Soft target, more hand-outs

Prime Minister Kevin Rudd has released the finalised white paper on the government’s Carbon Pollution Reduction Scheme (CPRS). The target for carbon emission reduction has been set at 5% of 2000 levels by 2020. If, however, other countries sign up to stronger reductions it may be increased to a maximum 15% of 2000 levels by 2020. The proposed scheme will now go through both houses of parliament  to become law, if accepted.

The scheme is much more generous to business, mainly due to the global financial crisis. Climate Change Minister Penny Wong says small businesses and community groups will get $1.4 billion over five years to help them adjust to the scheme. The coal industry will also get $4 billion in compensation and more businesses will receive free pollution permits. Low income households, pensioners, seniors, carers and jobless will also receive benefits to compensate for the increased electricity and gas prices.

The cap-and-trade mechanism will commence in July 2010. This mechanism will set a price for the right to generate carbon pollution. Companies buy or are given free permits to generate carbon pollution. The initial price is estimated at $25 a tonne; however, it will be capped at $40 a tonne, increasing annually by 5% above inflation until 2014–15. The number of tradeable permits will be equal to the cap, which is the limit on aggregate annual emissions.

The quantity of emissions produced by firms will be monitored, reported and audited. At the end of each year, each liable entity will need to surrender a permit for every tonne of emissions that they produced in that year. The number of permits issued by the government in each year will be limited.

Firms will compete to purchase the number of permits that they require. Firms that value the permits most highly will be prepared to pay most for them, either at auction or on a secondary trading market. For some firms, it will be cheaper to reduce emissions than to buy permits.

The scheme is expected to earn $12 billion a year. About $10 billion of this will go to compensation and free pollution permits. Only $700 million will go towards energy-efficiency measures.

Of course, most conservationists are outraged with the government’s soft targets and generous hand-outs to polluters. Damien Lawson from Friends of the Earth Australia said, “[The scheme] is a polluter's paradise and could have been comfortably proposed by John Howard.”

Environment Victoria has expressed deep disappointment with the targets which shun the advice of climate scientists worldwide. Mark Wakeham, Environment Victoria’s campaigns director, also warned that if the targets become law, Australia would be delivering a huge blow to international climate negotiations. “The Rudd government has deserted the millions of voters who voted for real action on climate change. The proposed 5% target is the kiss of death for the Great Barrier Reef and other national icons,” he said.

On the plus side, the Prime Minister has confirmed his renewable energy target of 20% by 2020 and brought forward the Renewable Energy Fund to begin immediately.