IGCC, which represents big funds, says ‘small-scale’ package is unlikely to offer a durable policy framework
— Scott Morrison’s recent pivot on climate policy is unlikely to have a positive impact on Australia’s emissions profile because it fails to grapple with the underlying drivers of increased pollution, according to a new analysis by the Investor Group on Climate Change.
The IGCC, a group that represents institutional investors such as super funds, with total funds under management of about $2tn, has told its members Morrison’s “climate solutions package” won’t change the current trajectory of rising emissions because it is “small scale and unlikely to be a durable policy framework through time”.
The group has also questioned the Coalition’s investments in Snowy 2.0 and Tasmania’s “battery to the nation”, arguing that these projects “could be crucial to decarbonising the electricity system” but also noting “they are not a substitute for private sector investment in new zero emissions generation and a national strategic plan for enhanced transmission and distribution”.
The government has attempted to appeal to voters concerned about the Coalition’s record on climate action by rebooting and rebadging Tony Abbott’s emissions reduction fund; investing in large pumped-hydro projects; supporting energy efficiency measures; and also setting out a carbon budget detailing how it proposes to meet the Paris target.
The IGCC is underwhelmed by the recent pivot. It says that until a policy is produced creating a credible pathway to net-zero emissions, investors will continue to sit on the sidelines. “In the absence of this, policy uncertainty will be increased, the necessary investment in zero emissions generation will be delayed and upward pressure will continue on electricity prices,” the new paper warns.
The group is also critical of the government’s use of carry-over credits as a tool to ensure Australia complies with its obligations under the Paris agreement, warning that it will only delay the necessary transition, and increase the adjustment costs – socially and economically.
The Morrison government is counting a 367-megatonne contribution from carry-over credits – an accounting system that allows countries to count carbon credits from exceeding their targets under the soon-to-be-obsolete Kyoto protocol periods against their Paris commitment for 2030 – to help meet the 2030 target.
The IGCC notes taht there is currently a gap between the targets that countries have set, and actions required to achieve the objectives of the Paris agreement.
“For investors this is concerning because the economic and social impacts of current projected levels of climate change risk investment returns and economic prosperity over the longer-term,” the paper says.
It points to recent economic analysis suggesting that, “conservatively, currently projected warming of 2.5-4°C could reduce global economic output by 10% to 30% over the lifetime of assets and superannuation returns”.
“The use of carryover to weaken Australia’s emissions commitments is also fundamentally at odds with limiting warming in line with the objectives of the Paris agreement and driving global momentum for coordinated, and increased ambition,” the paper says.
“This could threaten to spread a low ambition contagion in the international system by further encouraging other countries like Russia to use carryover to delay emissions reductions.”
The IGCC also says Labor is yet to take a position on the use of carry-over credits. It says that if the ALP uses the same accounting as the government, factoring in a 367-megatonne contribution in its carbon budget, Labor’s 45% emissions reduction target would become a 35% target.
The most recent emissions data confirms that emissions in Australia are continuing to rise, with the latest increases driven predominantly by higher liquefied natural gas production in Western Australia.
Emissions for the year to September 2018 went up 0.9% on the previous year, according to the latest inventory, primarily due to a 19.7% increase in LNG exports, but there were also increases in stationary energy, transport, fugitives, industrial processes and waste sectors.
The trend of rising emissions has been in evidence since the Abbott government repealed the carbon price Labor legislated during the 43rd parliament.
While boosting funding for the emissions reduction fund, the government has also this week foreshadowed changes to the accompanying safeguard mechanism.
The changes will make it less likely that heavy polluters such as mines and smelters will be caught by the scheme in the short term – although the adjustments also set the mechanism up for a more seamless transition to a baseline and credit scheme, which Labor has flagged for liable entities – big polluters emitting more than 25,000 tonnes of carbon a year.
The safeguards mechanism – part of the Direct Action scheme, which is at the centre of Morrison’s recent climate redux – sets emissions “baselines”, or limits, for big polluters.
The mechanism is supposed to ensure pollution cuts paid for through the taxpayer-funded emissions reduction fund – rebadged by Morrison last week as the “climate solutions fund” – are not undone by a blowout in emissions in other parts of the economy.
by Katharine Murphy | The Guardian