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TheCarbon Pollution Reduction Scheme (orCPRS) was a cap-and-tradeemissions trading scheme for anthropogenicgreenhouse gases proposed by theRudd government, as part of itsclimate change policy,[1] which had been due to commence in Australia in 2010. It marked a major change in theenergy policy of Australia. The policy began to be formulated in April 2007, when the federalLabor Party was in Opposition and the six Labor-controlled states commissioned an independent review on energy policy, theGarnaut Climate Change Review, which published a number of reports. After Labor won the2007 federal election and formed government, it published aGreen Paper on climate change for discussion and comment. The Federal Treasury then modelled some of the financial and economic impacts of the proposed CPRS scheme.
The Rudd government published a finalWhite Paper on 15 December 2008, and announced that legislation was intended to take effect in July 2010; but the legislation for the CPRS (aka ETS) failed to gain the numbers in the Senate and was twice rejected creating adouble dissolution election trigger. A bitter political debate within the Coalition Opposition saw Opposition leaderMalcolm Turnbull lose the leadership to the anti-CPRSTony Abbott. The Rudd government did not call an election and in April 2010, Rudd deferred plans for the CPRS.
After the2010 federal election, theGillard government was able to get theCarbon Pricing Mechanism passed into law as part of the Clean Energy Futures Package (CEF) in 2011, and became effective on 1 July 2012. However, after the2013 federal election there was a change in government, and theAbbott government repealed the CEF package on 17 July 2014.[2][3][4] Due to the great deal of policy uncertainty[5] surrounding the scheme, organizations in Australia responded in a rather informal and tepid manner and largely withheld from making any large-scale investments in emissions reductions technology during the scheme's operation.[6]
In the 2007 election year, both the Liberal-led Coalition government and the Labor opposition promised to introduce carbon trading. Opposition leader Rudd commissioned theGarnaut Climate Change Review on 30 April 2007, while Prime MinisterJohn Howard announced his own plan for a carbon trading scheme on 4 June 2007,[7][8] after the final report of thePrime Ministerial Task Group on Emissions Trading. Labor won the election on 24 November 2007.
Thedraft Garnaut Report, issued on 4 July 2008, was only one of many inputs into the policy-making process. The Labor government also issued a "Green Paper" on 16 July 2008[9] that described the intended design of the carbon trading scheme.[10]
The Carbon Pollution Reduction Scheme, was a market-based approach togreenhouse gas pollution, to be implemented in 2010 (Department of Climate Change, 2008, 9). The main concern for theAustralian government was getting the design of such a scheme correct, so that it would have complemented the integrated economic policy framework, and would have been consistent with the Government's commercial strategy (Department of Climate Change, 2008, 10).
The objective of the Carbon Pollution Reduction Scheme was to meet Australia's emissions reduction targets in the most flexible and cost-effective way; to support an effective global response to climate change; and to provide for transitional assistance for the most affected households and firms (Department of Climate Change, 2008, 14).
The basis of a Carbon Pollution Reduction Scheme was acap and trade system, and was a way of limitinggreenhouse gas pollution, as well as giving individuals and businesses incentives to reduce their emissions (Department of Climate Change, 2008, 11). The Australian Government would have set a cap on carbon emissions, consistent with longer-term goals of reducing Australia's emissions by 60% compared with 2000 levels by 2050 (Department of Climate Change, 2008, 11).
There were two definite elements of the cap and trade scheme: the cap itself, and the ability to trade (Department of Climate Change, 2008, 12). The cap is the limit ongreenhouse gas emissions imposed by the Carbon Pollution Reduction Scheme. The system aims at achieving the environmental outcome of reducing greenhouse gas emissions, the idea being that capping emissions creates a price for carbon and the ability to trade ensures that emissions are reduced at the lowest possible price (Department of Climate Change, 2008, 12). Setting a limit means that the right to emit greenhouse gases becomes scarce, and scarcity entails a price. The Carbon Pollution Reduction Scheme would have put aprice on carbon in a systematic way throughout the economy (Department of Climate Change, 2008, 13).
