Ch 6: Post-2007 Policy Development

6.3 Post-2007 policy development

In early 2008 the government fulfilled an election commitment by announcing that a national-level cap and trade scheme called the ‘Carbon Pollution Reduction Scheme’ (CPRS) would be implemented to commence operation on 1 July, 2010. However, as the practical challenges of implementation became more apparent, the CPRS start date was delayed a year, while simultaneously lifting the government’s maximum limit for its 2020 Kyoto-style target from 15 to 25 per cent. This focusing of public attention on targets and timetables while delaying implementation of national legislation to control pollution is another layer consistent with the Veil of Kyoto.Following the 2007 election, the Labor government requires an extra seven votes to pass legislation in the senate.

The Greens oppose the CPRS bill as they believe it should aim to cut emissions by 40 per cent by 2020 (rather than the 5 per cent proposed) and it was first rejected by the senate in August 2009. The Liberal-National coalition, was led for most of 2008 and 2009 by Malcolm Turnbull switched to supporting the signing of Kyoto, but retained a more conservative stance on the CPRS bill. The argued that it would be preferable to wait until a clear signal is given at Cophenhagen and also that greater structural adjustment assistance be given to polluters. Despite these qualifications however, towards the end of 2009 under Mr Turnbull it was looking lively that the CPRS bill was to pass in the senate on its second passage.

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In the lead-up to Copenhagen the situation was intensified by the second vote on the CPRS legislation in the Australian senate. The issue prompted a challenge to Turnbull’s leadership of the opposition led by Tony Abbott who argued against passing the CPRS legislation. Mr Abbott was supported by senate leader Nick Minchin who controversially had dismissed climate change as an extreme left plot to “deindustrialise the Western world” after the collapse of communism (The Economist, 5 December 2009). Winning the contest by only one vote, Mr Abbott took control of the opposition, and the CPRS legislation was voted down for the second time. It has also left the opposition with a gap in its policy agenda and the need to articulate a coherent response to a major issue of public concern.

Now ejected for a second time after a period of three months has elapsed, a ‘trigger’ will be given to the government to call an early ‘double dissolution’ election. This is significant as such an event is the only occasion when the entire senate faces the electorate, as opposed to the usual practice of half-senate elections. It would also be significant as the election would be focused around the debate on the climate change bill. After the ‘trigger’ is given, such an election can be called any time at the Prime Minister’s discretion.According to Newspoll in The Australian newspaper, at the time of the August 2009 senate rejection of the bill, Labor led the opposition by 57 points to 43 with Rudd ahead of Turnbull in personal approval ratings of 65 to 17 percentage points. At the time of the second rejection of the bill the government was leading the opposition on a two-party-preferredbasis by 56 to 44 per cent.

This suggests an early election based around climate change in early 2010 is quite possible and would likely further extend Labor’s lead over the coalition.The CPRS was designed to replace, or at least complement, a number of other policies that had been instituted at the state and federal level. These included: the Greenhouse Challenge, launched in 1995 in order to encourage the abatement of greenhouse gas emissions through voluntary standards; the Generator Efficiency Standards, introduced in 2001 with the objective to increase efficiency in fossil-fuelled electricity generation; and the Mandatory Renewable Energy Target (MRET) which required electricity wholesalers to buy at least 2% or 9,500GWh of electricity from renewable sources. On coming into power, Labor promised to increase the MRET target to 20% or 45,000 GWh of electricity production to be purchased from renewable sources by 2020. Legislation to put this target into effect passed in the senate in August 2009.

The most significant attempt to slow emissions has been taken at the state level by the New South Wales Greenhouse Gas Reduction Scheme (NGAS) (IPRT, 2008). NGAS is a baselineand-credit emissions trading scheme which uses emissions intensity rules to regulate the stationary energy sector. However, while it has had some success at encouraging the development of the carbon offsetting sector, its use of emissions intensity rules mean that carbon emissions have actually increased in its covered sectors casting yet another veil over the issue of rising emissions (Passey et al., 2008).The government also intends on establishing an Australian Carbon Trust, modelled on the UK’s Carbon Trust, to help households invest in energy efficiency (Department of Climate Change, 2009c).

