‘Trying to cost what they have on the table is really just grasping at straws. We need to start filling in the detail,’ says head of Australian Industry Group.
• Comment: why Tony Abbott’s climate ‘strategy’ won’t neutralise the environmental argument
Business leaders have said Tony Abbott has no detailed policies to meet his new climate change target and fear the uncertainty of the current “blank sheet of paper” on greenhouse policy could harm the economy and push up power prices.
The prime minister is arguing he can achieve the target to cut Australia’s emissions by 26% by 2030 more cheaply than Labor, even though neither major party has outlined a detailed or costed climate policy.
Abbott said he would continue to allocate $200m a year to buying greenhouse abatement with his emissions reduction fund, but this is likely to account for less than a quarter of the new target and the environment minister, Greg Hunt, said Wednesday the spending was “capped”.
Another quarter is likely to come from the so-called “safeguards mechanism” – which is supposed to impose limits on industrial emissions and could – if stringent – become an emissions trading scheme where businesses buy and sell permits.
Matthew Warren, the chief executive of the Energy Supply Association of Australia, said: “It is not possible to meet this target with the government’s emissions reduction fund or the safeguards mechanism as it stands.”
“It is not credible to think we can just keep buying emissions through the emissions reduction fund to meet this kind of target.”
Warren said: “We really need a clear and substantial policy from each major party to either price carbon or else regulate carbon emissions … It might be possible if the Coalition’s safeguards mechanism becomes, in effect, a baseline and credit emissions trading scheme. That will impose a cost on industry and it has to mean costs to consumers. These conclusions are inescapable and we desperately need to start talking about what policy we will use to make this change, because this is major economic reform we are talking about.”
Innes Willox, the chief executive of the Australian Industry Group, said it was “impossible to compare the costs of the major parties’ climate policies because neither has told us how they would achieve a target”.
“Trying to cost what they have on the table is really just grasping at straws. We need to start filling in the detail … the Coalition could ramp up the safeguards mechanism, but that obviously has costs and consequences for businesses and for consumers.”
The Ai Group said achieving the new target using only the emissions reduction fund would cost between $100bn and $250bn. “We prefer a market-based mechanism designed to be least-cost and not to damage trade-exposed industry,” Willox said.
According to Warren: “the only good thing to say about the scorched earth of Australia’s climate policy debate in recent years is that we are at least starting with a blank sheet of paper.”
“The current uncertainty will itself drive up prices. Banks have put away their cheque books on energy projects. Policy uncertainty has rendered electricity generation projects unbankable. That cost has been masked because lower demand has meant we haven’t needed new projects but when new assets are needed, that risk premium will be there and it will push up electricity prices.”
The warnings were born out in the government’s own economic modelling, which found that the impact of business uncertainty on the cost of Australia’s climate action had an even bigger impact on the Australian economy than other countries’ climate action.
Press link for more: Lenore Taylor | theguardian.com