New Minister Offers Hope for a Sustainable Australia 2

Tuesday, July 26th, 2016
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The appointment of Josh Frydenberg as the new Minister for the Environment and Energy provides a much-needed opportunity for the Turnbull Government to press the reset button on climate action and renewable energy.

Malcolm Turnbull has been stuck in a climate change straight jacket since he became Prime Minister in September 2015. Despite previously calling the Coalition Government’s Direct Action policy “bullshit,” he has embraced the policy as Prime Minister as part of his agreement with the National Party.

The results speak for themselves. Since the axing of the carbon price, greenhouse gas emissions in the electricity sector have soared by 5.7 per cent since June 2014.

The Emissions Reduction Fund – the centrepiece of the Government’s climate change policy – is on current spending allocations unfunded beyond 2017. The Renewable Energy Target is closed to new investments after 2020, meaning the Government does not have a climate change policy beyond 2020.

It is impossible to see how, under current policy settings, the Australian Government can meet its emissions reduction target of 26 to 28 per cent on 2005 levels by 2030, let alone a 40 to 60 per cent reduction by 2030, as recommended by Climate Change Authority.

The challenge is to turn that around – to modernise Australia’s electricity system, to reduce greenhouse emissions in the electricity and transport sectors and to develop a credible climate change policy that sets Australia up to meet its international commitments.

The merging of the climate change and energy portfolios make sense given electricity is the largest source of Australia’s greenhouse emissions at 33 per cent, and Josh Frydenberg is well-placed to drive a new climate agenda.

Thankfully, there is already a clear pathway to a sensible climate change policy.

The Australian Energy Market Commission (AEMC), which sets the rules for Australia’s electricity and gas markets, has suggested modifying the Emissions Reduction Fund so that generators could create and trade carbon credits, the stepping stones for an emissions trading scheme.

The so-called baseline and credit scheme could be designed in such a way as to complement the Renewable Energy Target and establish a climate policy that matches Australia’s increasing emissions reduction targets beyond 2020. Ultimately, the credibility of this approach will be dependent on the stringency of Australia’s emissions reduction targets.

This approach is understood to be supported by Senator Nick Xenophon, whose Senators will be critical to the success of the Turnbull Government.

There have been suggestions the Government is working behind the scenes to establish a baseline and credit scheme, although it will need to be endorsed by Federal Cabinet – an important test for the Prime Minister.

A second, parallel pathway has been outlined by Professor Frank Jotzko of the Australian National University.

He has recommended establishing a market mechanism for the regulated exit of the most emissions-intensive power stations from the electricity grid. Power plants would bid competitively over the payment they require for closure, the regulator would choose the most cost effective bid, and payment for closure would be made by the remaining power stations in proportion to their carbon dioxide emissions.

This approach addresses the perverse incentive for power stations to continue to operate well beyond their natural lives as they wait for competitors to drop out of the market.

The third pathway to action on climate change must include a strong renewable energy target. The states are already leading the way: South Australia has a target of 50 per cent renewables by 2020, the ACT 90 per cent by 2020, Queensland 50 per cent renewables by 2030 and Victoria 40 per cent by 2025.

The Federal Government can, and must, initiate measures to significantly expand our renewable energy output through the existing Renewable Energy Target, reverse auctions and the newly formed Clean Energy Investment Fund.

Josh Frydenberg has a big job ahead of him, but he appears to be up to the task. Young, intelligent and enthusiastic, this could be the making of his political career. It could also be the making of a nation that is ready for the global challenges of the 21st Century.

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  1. Rob Francis

    Josh Frydenberg is one of the most sensible and level headed members within the senior ranks of the Coalition and his appointment to the new role is welcome.

    Direct action was nothing but a sop to corporate Australia which largely poured taxpayer money into the hands of corporate Australia – largely, no doubt for projects which were most likely to happen anyway. Market based mechanisms, by contrast, represent an effective and efficient way in which to achieve sustainable emissions reductions.

    To be sure, we must acknowledge that Turnbull does face constraints as to what he can do within his own party. Be that as it may, we now have sensible people in leadership who understand the way in which business, the economy and the world at large work. We now have an opportunity to ditch the stupid old ways of policy making by ideology and two word sentences which so characterised the Abbott era and in its place implement policies which are actually well thought out and sensible. Lets hope that whatever policies are made in this term reflect sensible and economically efficient ways to reduce carbon emissions.

  2. Mark Whitby

    Thanks for keeping us informed Fiona.

    Let us not forget the sacking and non-reinstatement of our scientists as it relates to a 'clever country'.