While these policies are all important, it is the CPRS which forms the keystone of the government’s strategy to reduce emissions and therefore is the focus of our paper.In December 2008, the government released its White Paper (2008) outlining how the CPRS was to operate. This included what sectors of the economy it would cover, the emission thresholds for participation, what businesses would be forced to comply, and the rules regarding the accounting, trade and generation of greenhouse gas emission permits. Notably, however, at this time the government took no decision on the actual cap to be set under the CPRS6 , signalling that it would be announced just months before the start of the scheme on 1 July, 2010. During public consultation on the bills in April 2009, and after pressure from business groups in the midst of global recession, the government subsequently decided to delay the CPRS by one year to commence on 1 July, 2011. However, the proposed announcement of the CPRS cap is still intended to occur in the months prior to 1 July, 2010 according the Department of Climate Change (2009d).

The CPRS cap will be influenced by the Government’s medium term national target. This was set in the December 2008 White Paper as a minimum of a 5 per cent reduction of national emissions by 2020 relative to 2000. In absolute terms, this amounts to a reduction of 27.6 MtCO2-e from the 2000 base-year value of 552.8 MtCO2-e 7 . The choice of 2000 as a base year rather than 1990 is a notable departure from the Kyoto Protocol. However, bringing the baseline forward does not in Australia’s case undermine the environmental integrity of the scheme.

Once, emissions reductions from land clearing are factored in, emissions in 2000 were 552.8MtCO2-e, almost identical to 1990 emissions of 552.6MtCO2-e. However, excluding land clearing it represents a weaker baseline. In the 2008 White Paper, the government also signalled that in the event of a “global agreement under which all major economies commit to substantially restrain emissions…” it was willing to adopt up to a 15 per cent target, or an absolute reduction of up to 82.9 MtCO2-e.A series of indicative national emission pathways were set out in the White Paper for the first commitment period of the CPRS.

While the CPRS will only cover approximately 75 per cent of national emissions, these pathways give a good indication of the expected stringency of the cap:

  • 109 per cent of 2000 levels (602.6 MtCO2-e) for 2010-11;
  • 108 per cent of 2000 levels (597.0 MtCO2-e) for 2011-12; and
  • 107 per cent of 2000 levels (591.1 MtCO2-e) for 2012-13.

Thus the CPRS did not impose any greater obligations, in terms of national emissions, than would have been required under the Kyoto Protocol (108 per cent of 1990 levels).

Indeed, in its originally proposed first year commencing on 1 July 2010 it was to actually allow more pollution that was intended under Kyoto.In May 2009, the government announced “in response to extensive consultation with environmental advocates…,” and “international developments since December 2008 [that] have improved prospects for such an agreement,” that it had increased the maximum national target cut to 25 per cent relative to 2000 (Department of Climate Change, 2009c).

However, until the parameters of what a “global agreement under which all major economies commit to substantially restrain emissions…” are laid out, there remains significant uncertainty around what stringency the CPRS cap will impose on emissions and following the lack of progress at COP15 this statement now would seem optimistic at best, or a misjudgement of the international political realities to exploit the political benefit of being perceived to strengthen Australia’s target.A transitional Electricity Sector Adjustment Scheme has been established to cross-subsidise carbon-intensive business (such as coal-power stations) using around $3.9 billion of revenue from CPRS permit sales, based on an initial carbon price of around A$25 per tonne (White Paper, 2008).

Such mechanisms, while they can play an important role in the transition away from long-lived, high-cost infrastructure (Compston and Bailey, 2009), need to be carefully managed so that they do not merely increase the profitability of heavy polluters in the short term and undermine domestic emission reductions implied by targets.Even with a weak cap, Australia’s rapidly growing emissions trends suggest demand for carbon permits will be strong. This is because while caps may be modest, emissions are still likely to grow rapidly beyond them. This can be illustrated by looking at the stationary energy sector which comprises around half of total Australian emissions (Figure 6.3) and where emissions have risen by almost 50 per cent over the Kyoto period (Figure 6.2) and continue to rise as result of new build coal generation.

For example, in 2007 (the most recent year of data) Australia’s emissions from stationary energy were 291.7 MtCO2 and growing at a rate of around 2.5 to 3 per cent on average, or approximately 5 MtCO2, each year.

To put these figures in perspective, the 445MW Tarong North power plant in Queensland produces 3.1 MtCO2 each year (Passey, et al. 2008: 3011).

This growth implies that there will be healthy demand for emissions permits from electricity generators, especially if they continue to build new coal-fired plants.Significantly, the government also revised its initial CPRS exposure draft, which placed a limits on the volume of carbon permit imports (as does the EUETS), to a position of no limits on international trade in carbon permits. This means carbon polluters in Australia will be able to source an unlimited supply of emission permits on international markets meaning they can continue to pollute domestically, but offset these emissions with international permits. Disturbingly, there is evidence to suggest that many of these international permits may not be ‘additional’ – that is that they do not represent actual emissions reductions and would have occurred anyway (Wara, 2007). This propensity of the Kyoto mechanisms to slow investment in low carbon technologies at the nation-state level is another contributor to the Veil of Kyoto.