The 'covered' sectors are sources of emissions subject to the cap, which were specified in the Carbon Pollution Reduction Scheme (Department of Climate Change, 2008, 12). After setting the cap, the Government would have then issued permits that are equal to the cap. The Green Paper gives the example "if the cap were to limit emissions to 100 million tonnes of CO2-e in a particular year, 100 million 'permits' would be issued that year" (2008, 12). For every tonne of emissions emitted, a source of emissions would have been required to acquire and surrender a permit (Department of Climate Change, 2008, 12). About one thousand firms were expected to have obligations from the Scheme.
The price of emissions would increase the cost of those goods and services that are most emissions-intensive (Department of Climate Change, 2008, 13). This means that there will be a change across the prices of goods and services across the economy, reflecting how emission-intensive the goods or service is. That therefore provides businesses and consumers with incentives to use and invest in low-emissions technologies.
The second essential element of a cap and trade scheme is the ability to trade. Since carbon pollution permits will be tradable, the price of permits will be determined by the market (Department of Climate Change, 2008, 13). The main idea behind this part of the scheme is that a firm who can undertake abatement more cheaply than the permit price will do so, and that a company will pay for permits if the cost to it of lowering its emissions exceeds the cost of the permits. By trading among themselves, firms achieve the scheme cap at the least cost to the economy (Department of Climate Change, 2008, 13).
The cap would only achieve the desired environmental objectives if it is enforced. This means that firms responsible for emissions covered by the Carbon Pollution Reduction Scheme must monitor their emissions and report them accurately to government (Department of Climate Change, 2008, 12). The reported emissions data would need to be monitored and verified.
The Australian Treasury's report on theeconomics of climate change mitigation was released on 30 October 2008.[11] The report was a key input in determining the structure and targets for the Carbon Pollution Reduction Scheme.
The Treasury's modeling demonstrated that early global action to reduce carbon emissions would be less expensive than later action and stated that a market-based approach allows robusteconomic growth into the future as emissions fall.
The report also stated that:
The White Paper was released on 15 December 2008.[12] The White Paper included the Rudd Labor government's targets for Greenhouse gas emission reductions, 5% below 2000 by 2020 on a unilateral basis or up to 15% below 2000 by 2020 if also agreed by the other major emitters. This compares to the 25 to 40% cut compared to 1990 emissions recommended by theIPCC as needing to be made by developed countries to keep CO2 below 450 ppm and to have a reasonable chance of keeping global warming at less than a 2-degree Celsius increase above pre-industrial times.
The White Paper also set an indicative national emissions trajectory for the first few years of the scheme:[12]
For comparison, in 2006, Australia's emissions were 104% of 2000 levels (under Kyoto accounting).[13]
Some of the features of theemissions trading scheme proposed were:[12][14]
The national Climate Action Summit of 500 participants representing 140 climate groups Australia wide has condemned the CPRS and agreed to campaign to prevent it becoming law. Major concerns included announced targets, granting of property rights to pollute and providing free permits to major polluters.[15] Summit participants were joined by 2,000 other people in surrounding parliament house to express dissatisfaction with the Rudd government climate change policies.
Several organisations criticised the choice of emission reduction targets in the CPRS.Greenpeace, theWorld Wildlife Fund, theWilderness Society and the Climate Institute were joined by the Greens and other environmentalists in calling for more ambitious 2020 targets of 25 to 45 per cent reductions.[16]Professor Andy Pitman described the targets as inadequate.[17]Professor Barry Brook, the Director of the Research Institute for Climate Change and Sustainability at the University of Adelaide, stated that "the 14% cut in our total emissions by 2020 announced today is such a pitifully inadequate attempt to stop dangerous climate change that we may as well wave the white flag now."[18]Dr Regina Betz, Joint Director of the Centre for Energy and Environmental Markets atUNSW, stated "The proposed 2020 targets of emission reductions of 5 to 15% are, according to the climate science, entirely inadequate for an equitable global response toavoid dangerous global warming."[18]Dr Frank Jotzo, deputy director of the ANUClimate Change Institute, and former advisor to theGarnaut Climate Change Review, said "ruling out a 25% reduction is a mistake, since Australia's overwhelming interest is strong global climate action. An international agreement with deep cuts has just become a little bit more unlikely, as a result of Australia not putting a compatible offer on the table" and "the Treasury modelling has shown that even deep cuts won't carry big economic costs for Australia, if the policies are sound."[18]
