by John Connor, Chief Executive Officer, Carbon Market Institute.
Delivered at the Stimulus Summit: A Renewables-Led Economic Recovery, 6 May 2020 , hosted by the Smart Energy Council and RenewEconomy
Australia is staring down the barrel at three huge needs.
1) the need to manage an economy, community and environment recovering from last Summer’s bushfire crisis – a crisis that ended just three months ago.
2) the need to transition to a net-zero emissions economy, so we can credibly engage with other countries regarding climate hazard reduction. Only by helping achieve net-zero emissions, can we stop fuelling hazards such as more intense bushfire weather, extreme rainfall and other growing climate impacts.
3) the need to build an economy that’s more resilient and ready for pandemics such as COVID-19 – whose impacts on public health, supply chains and security some have argued is climate change at warp speed.
Elsewhere I’ve described this as a task of combining land, climate and economic repair.
When it comes to a repair job there’s no point replacing a flat tyre if the engine is bust. There’s no point fixing the engine if the chassis is corroded.
There’s no point in a Fred Flinstone led recovery.
Fortunately Australia and Australian business has every opportunity for a resilient, regenerative and renewable recovery. Our resources and re-discovered capacity for national coordination, innovation and common purpose presents us a historic opportunity with which to engage it.
Managing Risks and Seizing Opportunities
However, we need to be mindful that this is not just a finger clicking transition. We need a plan to manage the risks and seize the opportunities of this transition for Australian business, workers and the community.
Helping business manage risks and capitalise on opportunities in the transition to a net-zero emissions economy is the mission of CMI.
CMI has over 75 member companies engaged in the carbon reduction business.
We have carbon reduction “supply-side” members generating carbon reductions through carbon farming, energy efficiency, transport and clean technology solutions.
We have “demand-side” emissions intensive members needing those solutions because of compliance obligations and voluntary commitments.
We have service members providing expertise, zero-carbon technology and innovation, finance and insurance to other members and exporting that expertise internationally.
Some members integrate all or much of the above.
Even before last Summer our 2019 survey of attitudes in Australian business revealed a strong desire for a proper plan and an end to climate and energy discord and divisiveness.
Almost 95% of survey participants – including over a third from emission-intensive companies – think Australia’s current suite of climate policies do not sufficiently assist business in the transition to net-zero emissions.
Stocktake: Australia’s resources, policies and expertise
From Australia’s resources and the rudiments of climate and energy policy we can quickly evolve policies and build our economy back better.
A very quick stocktake is in order.
We have abundant renewable and other energy resources that can manage the transition to zero if not negative emissions energy, transport and industry.
We have significant farmlands, woodlands, forests, savanna, coast and sea country on which we are building a potential export industry for the “negative commodity” of carbon reductions stored in deep substrata, soils, minerals and vegetation.
And say what you will about Australia’s policy ambition, we have an internationally respected architecture of integrity and assurance for emissions reduction – this includes the world’s first carbon industry code of conduct currently administered by CMI, a robust Clean Energy Regulator and Assurance oversights as well as a reduced but not removed Climate Change Authority with independent review and advisory capacity.
We have been refining corporate emissions measurement since Prime Minister Howard first brought in NGERS in the late 2000s, and continual improvement in measurement of supply chain or scope 3 emissions – better management of which is being increasingly demanded by investors and managers.
We have proven and successful platforms for clean technology development and deployment in the CEFC and ARENA alongside CSIRO and a range of Cooperative Research Centres and other knowledge hubs.
And let me let you in on a secret. Australia has carbon pricing and functioning carbon markets.
While the compliance load is not heavy, the Government’s Safeguard Mechanism requires our larger emitters to manage their emissions and purchase carbon reductions in some instances to meet required baselines. Australian companies are trading in emissions.
Finally, the centrepiece of the Government’s policy is a carbon pricing scheme with the Emissions Reduction Fund applying billions of public taxpayer funds in auctions. The last auction set an average carbon price of just over $16 a tonne and we have a secondary market for compliance and voluntary trades at around that price.
From these resources, policy rudiments and our technological, industrial and agricultural expertise we have as Professor Garnaut says “the potential to be an economic superpower of the future post-carbon world.”