The disjuncture between the CPRS policy and the discourse is a result of several factors, not least the influence of the resource sector on the economy and the health of the public finances. This issue is strikingly illustrated in the observation that (according to Kyoto’s accounting rules) Australia has the highest per capita CO2 emissions in the developed world (Brohé et al., 2009:7). The Australian economy is closely tied to semi- or un- processed (but energy intensive in terms of extraction and/or processing) resource exports to the Asian economies.The Reserve Bank of Australia (2008) reported that in 2007 46.5% of Australia’s total exports were primary resources to Asia, of which coal and metal ores and minerals accounted for 26.

7% and other resources 19.9%. Similarly, Australia’s wealth of costeffectively obtainable coal and natural gas creates economic obstacles to a significant transition to alternative energy supplies, especially where the alternative generation technologies have yet to be developed on a large scale in Australia. This means that in addition to relying on coal for its own energy generation, Australia is the world’s largest coal exporter with around $A26 billion of exports each year, most of which fuels China’s rapid development (and emissions).Kyoto’s accounting rules dictate that emissions are attributed to where they are produced rather than where they are consumed, which leads to an overstating of the emissions attributable to export dependent countries like China and understating them to importing countries such as America (Helm, 2009:19). For Australia, this means that exports of coal and other carbon intensive resources to China do not figure in its greenhouse accounting, even as the Australian government excises revenues from those exports and the Australian consumer benefits from the import of manufactured goods using that high carbon energy. Thus Kyoto’s accounting understate Australia’s true carbon emissions contribution both as a consumer of Chinese imports (thus driving energy demand from production in China) and as a supplier of the coal to fuel that energy demand.

This is the final element to what we have called the Veil of Kyoto.

6.4 Conclusion

In this paper we explored how the Kyoto Protocol has framed the politics of greenhouse gas mitigation in Australia. While we find it has exhorted a powerful international symbolic norm around climate change, its success at encouraging environmentally effective policy has been limited. Indeed, while the Rudd government and most Australians seem to have embraced ‘Kyoto’ with good intentions as a powerful symbol of ‘the everyday’ relating to action on climate change, the power of this symbolism has veiled the structural drivers of Australian emissions in several ways.Firstly is the common perception that Australia is ‘on target’ to meet its Kyoto obligations, and hence ‘doing a reasonable job’ at reducing its emissions.

When we look at structural emissions growth in the last 17 years we reveal that emissions have increased by around 50 per cent in the stationary energy sector. If one looks behind the Kyoto accounting rules to actual (including non-anthropogenic) emissions we see that rather than an increase of 108 per cent relative to 1990 levels (under Kyoto), Australia’s emissions in 2007 were 182 per cent of 1990 levels.A second feature of the ‘Veil of Kyoto’ has been its focusing of attention on targets and timetables. In Australia, the strengthening of 2020 targets has been used by the government at the same time as delaying the implementation of the CPRS legislation. Another factor is that the efficacy of these targets may be tempered by the use of $AUD3.

9 billion in ‘structural adjustment’ payments to high carbon industry.The open-ended availability of international carbon offsets may also mean Australian polluters will be able to defer domestic mitigation investment and continue to increase their emissions. Furthermore, Kyoto accounting rules allow Australia to cloak its role as the world’s largest coal exporter to the world’s largest emitter, China, even as it earns billions of dollars in export revenues and acts as a driver for Chinese emissions by being a consumer of her imported goods.

These factors have combined to form the ‘Veil of Kyoto’: a powerful political symbol of the everyday which has transcended science and the physical state of actual Australian emissions. This has left Prime Minister Rudd in something of a ‘climate trap’. As the inconsistencies between symbolism and policy become reconciled, Rudd faces the risk of alienating Labor from groups which favour strong action on climate change and those more worried about short-term prosperity being damaged by mitigation policies.This difficult balancing act is currently being played out in dramatic fashion by the Australian senate’s second rejection of the CPRS legislation and the potential for this to trigger an early ‘double dissolution’ election in 2010.

