The Greens and emissions trading – your questions answered

news-stories
14 Jan 2010
Climate change / Treasury

The Greens are the party offering political leadership for a safe climate. We pursue policies to transform the economy to achieve that aim, such as our Safe Climate Bill.

A well-designed emissions trading scheme can be part of a comprehensive climate policy, and it is part of our Safe Climate Bill. But a badly designed emissions trading scheme, such as the government's CPRS with its woefully weak targets, multi-billion dollar polluter handouts and unlimited overseas offsets, would actively block progress by locking in the current polluting economy for years to come.

The Greens have spent many months attempting to negotiate amendments with the government, to turn the CPRS from a barrier to action into an environmentally effective and economically efficient scheme. We have been rebuffed at every attempt, but we will not give up. We need your help to make it happen.

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UPDATE:

You can read about a new offer the Greens have made to break the CPRS deadlock with an interim measure here. We have been very pleased by the positive reception this proposal has received.

Why can't the Greens support the CPRS as it stands?

There is broad recognition that the Rudd government's emissions trading scheme is weak and badly designed. However, some still hold the view that "something is better than nothing", that, if the bill passes, "at least we'll have the architecture of a scheme to build on".

If that were the case and the CPRS were merely too weak, the Greens might have supported it as a start. But even the government acknowledged, as they negotiated with the opposition, that there comes a point when action becomes so weak that it is useless. Beyond that simple point, we Greens recognise that, when faced with a serious and complex problem, it is the choice of the right action that is vital, not simply the decision to act. Prescribing and locking in the wrong treatment to a seriously ill patient can hasten death rather than prevent it.

The Greens oppose the CPRS as it stands not because it is too weak but because it is the wrong action - it would actually point Australia in the wrong direction. It would pay polluters to keep polluting, hiding inaction with smoke and mirrors. It would undermine global action with its weak target, a target which, once set, would be impossible to lift without paying more billions in compensation. It would demoralise and disempower the community and it would repeat the mistakes of the Murray River, over-allocating permits.

This is why we say it is not just a failure, but it locks in failure.

Here is some detail on each of those points:

• Paying polluters to keep polluting - sending precisely the wrong investment signal
     o Far from driving investment in renewable energy, energy efficiency and clean transport, the CPRS as it stands would unleash a wave of investment in coal. Far from making polluters pay, Mr Rudd's plan will pay them to keep polluting.
     o A weak target and price signal will drive short-sighted investment in polluting infrastructure that will have to be closed down when appropriate targets and price signals are implemented, wasting time and money. Compensation to polluters linked to a requirement that they continue generation exacerbates this problem. A recent report by the Grattan Institute confirmed this to be the case.
     o In Western Australia, generators are considering recommissioning two old coal fired power stations to take advantage of this. In addition, experts expect to see new coal and gas fired power stations and refurbishment of old coal fired power stations that should really be closed down.
     o If we set out on the right trajectory with a realistic price signal from the beginning, we will make fewer of these mistakes and waste less time and money.
     o If, globally, we are to reduce emissions enough to constrain temperature increases to less than two degrees, then we need to make rapid emission cuts urgently. A slow start means that emissions have to be reduced much more rapidly later on, a requirement that is quickly becoming unrealistic.

• Hiding inaction with smoke and mirrors
     o Minister Wong claims that the CPRS will transform the Australian economy, but her own figures show that Australia's emissions, substantially from coal, will not drop at all before 2033. Almost all emissions reductions under the CPRS will be bought in from overseas - a case of smoke and mirrors, with offsets hiding the reality that Australia would be continuing with its highly polluting economy.
     o The government even refuses to accept the Greens' proposal to ensure that all offsets from offshore are accredited to make sure they are 100% reliable. There have been increasing reports of dodgy offset schemes around the world.

• Locking out the option of cuts deeper than 25% limits the options of later governments
     o The government repeatedly refused Greens' requests to model the economic impact of emissions cuts beyond 25%. This is particularly bizarre given that, while the economic impact of 25% cuts is almost identical to 5%, there is evidence that steeper cuts will be cheaper, as we will learn faster and make fewer mistakes.
     o The Greens have obtained legal advice that says that if a future government chooses to lift the targets to beyond the current 5-25% range even more compensation to polluters would be payable. Read this advice here.

• Undermining global action with a weak target
     o The key stumbling block to a global climate agreement is the refusal by developed nations to sign up to the kind of targets the science, the community and the developing world demand - in the order of 40% below 1990 levels by 2020.
     o The Rudd government's 4% target (below 1990), and the unrealistically stringent conditions placed on moving to the still too weak 24% target, are part of the problem globally.

• Demoralising the community with a weak target and undermined voluntary action
     o There is significant disquiet in the community about the impact of the CPRS on voluntary and additional action to cut emissions.
     o We need the community to be inspired, not disempowered.

