The agreement between the government and the Palmer United Party for the passage of the legislation to implement the Emissions Reduction Fund secures the continuity of the Carbon Farming Initiative and has been welcomed by Australia’s peak body for carbon market participants.
“The crediting and purchasing arrangements under the ERF to secure and expand the CFI are an important component of a policy suite of measures needed to achieve Australia’s emissions reduction target,” says Carbon Market Institute chief executive officer Peter Castellas.
“CMI members are strong supporters of the Australia’s domestic carbon offset scheme and the passage of this legislation ensures CFI projects remain viable,” says Castellas.
“Continuity of the CFI means jobs and investment in carbon abatement activities also continue. It’s great news for project developers of carbon abatement activities.”
“The preservation of the well designed, well governed domestic carbon offset scheme will be a vital component and complement to the government’s proposed safeguard mechanism or any market-based approach to emissions reduction that may evolve in the future,” says Castellas.
CMI has been actively involved in providing constructive, expert industry input into plans for the ERF policy implementation and amendments to the Carbon Farming Initiative Amendment Bill 2014.
The positive engagement of cross bench senators, particularly Senator Nick Xenophon, in coming to an agreement on the ERF should be acknowledged and augers well for further development of the suite of policy approaches that we will need to achieve Australia’s 2020 target and beyond.
The amendments made by Senator Xenophon were significant and included changes that will be welcomed by proponents looking to bid into the Emissions Reduction Fund. These include the alignment of contract periods with crediting periods and the prospect of securing additional crediting periods for projects.
The Xenophon amendments also set out the framework for the operation of the ERF’s safeguard mechanism which is broadly consistent with market-based baseline and credit design principles.
“Through consultation, the government has the opportunity to set the rules around the safeguard mechanism so it is designed and implemented as an enduring measure that provides long-term policy certainty, drives demand for domestic abatement and is a market-based approach to limit emissions growth in the economy and meet emissions reduction targets,” says Castellas.
“The ERF can do some of the important heavy lifting of emissions reductions in the next few years but limiting emissions growth in the period 2020-2030 also needs to be considered as a central part of the initial policy framework and, as such, the final design of safeguard mechanism will assume great importance,” he says.
Although the amendment for the establishment for a $500 million strategic reserve was not supported, it should be further considered as part of a suite of policy measures that will enhance Australia’s prospects of meeting our minimum five per cent by 2020 emissions reduction target.
“We are pleased to see the retention of the Climate Change Authority as a provider of much needed independent and balanced advice on climate change policy,” says Castellas.
Recently there have been very significant developments in Australia’s key international trading partners in their approaches to carbon pricing. Momentum will continue with countries setting post-2020 national emissions reduction targets in the lead up to the Paris climate change agreement in 2015.
“It is critical that the CCA tracks international developments including the market-based approaches of our key trading partners and provides input into how Australia’s emissions reduction targets should be set.”
“We welcome the passage of the ERF legislation and with the input of the CCA, an informed, mature debate on the consideration of a role of a market-based approach to emissions reduction in Australia’s future policy mix,” says Castellas.
CMI Briefing Note – Market-based approaches to emissions reduction: Australia’s key trading partners
CMI has produced a briefing note as a high level overview of the main policy options available to governments to meet their emissions targets and the market-based approaches used by some of Australia’s key trading partners.