Australia’s carbon pollution reduction legislation is badly flawed, but in our battle against global warming we’re going to have to live with emissions trading. [12 May 2009 | Peter Boyer]
In 1990 an ingenious way to make air polluters pay for their sins – or to reward effort to reduce pollution – was passed into law in the United States. The Clean Air Act set up a market for sulphur dioxide emissions, administered by the Chicago Board of Trade.
The scheme’s success in achieving a 40 per cent reduction in emissions in its early years was noted by the nations of the world. In 1997, in Kyoto, Japan, they voted to adopt its principles to tackle global greenhouse gas emissions.
Kyoto opted for emissions trading ahead of taxation because a functioning trading scheme, while it has price uncertainties, puts a physical limit on emissions. A carbon tax, which seems to appeal to some Australian commentators, has no mechanism for direct control over emission levels.
Like the US scheme, the Kyoto system follows the “cap-and-trade” principle, whereby governments set a cap on total emissions and issue permits to allow pollution up to that limit (but not beyond). The trading part of the scheme allows corporations that cannot operate within their permit limits to buy carbon credits from those who pollute less.
The Kyoto agreement encouraged regional trading schemes in advance of a global system, and in 2005 the European Union began its own emissions trading scheme. It got off to a shaky start with a collapse in the carbon price – a story often cited by opponents of emissions trading. Yet this was hardly a surprise: such a new scheme, on such a scale, must have time to settle down.
Australia started down the emissions trading path in 2007, when the Howard government, after many years of opposition, finally decided to get a scheme under way by 2011. The more ambitious program of the new Rudd government saw the starting date come forward to 2010.
That’s by way of background to the palaver that’s been so prominent in the national political debate leading up to tonight’s Budget. It also begins to explain why I think a trading scheme rather than a tax is the best national-scale tool available to tackle the mighty task of reducing carbon emissions.
When the Howard government signed Kyoto in 1997, and when the Rudd government finally ratified it in 2007, we recognised that climate change was a global issue demanding international cooperation. As Climate Change Minister Penny Wong has frequently said, an Australian emissions trading scheme is part of that agreement.
Human carbon emissions continue to rise, setting the prospect of a real (as opposed to a mere financial) meltdown. With the world now moving inexorably toward an international emissions trading future, it’s right that we adopt with all speed measures that fit with this global trend.
The scale of emissions trading means that while the government’s announcement of a delayed start until 2011 is to be regretted, it’s not surprising. Equally unsurprising is the welter of criticism about the scheme’s low emissions targets, its cap review process, its impact on business, the scale of its assistance to big polluters and the failure to adequately reward personal energy-saving efforts.
A few weeks ago I reported in this column a powerful critique of the government’s plan by Guy Pearse, a former Howard government staffer and a strong advocate of emissions trading. The criticism still holds: the government has put too much reliance on offsetting Australian emissions by paying for “avoided deforestation” in foreign countries.
There’s still a lot that can be done to make the proposed scheme work better. Opposition parties and independents are right to criticise it and to work to improve it through amending the legislation. But they would be very wrong to seek to block the legislation until after this year’s crucial UN climate meeting, starting in Copenhagen on 7 December.
Copenhagen is shaping up as the most important global congress in history. With European emissions trading now well under way and President Obama declaring for a similar cap-and-trade system, a failure in setting up an Australian scheme would put us in a weak bargaining position in this critical meeting.
To abandon or further delay emissions trading would be to throw the baby out with the bath water. We need to have legislation in place by the time we join the Copenhagen debate in December. We should seek to make the legislation better, but there will be time in the years ahead to address further shortcomings as they become more apparent.
To paraphrase Winston Churchill’s quip about democracy, there’s no doubt that the Rudd government’s emissions trading option has serious shortcomings. The only trouble is that all the other options – including delay – are so much worse.
• More than 8000 primary schools from around the nation will pound the pavement this Friday, May 15, doing their bit for their own good health and that of the planet, as part of the 10th national Walk Safely to School Day. For more information visit www.walk.com.au.