What is it and how does it work...


The federal government’s policy for meeting Australia’s target of reducing carbon emissions by five per cent by 2020.

It will replace the carbon pricing scheme repealed by the government in July.

The centrepiece of direct action is a $2.55 billion pool of government money known as the emissions reduction fund.


The fund will pay for projects that reduce emissions. These could include cleaning up power stations, capturing waste gas at landfill sites, improving energy efficiency or planting (many) trees.

Companies volunteering to carry out these projects can compete against each other for a slice of the $2.55 billion.

Whichever company promises the biggest cut in emissions at the lowest cost gets the cash in a process known as a “reverse auction”.

The government is confident this carbon buyback approach will meet Australia’s five per cent target at the cheapest possible price.


This is a subject of much debate. Environment Minister Greg Hunt insists direct action will work once its up and running, but not everyone shares his confidence.

There’ve been ample studies showing direct action can reduce emissions, but not by the amount needed with the cash available.

This is problematic because the fund is capped and it’s been made very clear there’s no backup cash should it fall short of its goal.

Critics also point out the scheme has little room to “ramp up” if Australia needs to make deeper cuts beyond the promised five per cent.


Direct action is voluntary, so companies have no obligation to participate.

So far there’s no limit on big polluters. They can continue to release greenhouse gases at high levels without penalty.

The risk is the environmental benefits achieved through the $2.55 billion fund will be outweighed if emissions continue to rise in high-emitting industries like the power sector.


In exchange for his vote independent senator Nick Xenophon demanded the government set up a “safeguards” mechanism to penalise companies that continue to increase their emissions.

From mid 2016, companies will be forced to pay a fine if they breach a legislated limit on emissions.

What happens between now and then is unclear. The limits and penalties also haven’t been determined yet.

But Mr Hunt doesn’t anticipate wagging his finger at “rogue emitters”. He’s confident most companies will operate within the limits.


To get the numbers it needed in the Senate to pass direct action, the government agreed to abandon its election promise to abolish the Climate Change Authority.

It also agreed to investigate the Palmer United Party’s proposal for a “dormant” emissions trading scheme, and assigned the authority this task.

This proposed ETS would only take effect when Australia’s major trading partners – including China, India and the United States – adopt similar mechanisms.

Direct action will also provide a market for about 170 carbon farming projects and thousands of jobs nationwide that were facing collapse following the repeal of Labor’s carbon price.