A “Clean Energy Future” for Australia?

As anticipated last February by the Prime Minister (PM) Julia Gillard, the Australian government unveiled the new policy and taxation package to tackle climate change. The “Clean Energy Plan”, released on July 10, is part of a long term plan to reform the Australia’s economy, drive innovation and avoid increasing costs of delayed action. It includes a carbon pricing mechanism with a three-year fixed carbon price, which will be then replaced by a real market based emission trading scheme (see below). The program will involve around 500 businesses, accounting for 60 percent of Australia’s emissions. The revenue collected will be used to finance employment policies, household compensations and investments in clean technology. The proposal represents the attempt to revive the climate changes debate after the last years’ failure of the former PM Rudd’s Carbon Pollution Reduction Scheme (CPRS), whichwas twice rejected in the Senate. Although a very slim majority, the ruling government seems to be confident to manage to pass the plan. Unlike the CPRS, indeed, this proposal has the support of both the Green Party and some Independents.

However, soon after its release, the plan received an adverse reaction from the public, concerned about rising energy prices, job losses and the delay of the international action. In addition, the PM is facing a credibility loss mainly due to the fact that, during the election campaign, she promised (maybe naively) that “there will be no carbon tax” under her government. After all,  the unpopularity of the“carbon tax” in the country has been also confirmed by a recent poll in which 39 percent of citizens said they would not be willing to pay more to solve climate change (nearly doubled from 21 percent in 2008). This time, convincing the voters could be harder than winning the battle in the  parliament.

The main contents of the Australian plan are:

Targets: emissions 5% below 2000 levels by 2020, 80% by 2050; Renewable generation 40% by 2050.

Overall structure: create a carbon pricing mechanism with carbon price fixed at $23/tonne from 1 July 2012and which will rise by 2.5% a year until 1 July 2015. The price mechanism will then transition to an emissions trading scheme with the price determined by the market.

Coverage: six “Kyotogases” from sources emitting more than 25,000 tCO2e/year within stationary energy, industrial processes, fugitive emissions, other than from decommissioned coal mines, and the waste sector.Energy-intensivesectors facing international competition will receive 94.5% of free permits, while less energy-intensive companies 66%.

Offset provisions: use of up to 5% of credits from a carbon credit offset program for the agriculture and forestry sectors (Carbon Farming Initiative).

Clean Energy investments:

  • creation of a Clean Energy Finance Corporation responsible for investing $10 billion in private innovative clean energy proposals and technologies;
  • creation of a Renewable Energy Agency to manage $3.2 billion grants for research and development intorenewable energy;
  • institution of a Clean Technology Innovation Program to distribute $200 million in business investments in renewables, energy saving and low-emissions technologies.