As is my lot in life, late on Sunday night I was trawling through the submissions made to the Senate Inquiry into Direct Action. I was about to nod off when an old name from the past leapt out at me – a submission from a Mr David Rossiter.
For those who don’t know the name, David Rossiter was a senior public servant who worked under the Howard government, playing an important role in the development and implementation of a range of its carbon emission reduction policies during the formative period of this area of policy. Many of the characteristics of these programs will form components of the Direct Action Emissions Reduction Fund.
As the rather blunt wording in his submission testifies he has now quite clearly retired from the public service. The public service is supposed to provide frank and fearless advice but once you become retired, frank and fearless takes on a far more obvious shape.
In short, Rossiter believes that the Emissions Reduction Fund will repeat hard-learned mistakes from the past. It will take too long, cost too much and will ultimately result in the Abbott government falling 85 per cent short of its election commitment to reduce emissions by 5 per cent by 2020.
So what would this guy know?
He helped to implement the Generator Efficiency Standards program – which defined achievable levels of energy efficiency major Australian power generators agreed to achieve. Of critical relevance to the Direct Action ERF, these were later were used as abatement crediting baselines for the NSW Greenhouse Gas Abatement Scheme.
He was also involved in the development of Australia’s first market-based tradeable certificate abatement scheme – the Mandatory Renewable Energy Target. He subsequently became the head of the regulatory body responsible for managing the scheme and later was put in charge of the National Greenhouse and Energy Reporting System. This regulatory body is what we now know as the Clean Energy Regulator and will be tasked with implementing the government’s ERF. In addition, Environment Minister Greg Hunt has said the National Greenhouse and Energy Reporting System will form the basis for setting of emission baselines for his Emissions Reduction Fund.
Rossiter also got to observe at close quarters (although was not directly responsible for) the first attempt by an Australian government at buying abatement at the lowest cost – the $400 million tendering program commonly referred to as GGAP (not to be confused with the NSW emissions trading scheme – GGAS).
One of the refreshingly different things that distinguished Rossiter from many other senior public servants is his background as an engineer, not an economist. Unlike many economists he is very comfortable going beyond theoretical abstractions to delve into physical realities. For example, he once chose to enlighten me on the design of South Australia’s coal-fired Northern Power Station and the pros and cons of dry versus wet cooling of coal-fired power stations.
In short David Rossiter understands a lot about the nitty gritty of how you translate some abstract policy idea into practical reality.
And he can see a world of pain ahead for the government, stating:
[The Direct Action Emissions Reduction Fund] requires setting baselines for a diverse set of projects over a wide variety of sectors. This is a very difficult and highly specialised task that should not be underestimated. It is highly site and geographical location specific, extremely resource intensive and often exposes a lack of firm data from which baselines can be set.
The government claims that the DAP system will be simple, straight forward and streamlined to make it "easy for businesses to participate".
The reality is the baseline system proposed is extremely complicated, detailed and data intensive, if it is to be credible and accountable, as it will have to be for the grants system proposed for allocating public money. History also tells us the system will inherently take a lot of time to reach decisions because of the baseline process and consequently the timeframes for abatement will be reduced from the maximum of five years and costs per tonne will inevitably rise further.
He then delves into the engineering practicalities ahead for the government:
The DAP as described in the ERF paper (see Figure 1.5 p12) gives a cost abatement curve for emissions from a variety of sectors and actions over the economy. Approximately 60 actions are identified.
Each one of those actions may occur in a wide range of geographic locations, in different states and territories and within those jurisdictions, too. For each action there might be 10 or more geographic locales in which those actions might occur. For example a baseline for a seawater cooled power plant on the coast, will be different from one cooled by a lake or using dry cooling and at each location the range of ambient temperatures for the location will be site specific, too.
As a consequence, perhaps 600 or more baselines might be called for in the bidding process with each being proposed and having to be independently verified. This alone is an enormous task.
The government has already admitted that they won’t have emission baselines set in time for the launch of the Emission Reduction Fund at the promised date of July 2014, when the carbon price is supposed to be no longer. If Rossiter is right, they might be lucky to have something ready by July 2015. It generally takes at least 12 months for a project to move from being approved for funding to operational. That leaves just four years to hit the 2020 target – a truly challenging task.