Climate Change Policy

The Coalition Government’s climate change policies are contained in its Clean Air policy, within its broader plan for the environment that also includes Clean Land, Clean Water and Heritage Protection.

In framing this policy, the Government “…accepts the science of climate change… [and that Australia will have] to play its part in solving this global problem”. 1 The Government is committed to the unconditional reduction target to reduce emissions by five per cent below 2000 levels by 2020. 2 The Government has furthermore committed to reducing Australia’s emissions by 26 – 28 per cent below 2000 levels by 2030.3

The Government intends to reach its emissions reduction targets through efficiently and effectively sourcing low cost emissions reductions. The government has allocated $2.55 billion over the next four years for the purchase of lowest cost abatement via a reverse auction process.

The Government’s Clean Air policy is implemented through its Direct Action package of measures. This includes the Emissions Reduction Fund (ERF) and its accompanying safeguard mechanism.

Three design principles have guided the development of the ERF. These are lowest cost emissions reductions, genuine emissions reductions and streamlined administration.

The safeguard mechanism commenced on 1 July 2016. Its job is to “…ensure that emissions reductions purchased by the Government are not offset by significant increases in emissions above business-as-usual levels elsewhere in the economy.” 4 The safeguard mechanism covers around 140 large businesses comprising about half of Australia’s emissions. It includes facilities in power generation, mining, oil and gas, manufacturing, transport, heavy and civil engineering construction, and waste. 5

By contrast, the crediting element of the ERF is open to the whole economy. Emissions reduction projects are implemented by participants and must follow rules set out in the relevant emissions reduction method; the Regulator then issues Australian Carbon Credit Units (ACCUs) for the emissions reductions achieved. These can be kept to acquit potential liabilities under the safeguard mechanism, to trade on the (as yet small) secondary market, or offered to the Government for purchase. 6

The purchasing element of the ERF is administered by the Regulator through competitive reverse auctions; the Regulator, acting on behalf of the Government, purchases emissions reductions at the lowest available cost (awarding successful bidders contracts guaranteeing payment in return for delivery of these emissions reductions). 7

Since the commencement of the ERF, auctions have been held each April and November in 2015 and 2016. Over the course of these four auctions, $2.1 billion of the $2.55 billion available to the Regulator has been spent purchasing 34.4 million tonnes of abatement, at an average price of $11.83 per tonne of CO2-e. At least 29.3 million tonnes of this abatement comes from sectors that are not covered by the safeguard mechanism. 8

In the context of announcing its post 2020 emissions reduction target, the Government has indicated that the policy framework for achieving the target will be considered in more detail in 2017/18 and be informed by lessons from the implementation of the ERF. However the Government also intends to consult on and develop the following initiatives in the meantime:

  • The National Energy Productivity Plan (developed with COAG Energy Ministers)
  • Improving vehicle efficiency
  • Phasing down hydrofluorocarbon use as a refrigerant
  • Developing a strategy to improve the utilisation of solar power
  • Developing a Low Emissions Technology Roadmap

  • The above measures will be accompanied by existing measures including the Renewable Energy Target, Minimum Energy Performance Standards for appliances and buildings, and the 20 Million Trees program. 9

    The Government is undertaking a review of Australia’s emissions reduction policies in detail in 2017/18, in consultation with businesses and the community. 10

    1 Greg Hunt 2013. The Coalition Government’s Plan to Repeal the Carbon Tax and Tackle Climate Change Paper to the Carbon Expo Australia (3 December 2013).
    2 Ibid.
    3 Summary Australias 2030 emissions reduction target
    4 Safeguard Mechanism
    5 Factsheet Safeguard Mmechanism Coverage
    6 Emission Reduction Fund
    7 Emission Reduction Fund
    8 Auctions Results November-2016
    9 Summary Australias 2030 Emissions Reduction Target
    10 Review Climate Change Policies

    Related files

    • Learnings - 10 years of Carbon Policy.docx
      This document briefly canvasses the climate change policy environment that has applied over the past decade, lessons learnt, and the appropriate policy approaches required for sustainable investment in reducing emissions. (67kB DOCX file uploaded 22/10/2015)


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