• Repeating the mistake made with the Murray by over-allocating free permits
     o Once rights are issued for something - for example for water rights - it is politically very difficult, and very expensive, for a government to change its mind.
     o The government has been at pains to point out that scheme will provide long-term certainty by setting a 5 year rolling cap, supported by longer term gateways. In reality, this means that it will politically very difficult for any government to ramp up emissions targets after they are set.
     o Just as the over-allocation of water in the Murray Darling has made a fix almost unimaginably difficult, the over-allocation of free permits in the early years would lock in a weak trajectory and make it almost impossible to strengthen the scheme without massive additional compensation to polluters or cost to taxpayers through purchasing imported permits.

The Greens did not take the step of opposing the CPRS lightly. We did so after extensive considered analysis of the legislation and many months of attempting to negotiate amendments. However, we remain determined to negotiate with the government and we have written to the Prime Minister once again seeking to open negotiations. These substantial problems can only be fixed if the legislation is amended before it is passed.

You can download a printable version of this explanation here.

What do the Greens propose to do?

The Greens are determined to deliver meaningful action to prevent climate crisis, which is why we developed our Safe Climate Bill - http://www.safeclimatebill.org.au - which sets out what needs to be done. In the meantime, we are also working to convince the Rudd Government to improve its CPRS to a state where we could support it. So far it refuses to do so. We are continuing to make every attempt to negotiate amendments with it for the bills' return in February.

We have introduced into the Senate 22 amendments, alongside many consequential ones, that would have turned the government's emissions trading legislation from a barrier to action into an environmentally effective and economically efficient scheme. These sensible amendments are based on Professor Garnaut's economics and the globally accepted science. But the government did not support any of them, refuses to negotiate unless the Greens accept their woefully weak greenhouse reduction target range of 5-25%.

The Greens' amendments to the CPRS (release here and full chart here) were designed to:
• insert environmentally effective emissions reduction targets of 25% unconditional and 40% in the context of global action, in line with the UN Bali Negotiating Range;
• adopt Professor Garnaut's economically credible proposals to:
     o auction all permits;
     o compensate trade exposed industries only to the value of their lost competitiveness, not for lost profits; and
     o not compensate electricity generators at all;
• fix the problem of undermining additional and voluntary action by providing for such action to be tallied and equivalent emissions cut from the following year's target;
• remove market distortions such as the price cap and the ban on permit export;
• ensure that transport is covered by the scheme; and
• only allow the import of the most highly credible permits and restrict total imports to ensure credibility of the scheme and drive domestic economic transformation.

The Greens understand how negotiation works - we presented these amendments as a starting point for discussion and did not expect the government to accept them all. Neither, however, did we expect the government to reject them all out of hand. Significant progress towards our position needs to be made if the CPRS is to be improved to a state where we could support it.

How have the Greens been working with the Government?

The Greens first attempted to discuss emissions trading plans with Prime Minister Rudd and Minister Wong as soon as the government was elected. Early meetings set the tone for what was to come - a complete refusal by the government to accept Greens input.

Bob Brown and Christine Milne have written to Prime Minister Rudd and Minister Wong requesting negotiations, setting out proposed amendments and looking for a way forward on no fewer than ten occasions since March 2009. Responses have been less than forthcoming.

General letters were exchanged in March, following the release of the original draft legislation and surrounding Senate inquiry processes. With no negotiations having occurred, the Greens sent proposals for amendments to the government on May 4, including a shift from the previous position of 40% emissions reductions only to a 25-40% range for negotiation.

On May 27, the Prime Minister wrote to Bob Brown refusing to negotiate directly and passing the issue to Minister Wong, who had not personally responded. Senator Brown wrote back the next day, requesting meetings at the leadership level. No response has been received but a meeting took place between Senators Brown and Milne and Minister Wong at which the Minister refused to move on any issue, simply requesting that the Greens sign up to the government's policy.

On June 14, the Greens Senators wrote to Minister Wong requesting further modelling of emissions targets. No response has been received.

Following the first defeat of the CPRS on August 13, the Greens wrote again to the Prime Minister and Minister Wong, suggesting negotiations to find a way forward. The Prime Minister again responded with a letter passing all responsibility to the Minister, who had not responded. On September 30 Senator Brown again requested a personal meeting with the Prime Minister, without response.

On October 11, the Greens sent the government fully drafted amendments to the CPRS bill. A meeting took place to discuss these amendments in early November at which Minister Wong told the Greens Senators that no negotiations on any of the amendments could take place until the Greens signed up to the government's 5-25% target range. The Greens rejected this precondition in a letter on November 5, requesting negotiations around all the issues in the bill.

Following the second defeat of the legislation on December 2, Senators Brown and Milne again wrote to the Prime Minister and Minister Wong requesting negotiations to seek a way forward. Another letter was sent on December 22 following the Copenhagen conference. The Prime Minister again replied on January 7 2010 that any negotiations must occur with Minister Wong. There has been no response from Minister Wong as at January 13, but she closed 2009 telling the media that she would not negotiate with the Greens.

