Putting action into Direct Action

With the Coalition dominating the polls, it is time Tony Abbott nailed down some gospel truths about the Direct Action policy – and here's how he can do it.

As explained in the article From Direct Action to Abbott’s Gospel Truth (April 24), the clean energy sector must convert the Coalition’s Direct Action policy into some more detailed and unambiguous “gospel truth” commitments before the next election. Without further detail nailed down about this policy, it runs the risk of going the way of other grant tendering schemes that made for impressive press releases and precious little else.

In that prior article I listed two of these gospel truth commitments:

1) An institution to audit Australia’s progress to its emissions targets, with the board appointed by parliament rather than the government.

2) The level of the financial penalty firms will face for exceeding agreed emissions baselines.

In addition to these two, there is a desperate need to better explain how the Direct Action program will function in terms that can provide us with some confidence it can acquire the huge level of abatement required in the short time period available, while maintaining environmental integrity.

At present the level of detail we have surrounding how Direct Action will work is pretty superficial. According to Tony Abbott’s recent speech, he has said:

“Our Emissions Reduction Fund will spend, on average, a billion dollars a year to encourage businesses to take further steps to reduce energy and fuel consumption, relying on incentives, not penalties.”

Such a policy faces an inherent challenge around identifying what actions constitute a genuine reduction in greenhouse gases that should be eligible for government support.  This is actually far less straightforward than you might think. That’s because abatement is not a physical molecule of CO2, CH4, N2O etc (CO2-equivalent or CO2-e), but rather the absence of these molecules.

A pure emissions cap and trade scheme largely avoids this problem because it only concerns itself with what molecules of greenhouse gases are actually emitted, which can be quantified through chemistry. If you actually emit you’re required to obtain a permit. Whereas Direct Action has to determine what might have been emitted were it not for government policy and can’t be measured in any objective physical sense, because it is an assessment of what might have happened in the future, rather than what has actually happened.

Contrary to what Abbott said in his speech, it is his Direct Action scheme, rather than Labor’s policy, which is closest to the idea of paying someone for the, non-delivery of an invisible product to no one.”

Nonetheless such an abatement purchasing initiative can work, but requires some very good systems and processes. So far the information we have about this is insufficiently detailed to be rated as gospel truth. Abbott said in his speech that abatement will be acquired:

“Through a tender process, overseen by an independent panel, the Coalition will support measures that reduce emissions and that deliver practical environmental benefits but that don’t increase prices to consumers or cost local jobs.”

If government, or this independent panel, have to evaluate each tender individually to assess the absence of greenhouse gases they are likely to deliver, and how much they should be paid, we have no chance of reaching the 5 per cent target by 2020.

Based on current estimates they need to acquire about 160 million tonnes of CO2 annual abatement within six years. Yet over 2000 to 2005 the Howard government could only manage to obtain 3.4 million tonnes using a tender process under the Greenhouse Gas Abatement Program. This was not for lack of money –more than half the program’s budget remained uncommitted at the conclusion of the program.

The volumes of abatement required necessitate an approach similar to mass production of cars. They can’t employ highly tailored evaluations of each tender that you might do if you were constructing a one-off custom-designed structure such as a museum, hospital or nuclear power station. A mass-production approach requires standardised assessment and emissions measurement processes and systems to quickly evaluate:

- What projects and technologies qualify;

- How much abatement they deliver; and

- How much they should get paid and when for the abatement they provide.

This would be similar to the approaches taken for the Clean Development Mechanism; the NSW Greenhouse Gas Abatement Scheme (not to be confused with the Howard government’s Greenhouse Gas Abatement Program); and the Carbon Farming Initiative. These all involve pre-set, generic, transparent rules that govern creation of carbon credit. This avoids the need to evaluate each abatement project individually.

Now the Coalition has no chance of developing such rules before they take government. But they can at least promise that they will employ a transparent, rules-based approach to acquiring abatement similar to NSW GGAS. And explicitly rule out using the obscure, highly subjective selection processes that have occurred with past carbon abatement grant-tendering programs (explained in chapter 3 of the Grattan Institute report, Learning the Hard Way – Detailed Analysis).

At present the Coalition climate change spokesperson, Greg Hunt, has repeatedly referred favourably to the NSW GGAS. But we’re yet to see an unambiguous commitment to employing it as the model for administering Direct Action. 

To give people confidence that the Direct Action program will have environmental rigour,  the Coalition should announce the members they will appoint to an expert panel of engineers and scientists that could develop these GGAS-style rules for a national abatement scheme.