Australia's slow energy transition

The Catch 22 of carbon credits

Joseph Heller’s Catch 22 describes Major Major’s father, a farmer in America’s midwest, who was living rather comfortably:

His specialty was alfalfa, and he made a good thing out of not growing any. The government paid him well for every bushel he did not grow. The more alfalfa he did not grow, the more money the government gave him, and he spent every penny he didn’t earn on new land to increase the amount of alfalfa he did not produce.

At the time Heller wrote Catch 22, 1961, the US government was indeed subsidizing farmers not to plant certain crops. Were he writing Catch 22 now, Heller would surely use carbon credits as his example of policy craziness, because in the way they are applied in Australia, they can be achieved through not cutting down trees.

The significant difference, however, is that in the 1960s the US Department of Agriculture was trying to keep grain prices high by restricting supply, while in Australia carbon credits, because they are so easy to obtain, are under-priced, making it easy for large carbon dioxide emitters to achieve their targets under the government’s safeguard mechanism while doing little or nothing to abate their emissions.

The government’s so-called “safeguard” mechanism – a name it inherited from the previous government – applies to 215 high-emission production facilities, in fossil fuel extraction, airlines, steel and concrete, and other manufacturing, accounting for about 28 percent of our country’s emissions. To help us understand how it works, or at least how the government presents it, the ABC’s Casey Briggs has an instructive five-minute video clip. He mentions that in order to meet their obligations, rather than reducing their own emissions, firms can buy carbon credits from other firms that are exceeding their reduction targets, or they can buy credits from businesses doing things to remove carbon dioxide from the atmosphere. Planting trees for example.

Nick Feik, former Editor of The Monthly, has an article – The great stock ‘n’ coal swindle – explaining why the government’s carbon credit scheme won’t do anything to bring down emissions. Basically that’s because they are too easy to obtain. They can be awarded for doing things firms intended to do anyway, or worse, for not doing things they never intended to do anyway – such as not cutting down trees to clear land.

Earning credits through planting trees may be a little better, but not much. Trees don’t provide a permanent carbon dioxide reduction because they stop absorbing carbon once they mature, and even for short-term carbon dioxide reduction they are of only limited use because there isn’t enough land on the planet for tree planting to make an adequate contribution to bringing down the global temperature. The EU allows offset trading, but they do not permit them for forestry, and they limit their use.

Feik explains how the government did order a review of the safeguard mechanism, which was mainly about carbon credits. That review recommended no more than a few tweaks to carbon credits, but it was strongly criticized by independent scientists. (See the roundup of February 4.)

Feik’s article goes into the politics of the government’s emission reduction policies more generally, explaining how, in spite of the change in government, the fossil fuel industry still wields tremendous political influence, including in the governance of the Australian Renewable Energy Agency and the Clean Energy Finance Corporation.

Internationally, it is doubtful if our accounting legerdemains are convincing anyone. Deutsche Welle has a neat 13-minute clip about Australia’s climate change policies – How this country became a climate villain – pointing out the absurdities and contradictions in our policies.

Feik’s analysis would be more convincing if he distinguished more clearly between emissions that come about through our own activities (“Scope 1” and “Scope 2”) emissions, and emissions occurring in other countries that burn coal and gas extracted in Australia (“Scope 3”).

There is appeal in the argument that if countries like China don’t burn Australian coal they will burn someone else’s coal, with no nett effect on the planet’s emissions. But to draw again on Catch 22 the flaw in that argument is that there will be no reduction in emissions if every country thinks like that – a point stressed by international climate change agencies.