Australian industrialists were concerned about cost impacts.Australian Chamber of Commerce & Industry chief executive Peter Anderson said his members were "apprehensive" about the scheme because it was "too risky" and warned the costs would be borne not only by emissions-intensive, trade-exposed industries but also by "small and medium businesses through higherenergy costs and the flow-on from restructuring of larger industries".[19]Australian Industry Group chief executive Heather Ridout said the scheme was "a big ask and will have a big impact on the Australian economy" and estimated it would add about $7 billion to business costs by 2010.[19]
Other sources of criticism included concerns over coverage of agriculture, impacts on the minerals sector and implications for international agreements. Dr Hugh Saddler, Managing Director of Energy Strategies Pty Ltd,[20] stated "the white paper does not include measures to reduce emissions from the major non-energy sectors such as agriculture andland clearing. While it is a good decision not to include these emission sources within the CPRS, it is essential that there be other strong programs specifically directed at these sectors."[18]Mitch Hooke, the head of theMinerals Council of Australia, said his organisation was "profoundly disappointed that the white paper was not better aligned with progress towards a global agreement on reduction commitments, new low emissions technologies and emissions trading schemes in other countries"[19] South Africa's environment minister,Marthinus Van Schalkwyk, described the scheme as an inadequate "opening bid", and warned that it is not "nearly good enough to bring developing countries to the table".[21]
ProfessorRoss Garnaut, previously an adviser to the Government on climate change, 'damned' the Rudd government's carbon policy because of the gross over-compensation ofcoal-fired electricity generators; the possibility of taking 25% emission reduction targets off the table when they are in Australia's best interest; the lack of a principled basis for support of trade-exposed industries and the potential threat to public finances of the proposed compensation to industry.[22]
Statements of support included:The United Nations climate negotiatorYvo de Boer told ABC Radio "Australia's now put a figure on the table, something countries have been calling for a long time".[23]Gerard Henderson, the former Chief-of-Staff toJohn Howard, has described Rudd'semissions targets as "responsible".[24]
Afterchanges announced in May 2009, some business and environment groups announced that the CPRS, although weak, was now worth supporting.[25]
On 4 May 2009, the government announced a number of modifications to the proposed Scheme, including a delayed start, a deeper conditional target (25% by 2020, in the event of a global agreement aiming at 450 ppm), more assistance for industry, and a "carbon trust" to enable voluntary action by households.[26]
There were a number of significant changes made to the scheme in November 2009 after Malcolm Turnbull negotiated with Prime MinisterKevin Rudd. These changes included large increases in compensation for polluting industries, including the coal and aluminium smelting industries. $4 billion was proposed for the manufacturing sector and $1.5 billion was proposed for electricity generators.
Without amajority in theSenate, and without the support of theOpposition,Labor needed support from the undecidedcross-bench members, theGreens,Family First andindependent senators.[27] On 30 November 2009, the Senate failed to pass the CPRS,[28] givingKevin Rudd a potential reason for calling adouble dissolution election.[29]
On 27 April 2010,Prime Minister Rudd announced that theGovernment had decided to delay the implementation of the CPRS until after the current commitment period of theKyoto Protocol (which ended in 2012).[30] The Government cited the lack ofbipartisan support for the CPRS and slow international progress on climate action for the delay. The Prime Minister announced that the CPRS would be introduced only when there was greater clarity on the actions of other major economies including theUS,China andIndia.
In June 2010, theMinister for the Environment, Heritage and the Arts,Peter Garrett, toldSky News that he first learned of the scrapping of the CPRS when he read about it in a newspaper after it wasleaked by a Government source.[31]
The delay in implementing the CPRS drew strong criticism of Rudd and the Labor Party from the Federal Opposition,[32] and from community and grassroots action groups such asGetUp.[33] On 5 April 2011, Rudd stated that he believed it had been a mistake to delay the ETS during histerm as Prime Minister.[34]
In February 2011, theGillard government announced theClean Energy Bill 2011, an emissions trading scheme to replace the CPRS. This Bill was passed into law later that year, paving the way for acarbon price which was introduced on 1 July 2012.[35]
The national director of the progressive grassroots campaigning outfit GetUp!, Simon Sheikh, saidprogressive voters won't take this lying down.
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