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Climate Change: Australia’s 80/50 Plan; Modelled On EU’s 20/20 …

  • July 11th, 2011
  • Posted by EUEditor

eu-industry-scape.jpgThe European model chosen by Australia to peg the price of carbon has its blind-spots and problems, but is challenging climate change on a grand scale.

The Australian government on Sunday (10.7.11) announced the biggest anti-climate change program outside of the EU, a large-scale economic reform with an emissions trading scheme at its core.

NATIONAL PROGRAM FOR AUSTRALIA

The scheme will begin  in  one year with a charge, or tax,  equivalent to today’s AS23, and reflecting the average price in the EU during recent trading – to be paid by 500 companies classed as main  polluters.

Built into the program, the tax threshold for lower-income Australians, the point below which incomes are not taxed, has been extended from  $6000 to $18000.

Extensive compensation payments will be made to most households, families with children and age pensioners in particular, drawing on funds from the tax, to blunt the impact of higher production costs.

That aspect has inspired the conservative Liberal party in opposition to call the change “socialism disguised as environmentalism.”

The Opposition says that it will repeal the measures if it attains government; suddenly a difficult order, given the scope of the changes announced at a Sunday media conference by the Prime Minister, Julia Gillard.

Her minority government has obtained support for the move from independent members of Parliament and the Green Party, to provide the numbers to put it through.

The program includes:

  • Use of the tax over four years to get an ongoing price established and stabilised for carbon, after which the mechanism will change to to a market scheme, like the ETS in Europe.
  • A substantial percentage of the carbon saving will then be in the form of off-sets purchased from other  countries, with a “quality assurance” system to ensure real savings for the atmosphere.
  • Targets of  a 5% reduction in carbon gas emissions (on 2000 figures) by 2020, and 80% by 2050.
  • Large policy and funding agencies to be created, to promote large-scale energy saving, and set up renewable energy producers, notably in solar and wind.
  • Closure of the most polluting power stations, and no more coal fired generators in Australia.
  • No new tax impact on petrol for consumers, though domestic airline operators will have to pay it on their fuel.
  • Landscape provisions including payments for farmers’ afforestation projects.
  • Exemptions and compensation have been provided for certain trade-exposed industries  – steel and manufacturing.
  • The overall scheme will not be revenue neutral – not quite a “merry go round” or re-allocation of moneys from the polluting industries. One general figure puts its cost at A$10-billion for the coming four years, of which some $4.6-billion is to come from general revenues.
  • The latter will be for compensations not assented to by the Greens, for heavy industry including coal.
  • While aviation, rail and shipping will be facing up to new costs, trucks have had a reprieve, thanks mostly to representations from the rural lobby, their case to be considered again after  two years or more.

STOPS AND STARTS FOR EU SCHEME

In the lead up to a long-delayed, much fought-over decision by Australia to go ahead on climate change, EUAustralia Online made a check on the European model, (see “Carbon trading – steps backward and forward”, 1.3.11):-

“The European Union has no such hesitations over running a system that puts a price on pollution, via paid-for emissions of carbon; pushing towards its goal of a ’20/20′ answer to climate change – a 20% drop in output of global warming gases by 2020.

“It does have continuing problems with running the scheme, even from the earliest days, when prices dropped to ridiculously low levels – the product of national governments giving excessive free allocations to their own industries.

“Rectified, the scheme still had to be worked on.

“It was suspended  on  19.1.11 in  all EU member countries,  because of criminal activity, credits being diverted in an intrusion that the European Commission is referring to as ‘cyber theft’.

“Some parts of the system have been allowed to resume trading since then, on assurances they had improved their control mechanisms …

“Positive results have been marked-in, along the way.

“A report from the European Commission last June showed that emissions of greenhouse gases from EU businesses participating in the Emissions Trading System fell 11.6 % in 2009 compared with 2008.”

CURRENT PROGRESS – BRUSSELS REPORT

What does the EU have to say for itself?

It does not have to cope with the same levels of resistance from mining interests, as governments in Australia, but has had to perform a patient build-up, since the 50th Anniversary of the European Union, in March 2007 – when emissions trading was in its infancy and climate change was declared a first priority.

Its current report:-

The EU Emissions Trading System (EU ETS) is a cornerstone of the European Union’s policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively.

Being the first and biggest international scheme for the trading of greenhouse gas emission allowances, the EU ETS covers some 11,000 power stations and industrial plants in 30 countries.

Launched in 2005, the EU ETS works on the “cap and trade” principle.

This means there is a “cap”, or limit, on the total amount of certain greenhouse gases that can be emitted by the factories, power plants and other installations in the system. Within this cap, companies receive emission allowances which they can sell to or buy from one another as needed. The limit on the total number of allowances available ensures that they have a value.

At the end of each year each company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances. The flexibility that trading brings ensures that emissions are cut where it costs least to do so.

The number of allowances is reduced over time so that total emissions fall. In 2020 emissions will be 21% lower than in 2005.

The ETS now operates in 30 countries (the 27 EU Member States plus Iceland, Liechtenstein and Norway). It covers CO2 emissions from installations such as power stations, combustion plants, oil refineries and iron and steel works, as well as factories making cement, glass, lime, bricks, ceramics, pulp, paper and board.

Nitrous oxide emissions from certain processes are also covered. Between them, the installations currently in the scheme account for almost half of the EU’s CO2 emissions and 40% of its total greenhouse gas emissions.

Airlines will join the scheme in 2012. The EU ETS will be further expanded to the petrochemicals, ammonia and aluminium industries and to additional gases in 2013, when the third trading period will start. At the same time a series of important changes to the way the EU ETS works will take effect in order to strengthen the system.

See EUAustralia Online: “Europe Day celebrations and sorrows”, 17.5.11; “World climate change accords …”, 25.4.11; “Carbon trading – steps backward and forward”, 1.3.11.


Reference

European Commission, Brussels, “Emissions Trading System (EU ETS)”.
http://ec.europa.eu/clima/policies/ets/index_en.htm
, (11.7.11).

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