been “neutered” and accused the government of reneging on promises it made to secure his vote.

“Direct Action has no point if it does not have an effective safeguards mechanism, and what the government has released seems like a try-on,” he said. “It goes against what they promised me in the discussions before the vote. I was assured this safeguards mechanism would have real teeth.

“There is no point in the government spending $2.55bn if there is no requirement to cap or reduce emissions from industry.”

The issues paper said baselines for emissions would “reflect the highest level of reported emissions for a facility over the historical period 2009-10 to 2013-14”.

If companies exceeded the baseline calculated that way, they could have their emissions averaged out of the next three years, or apply for a baseline “expansion”, or apply for an exemption, for example after a natural disaster. Only if that all failed would they be required to buy emission reductions.

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