Direct Action already behind schedule

In a document the government released yesterday it was revealed Direct Action is already facing delays. If the carbon price is repealed in July 2014 it's unlikely there will be anything to replace it for some time.

On Wednesday the new Abbott government issued its first document detailing its plans for the Direct Action Emission Reduction Fund – all one page of it. 

OK, there were really five pages. A cover page with pictures of people planting trees, followed by a blank page, then a page outlining the process for consultation, and then a page about confidentiality, followed by the final page.

Thinking this last page would finally answer all my questions about the Direct Action abatement auction scheme I turned to it to find the following revelations filling the first two thirds of the page:

a) climate change is occurring;

b) they’ll axe the carbon tax;

c) they want to reduce Australia's emissions 5 per cent below 2000 levels by 2020; and

d) they’ll review the Renewable Energy Target. 

Then came the real policy meat in the bottom third of the page. It said they have an emission reduction fund and that they want to use it to purchase low cost abatement! This was followed by seven short dot points asking for people’s views on:

1) Where they might buy some large but cheap abatement (I thought it was all coming from soil carbon);

2) How they could build on the existing Carbon Farming Initiative and the National Greenhouse and Energy Reporting Scheme;

3) Any ideas on how to run an auction;

4) What institutions should be involved in running the scheme;

5) Monitoring, verification, compliance and payment arrangements;

6) Transitional issues with phasing the CFI from the emissions trading scheme into the Emission Reduction Fund;

7) And they tried their hardest not to mention the word ‘penalty’ or ‘fine’ by asking for views on “the design and operation of a mechanism applying to emissions above the business as usual baseline”. (Funny, but I would have thought they might also want some views on how they might define business as usual baselines first, but no views were sought on this topic.)

From my 10 years of experience dealing with climate change policy I can’t recall a government program or scheme of even a 10th of the scale of this abatement auction scheme that called for stakeholder comment, yet provided precisely no detail about the likely shape of the program. Usually stakeholders are provided with a discussion paper of at least a few pages, which provides some level of detail on the key parameters for how the program could operate.

Instead, stakeholders will have to wipe the dust off the Coalition’s 2010 election policy platform, and then track down the assorted public statements both Hunt and Abbott have made on the scheme (which are sometimes contradictory) to piece together a picture of what the government might have in mind.

What is now becoming clear is that this government is in serious danger of having nothing to replace the carbon price by July 1 next year.

The document released yesterday revealed that, just five weeks in, the government is at least a month behind schedule.

Before the election, Environment Minister Greg Hunt stated:

“We will call for submissions within 30 days of being elected, consult between days 60 and 100, release the White Paper and draft legislation by day 100, receive further feedback and release final legislation by day 150.”

This means the call for submissions should have occurred on October 7 and the White Paper and draft legislation released on December 16 this year. 

The actual call for submissions was about a week late, which is no big deal, but they are now saying they’ll release the White Paper and draft legislation in “early 2014”. Hmm, no mention of definitive day and, heck, not even a definitive month. 

Also, they’ve now remembered that they need to issue a green paper before they issue the white paper, and this will come out in December. The poor sods in industry will then need to work over Christmas to provide detailed comment on the green paper. The public service then needs to consider all these submissions, talk with all the stakeholders and then work out how to adjust the scheme in light of the feedback.

Sounds suspiciously like “early 2014” means at best late February and probably March before we see the draft legislation. Then they need further stakeholder input, so that means April before they can finalise the bill to Parliament.

The Senate will then put the bill to an inquiry for a few months. That puts us over July 1, 2014. Then they’ve got to get the bill passed when the Greens don’t like it and neither do many of the newly elected independent senators. So add some more months.

Once the bill is passed, they’ll then need to:

– Develop the regulations outlining the nitty-gritty mechanics of the scheme. Again, this also requires consultation with stakeholders to avoid making bad mistakes.

– They’ll also need to conduct audits across the 300 or so major emitters to confirm their emission baselines.

– Develop the IT systems to run the auction.

– Plus, the existing Carbon Farming Initiative, which Hunt says will form the basis for developing processes for measuring and verifying emissions reductions from abatement activities, is woefully underdone. The lead time for adding new abatement activities is several months. Present indicators are that it would struggle to deliver much more than 2 million tonnes of abatement per annum with its current approved activities. So, beefing this up will add several more months.

All up it would be extraordinary if they had an auction by January 2015 capable of acquiring more than a million tonnes of abatement. Just in time for the review of the scheme they said they’ll undertake in 2015. 

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles