Progress is possible if we are patient

Posted on 29 November, 2021 by alloporus

Back in 2010, Australia was about to legislate a carbon price. Not the ‘great big tax’ that haunted the Gillard government but its predecessor, the Climate Pollution Reduction Scheme (CPRS), an attempt at emission control when the political climate still had a whiff of progress about it.

The CPRS, a cap-and-trade emissions trading scheme for anthropogenic greenhouse gases proposed by the Rudd government as part of its climate change policy, was voted down by the Greens. Under Bob Brown’s leadership, they decided it was too little, the targets were too weak. The perfect getting in the way of the good.

Instead of a start, there was no price on carbon and an open the door to the naysayers who ambled their way through for a good laugh and some appalling behaviour.

What followed was a decade of inaction, political assassinations of prime ministers, and the mess we are in now with the current PM not wanting to go to COP because he is held ransom by a bunch of clowns who think a $250 billion public purse to prop up coal mining is an idea. I could go on.

In the end, he went and tried to make climate change about submarines.

Progress is a process.

I know progress can be slow when there are values at stake. It takes time to test the water, convince the recalcitrants and avoid failure from unforeseen consequences.

And in politics, most important, do not scare the horses.

The reality that the Greens missed so badly back in 2010 is that some good is possible along the slow path to the perfect.

For example, when 136 countries sign up to a minimum corporate tax of 15% we should all applaud and pat the negotiators on the back. And yes, even if one of them is the forever on the nose Mr Cormann.

The agreement means that countries would legislate a global minimum corporate tax rate of at least 15 per cent for companies with annual revenues over 750 billion euros ($1.2 trillion), the big end of town. Then, if these big players have earnings that go untaxed or lightly taxed in one of the world’s tax havens, their home country would impose a top-up tax that would bring the rate to 15 per cent.

No more squirrelling away revenues from IP and other intangibles in the Cayman Islands without paying up.

This is a tiny step toward a more even distribution of wealth creation through governments legislating some trickle down to slow the charge to wealth inequality that grips the world. Recall that would be the trickle of wealth that the neoliberals claim is an inevitable consequence of successful economic growth.

Sure 20%, even 40%, would be better and more realistic. But 15% is a start.

Some developing countries and advocacy groups say the 15% is too low and leaves far too much tax revenue on the table. And although the global minimum would capture some $205 billion in new revenue for governments, most of it would go to rich countries where many of the big multinationals are headquartered.

This is a similar argument the Greens spouted when they couldn’t let the big emitters get away with it under the CPRS. They wanted justice right away.

Too far too soon.

The point here is that progress needs time and increments. It can do leaps, but the circumstances must be just right for rapid advances to stick. Waiting around for those opportunities is a luxury that humanity lost when it found fossil fuels.

Stick at the process

The option to wait for the leap that can only happen when the stars align and the wind is blowing away the smell is no longer risky, it is suicidal.

We have to stick at the process of incremental change. It is painful to support such a puny percentage as 15% but it’s way better than waiting for donut economics to appear and change the whole game.

What the Greens did in 2010 was irresponsible, even for them. What the leaders have done since is on a par.

But a carbon price back in 2010 would have seen a small but effective change in the emission trajectory and a far greater chance of reaching any targets that the world would have us set now.

Caught on the wrong side of history

Posted on 20 September, 2021 by alloporus

Photo by Shaah Shahidh on Unsplash

According to Ian Verrender, ABC business editor, a senior Australian government minister who was on the wrong side of a few drinks made this off the cuff comment…

“The difference between Labor’s policy and ours is that Julia Gillard introduced a scheme where big polluters paid Australian taxpayers. Tony changed it so that Australian taxpayers pay big polluters,”
Unnamed Austrailian Government Minister

This bizarre statement referred to the carbon price, the so-called ‘great big tax’ introduced by the Labour government in 2012. This blog has mentioned the debacle that is Australian climate policy and the frustration and sadness that it has been thus for over a decade.

Imagine the arrogance in this inebriated quip.

Australians elect such individuals, and as an excellent article by Leigh Sales, another ABC stalwart, tells us, this level of vulgarity is typical. It is not a personality thing but ingrained into the political system. It is leadership that lacks.

I always liked the idea that the cream rises to the top.

It ranks alongside ‘the truth persists’ as quotes that are hopeful and true. The problem is it’s taking a while, way too long.

“Cream always rises to the top…so do good leaders”.
John Paul Warren

The delay in the arrival of some genuine leaders will have consequences.

One of the more ironic is the one Ian Verrender describes, the consequences for Australia of the rest of the world putting a price on carbon in the form of carbon border taxes. Countries that have lowered emissions and want to keep it that way are reluctant to import emission-intensive commodities. At least that is the rhetoric.

The reality for Australia is that there will be carbon levies. The world was trending towards enforcing climate policy through trade action. For example, the EU Carbon Border Adjustment Legislation is still rough but will include aluminium, iron, steel, cement, natural gas, oil and coal.

Here are the 10 Biggest Exporting Industries in Australia

Iron Ore Mining $123.1B
Oil and Gas Extraction $39.8B
Coal Mining $37.6
Liquefied Natural Gas Production $34.8B
Gold and Other Non-Ferrous Metal Processing $29.4B
Meat Processing $15.9B
Grain Growing $8.2B
Alumina Production $7.4B
Pharmaceutical Product Manufacturing $6.9B
Copper, Silver, Lead and Zinc Smelting and Refining $6.8B

That is at least $309 billion in exports that could get slugged for their emission intensity. If the levy is just 5%, that is $15 billion in lost revenue… per year.

But it’s ok; the taxpayer is waiting patiently to pay the big polluters.

If you enjoyed this little rant or care at all that leadership needs some new blood, please share on your socials.

If this is leadership, heaven help us

Posted on 10 February, 2017 by alloporus

At various times I have ranted about the politics of climate change in Australia

The climate change action thing

Climate change policy – does Australia need it?

The Kardashian Index

And I am not alone. Many are tearing out what remains of their hair.

So I thought I would bring to your attention the latest from the current direct action policy option in place in Australia. This is the policy setting that hopes to achieve emission reduction targets through the purchase of greenhouse gas abatement at auctions.

At the end of 2016 the vehicle for this, the Emission Reduction Fund, had paid for 177 million tCO₂e of abatement purchased across four auctions at an average price of $12 per tCO₂e.

Yes, you read it right. Close to $2 billion, that is $2,000,000,000 or roughly enough to pay the annual salary of 100 cabinet ministers for over 50 years, has been spent to purchase roughly the amount of abatement needed to meet the emission reduction target Australia presented in Paris… for one year.

Let’s make this clear. Emitters of carbon are not paying for this abatement, the taxpayer is.

Now you could be generous and say that the taxpayer is really the economy, so the economy is footing the bill, but that is a very long bow. Industries that were previously under the carbon price and reducing their emissions to save money are not anymore. Instead, various activities from other players in the economy are offered to reduce emissions or to capture carbon into vegetation and the CO₂e tonnage presented for sale.

The concept of ‘polluter pays’ that has been so successful in a host of situations, from cleaning up rivers to closing the hole in ozone layer, is not in play here. Polluters carry on polluting as they merrily pass on the externality to the taxpayer.

This is neither good policy nor good governance.

There is no incentive to reduce emissions across the economy only an opportunity for a few to make a fast buck if they have access to some abatement.

At current prices, $2 billion will buy you 400 million tCO₂e of offset credit on the international markets, nearly 2.5 times the local option. So not only does the policy fail to incentivise prudence, it pays way over the top for mitigation.

You cannot help think that a few people are laughing all the way to the bank.

Lost post | big challenges for carbon offsets

Posted on 5 May, 2014 by alloporus

This is a lost post that languished as an unpublished draft for over a year. As with most things with any resemblance to climate change policy the comment remains relevant a year later…

The ‘elephant in the bathroom may have farted’ post tells us that the possibility we all knew was there — that market forces can go in both directions — now seems likely for the Australian carbon market.

At the end of the fixed price period in 2015, the carbon price in Australia may well be considerably less than $24. The new estimate is $10 per tCO2e, a shortfall that would deliver a $4 billion budget ouch on forward projections for the government.

Late last year the Australian government decided to remove the collar on the carbon price originally proposed for the 2015-18 period, presumably to allow alignment with the EU carbon market. It also allowes Australian companies to buy up to 50% of their permit requirement from international credits. This means that the domestic carbon price is more likely to track international markets, hence the potential permit price of $10 at the end of the fixed price period in 2015.

Not quite what is supposed to happen if the policy is to work, not least for the nascent offset market.

Here are three big consequences of $10 tCO2e for carbon offsets.

Big consequence #1 — few offset activities are viable at $9/tCO2e

When the permit price is low, then carbon credit prices will be lower still, around 10-15% usually. This makes sense because why go to the trouble of buying an offset credit if it is the same price as a permit? The only time you might is when you have some desire to commit a random act of kindness or to get PR advantage from the co-benefits that offset credits can bring. So usually credits are cheaper than permits.

Reminder of what offset credits are all about — short version is that credits can be generated from activities that abate, reduce emissions or sequester carbon into the landscape [e.g. capturing and burning landfill gas, growing trees on degraded land, managing manure from piggeries] so long as the activity complies with a several important carbon accounting rules

A $9 carbon credit will severely limit the number of offset activities that can be financially viable whilst still complying with all the rules.

In energy, infrastructure, waste and land based carbon projects it will be very hard to cover activity, transaction and opportunity costs of project implementation from a $9 tCO2e return.

Big consequence #2 — revenue from offsets do not go to Treasury

When projected revenue is halved the last thing a government would want is for emitters to buy offset credits instead of permits. Large-scale emitters will act rationally and buy offsets if they are cheaper only this money goes to the offset provider and not treasury. This makes the fiscal hole deeper.

There is also the significant risk that too many offsets could further deflate the price by increasing supply. This was probably the main, but rarely stated, reason for why REDD [reduced emissions from degradation and deforestation] mechanisms that generate credits from protection of tropical forests have not been embraced — too much credit volume further depresses the carbon price.

So we can expect government to be much less enthusiastic about offset credits, at least the complaint kind that can be exchanged for permits. They will, of course, continue to promote and talk up voluntary offset credits, the ones you might buy to offset a flight or a company might purchase in order to be carbon neutral.

It should be no surprise that, despite the fanfare, Australia’s domestic offset scheme called the CFI is taking a very long time to get going.

Big consequence #3 — not enough pain to change behaviour

Remember that the climate change policy that puts a price on carbon was all about reducing greenhouse gas emissions from human activities by making it increasingly more expensive for emitters to carry on emitting under business as usual. Create sufficient pain in the hip pocket and there will be a change in behavior.

Emitters will become more efficient, saving energy themselves, or pass the price on to consumers who will become more frugal. If it the price continues to rise and efficiency gains are exhausted then it pays to make more substantial shifts in behavior, mostly toward alternative energy sources.

At $9 tCO2e for an offset there is not enough pain to make the change.

May 2014 Postscript

See what I mean? A year on and offsets are still a pipe dream for all but a very few activities such as landfill gas capture that was already there anyway [so much for additionality].

And sometimes glacial pace of progress helps people forget the problem the policy was supposed to address.

Not good enough I say.