Policies for land, climate and economic repair
We’ve heard yesterday and today about the great potential for resilience and tens of thousands of jobs that renewable electricity can bring and that AEMO says the grid could handle up to 75% renewables by 2025. As such improved renewables policy should necessarily be central to policy solutions – necessary but not sufficient.
We can have a renewables led recovery but we need policy and investment to properly integrate land, climate and economic repair. We need to locate net zero carbon goals across the economy. We also need to be careful to avoid perverse outcomes between sectors.
Biological carbon sequestration, nature-based climate solutions or carbon farming – the names are interchangeable – provide not just offsets to be considered at the end of other activities. They must sit alongside necessary decarbonisation and renewable energy policies.
As Professor Garnaut has noted, nature based climate solutions can be a source for around a third of the reductions we need by 2050 if we are to achieve Paris Agreement temperature targets and net-zero emissions.
Since 2011 and the passage of the Carbon Farming Initiative legislation, Australia has seen 800 carbon farming projects providing millions of dollars of investment and significant employment into regional Australia.
CMI’s Carbon Farming Roadmap of 2017 identified that by 2030 strong policy could drive up to $24 billion of revenue from carbon projects and up to 21 000 jobs. There is a pipeline of potential projects around the country.
But to engage them we need strong and integrated policy that provides investors with long term confidence.
Australian governments will need to take some key steps including:
1. Nationally legislated long-term strategy with a goal of net-zero emissions by 2050 – there’s no point to a roadmap without a clear destination and our new found national coordination should see our national government joining all state and territory governments and the 83 % of business respondents backing this goal.
2. Alignment of the Safeguard Mechanism’s emission baselines downwards at least with nationally determined contribution (NDC) emissions reduction target trajectory – this should come with trade of national and credible international carbon reduction credits to assist the transition and drive investments in carbon farming and nature-based solutions here and potentially progressively through the Asia Pacific region. There is precedent in the Government’s Climate Active scheme for corporate carbon neutral accreditation.
3. Escalated use of Climate Solutions Fund for recovery and transition – The almost $2 billion Climate Solutions Fund can be more assertively applied to build the carbon farming industry and direct investments in the crisis. As a stimulus measure the Clean Energy Regulator can enter option contracts between auction cycles in addition to its support for early purchase of credits. Aligning baselines as above so business not the taxpayer is the main driver of credit purchases, can allow more investment in research and development, technology deployment and data measurement. This can include better resourcing and streamlining for carbon reduction methodologies that include enhanced fire management. ARENA’s budget should be replenished and also support relevant technology development.
4. Better integration of the carbon farming industry in land management as well as bushfire management and recovery processes – this includes improvement of current varied treatment of fire in current carbon farming methodologies. It should also include recognition and improved inclusion of Indigenous fire management knowledge and practice. Other Commonwealth and state government packages should support farmers assessment of carbon farming opportunities as the Queensland Government’s Land Restoration Fund does with up to $10 000 rebates and carbon farming should be seen as a primary industry for land tax and other government processes. The CEFC mandate and budget could be bolstered to encourage co-investment in bushfire and climate resilience.
5. No use of Kyoto carryover units towards Australia’s 2030 NDC target – policy and investment should focus our reduction efforts between 2020 and 2030 and allow for stronger investment for our 2035 Nationally Determined Contribution. Use of Kyoto carryover credits reduces that investment till 2030 and will require a “catchup” shock that will need to be added on to our next 2035 NDC.
6. An independent Statutory authority reporting regularly to Parliament, recommending and reviewing NDCs – whether by MP Zali Steggal’s proposed Climate Commission or the Climate Change Authority, community confidence, environmental credibility and investor certainty will be enhanced by 5 yearly carbon budget analysis and public NDC target recommendations and review for consideration by Government.
7. A strategic approach to managing the transition – that manages emission intensive companies trade exposure and supports a just transition for affected workers and communities. There are a range of other ways in which we can enhance public and private investment and policy support for the development of Australia’s comparative advantage in large-scale biological, industrial and geological sequestration beyond the remit of today’s discussion.
Australian governments, business and community have performed together admirably in response to the COVID crisis – we can do so again as we plan our recovery and our repair tasks responding to bushfire, climate and the COVID crisis.
Good policy and carbon markets can funnel investment to the right places for a more resilient, regenerative and renewable economic recovery.