With Rudd and Labor far ahead in the opinion polls, this may be part of a larger Labor strategy to flush out opposition stances on climate change and destabilise the Liberal opposition leadership. By gambling on building increased political support on the climate issue in this way, Rudd may be seeking to outmanoeuvre the opposition and resources sector in order to pass through a more ambitious CPRS bill than would have been possible by negotiating the original bill through the senate.We wish to emphasise that by suggesting ‘Kyoto’ has created a veil over the politics of greenhouse gas mitigation in Australia we do not to argue against targets and timetables, emissions trading, or strong action through international treaties. Rather, our analysis suggests a warning against placing too great a focus on the symbolic nature of political commitments while ignoring the structural drivers of emissions and the implementation on environmentally effective policies and measures at the nation-state level.An alternative approach which is being pursued in many OECD countries in parallel, or as an alternative (in the case of the United States), is to see climate change through the lens of ‘Green Growth’ or ‘New Green Deal’ policies (e.g. OECD, 2012). This positions climate change as an investment challenge which is closely related to the process of creative destruction described by Schumpeter (1975[1942]) and built upon in the fields of evolutionary economic geography and innovation studies, which place technological change as the focus of analysis (Nelson and Winter, 1982; Simon, 1955, 1957; Arthur, 1988; David 1993; Martin, 2010; Geels and Kemp, 2006).

This puts the focus squarely on the enabling framework necessary to catalyse private-sector investment in the transition to a low-carbon energy sector.Rather than appealing to the institutionalisation of a political symbol as the focus of policy, this approach looks to highlight the positive role of innovation to achieve both environmental and economic objectives along with a series of pragmatic set of policy conditions on energy efficiency, carbon pricing and innovation (OECD, 2012:12). The Veil of 319 Kyoto as evidenced in Australia may also be a useful analytical metaphor to consider the actions of other states. For example, for Russia, with 17 per cent of global emissions, ratifying Kyoto may have only ever a symbolic bargaining chip to be played in its bid for membership of the World Trade Organisation (Henry and Sundstrom 2007) and to help improve her international image (Gref 2004). More recently, it has been suggested that Russia has moved from a state of ‘symbolic gesturing’ to one of “dangerous indifference” as the Kremlin perceives that Russia “might actually benefit from climate change” (Mabey, 2008) (see also Wilson, 2008).In the case of the United States, President Obama has embraced the idea of national-level emissions trading to be brought in by 2012 and, in the lead-up to Copenhagen, announced a national emissions reduction target of 17 per cent below 2005 levels by 2020. However, when put alongside the European target of 20 per cent below 1990 levels by 2020, the American target reduces to a 3 per cent cut below 1990 levels.

In response to the American move, China also announced a target aimed at a 40 to 45 per cent decrease in emissions intensity per unit of GDP by 2020. However, with GDP growing at around 8 per cent a year, this means Chinese emissions can still rise strongly. These examples suggest the elements of the Veil of Kyoto could be a powerful force to obscure actual emissions after Kyoto expires in 2012.Another important shift was signalled in the August 2009 Japanese election, where climate change featured prominently in the debate.

With the election of the Democratic Party, Japanese national targets were strengthened to a 25 per cent cut by 2020 relative to 1990 levels, up from an 8 per cent cut as proposed under the former governing Liberal Democratic Party. However, at the same time the new government promised the immediate lowering of fuel taxes and road charges for drivers, policies likely to stimulate emissions. This again raises the spectre of climate symbolism trumping climate policy.Although there are common strands in the framing of climate change risk and policy between nations, equally important are these differences. Furthermore, how these are manifested and interweave in international discussions has important geopolitical implications relevant not just to greenhouse gas mitigation policy but also to energy security and the regulation of world trade.

  Given the critical importance of the nation-state in mitigating greenhouse gas emissions we hope that this paper begins to respond to Robbins’ (2003) call for political geography to pay to “an everyday political ecology of the state […] as the analytical and practical benefits of such a convergence are too attractive for critical scholarship to ignore” (Robbins 2003: 664).If framed through the metaphor of the Veil of Kyoto, the difficulty of securing meaningful action at COP15 in Copenhagen can be seen as stemming from the problems inherent in reconciling the momentum behind the symbolism and institutional arrangements of Kyoto with the reality of deteriorating environmental outcomes and renewed drive for effective policies. While the delay to conclude a successor agreement to Kyoto in 2009 may be disappointing for some, it may also offer hope that a renewed focus is being placed on the implementation of legislative measures by nation-states as the basis of a new international agreement.

This might be the basis for ‘meaningful’ action.Next Page – Ch 7: The Political Economy of Green House Gas Pollution in RussiaPrevious Page – Ch 6: The Political Economy of Greenhouse Gas Mitigation in Australia