With the CPRS returning to the parliament on February 2 and no prospect of the opposition supporting it, the government must either work with the Greens or acknowledge that bringing the legislation back a third time is purely a political stunt.

What others say

The Greens are not alone in our analysis of the CPRS. Here is a selection of comments others have made about the CPRS (direct link to this list here):

John Daley, CEO of the Rudd-friendly Grattan Institute, speaking on ABC radio AM, April 22 2010:
"actually the worst thing that we could do is to implement a carbon pricing scheme that played off those fears to provide a large quantity of industry assistance that is not necessary, that's going to cost the rest of the Australian taxpayers a lot of money and which, worst of all, is probably going to slow adjustment of the economy towards lower carbon emissions." The Grattan Institute report he was launching called the CPRS a "$20 billion waste of money... Much of the protection proposed ... is unnecessary or poorly targeted... It would delay the structural adjustment required to move to a lower carbon economy."

Editorial of the Australian Financial Review, December 2 2009:
"The CPRS is so riddled with concessions and handouts that it will struggle to achieve the underlying goal of transforming the fossil-fuel-dependent Australian economy into a low-carbon economy while maintaining our prosperity... Even before the latest round of handouts to the coal and coal fired power industries, the government's handpicked expert Ross Garnaut had denounced it as the worst public policy process he'd seen. Any vestigial arguments for passing the CPRS before next week's Copenhagen summit... disappeared weeks ago".

Editorial of the Australian Financial Review, April 30 2010:

"The real criticism that should be levelled at Mr Rudd and Senator Wong is that they devised a policy that was too generous in its compensating payouts to high-emission industries such as aluminium, and to power generators and households, and was therefore likely to be ineffective in changing behaviour. No wonder the Greens would not support it."

Highly respected Australian climate scientist, James Risbey, New Matilda, December 3 2009:
"The Australian Government's argument is effectively that it is preferable to adapt to large climate change than to prevent it. Their argument is not usually stated in this form, but that is the inescapable consequence of their policy of postponing meaningful carbon reductions. On the one hand the Government calls for rapid action to prevent climate changes, while on the other hand it has crafted a policy that would guarantee that effective action is not taken."

Citi Investment Research and Analysis director Elaine Prior, ABC Inside Business, November 29 2009:
"One of the things that the package has done is provided more surety for the coal-fired generators to keep generating until roughly 2020 or beyond ... So one might say in that sense that it's on the one hand created more stability in the electricity market, but perhaps reduced the urgency for people to look at change."

Guy Pearse, research fellow at the Global Change Institute at the University of Queensland, The Age, May 2 2010:
"The carbon pollution reduction scheme (CPRS) is in cryogenic freeze where it belongs... Rudd proposed an ETS that guaranteed more harm than good. It promised to cap greenhouse pollution and transform Australia into a low carbon economy. Yet, by allowing unlimited access to cheap international carbon credits, it failed to cap domestic emissions and avoided economic transformation. It promised to make polluters pay, but asked the worst polluters to pay for less than one in every five tonnes of CO2 they emit. It also paved the way for farmers to sell cheap soil carbon credits into a market flooded with international credits. All in all, a recipe to retard the viability of renewables and avoid emissions cuts at smokestacks and tailpipes for another decade."

Brian Toohey, Australian Financial Review, November 28 2009:
"Even when he [Rudd] announced billions of extra dollars to the biggest polluters on Tuesday, he lacked the policy nous to make this conditional on cuts to emissions. Instead, he subsidised them to keep polluting as usual."

Richard Farmer, Crikey, November 25 2009:
"Bob Brown's... party is the only one to emerge from the debate on the emissions trading scheme with reputation intact."

Environment groups like Friends of the Earth, Greenpeace, the Australian Conservation Foundation and hundreds of local climate action groups have condemned the CPRS as too flawed to be allowed to pass.

In addition to this, global leaders from NASA's James Hansen to Lord Nicholas Stern and Kofi Annan have said that a weak deal at Copenhagen would be a worse outcome than no deal at all. It would take years to unravel and replace. The Rudd Government's CPRS is such a deal.

Fran Kelly told ABC Insiders program on Sunday November 15: "There's lots of positive changes within the Greens' amendments that could make this bill better."

What can you do?

If we are to have any chance of bringing the government to the table to negotiate with the Greens, we need your help to lift the level of public pressure on the government.
     • Writing letters to the editors of newspapers is a powerful public pressure tool. You can find all you need here.
     • Write letters directly to the Minister here and Prime Minister here.
     • Sign up for our action emails here.
     • Talk to your friends and spread the word!

Ask your questions

If you have specific questions that you would like answered, please post them to this blog post and we will do our best to answer as many of them as we can.