Abbott government awards emissions reduction contracts worth $660.4m, but Climate Institute says first auction shows policy will fall short of stated goals

This article is more than 5 years old

This article is more than 5 years old

The Australian government has awarded emissions reduction contracts worth $660.4m for businesses to prevent 47m tonnes of greenhouse gases entering the atmosphere, in the first round of auctions under its Direct Action climate policy.



The federal environment minister, Greg Hunt, said the auctions produced a “stunning outcome” which exceeded expectations. But the Climate Institute has said the first auctions showed the policy would fall well short of meeting even Australia’s “woefully inadequate” emissions reduction target.

The Coalition’s emissions reduction fund, the $2.55bn centrepiece of its Direct Action climate plan, has bought promised carbon abatement at an average price per tonne of $13.95 in the first auction.

The fund will distribute taxpayer money for 107 contracts held by businesses and individuals for projects that aim to reduce greenhouse gas emissions, such as land regeneration and the capture of gases from agriculture and industry.

Hunt said the 47m tonnes of abated emissions outstripped his expectation that “three or four or five million tonnes” might be achieved.

“This is stunning outcome, it far exceeds all of our expectations and it achieves an outcome in the first auctions which is more than four times the entire emissions reduction produced during the carbon tax period at a fraction of the cost,” he said.

Hunt said the first round of auctions proved that the Coalition’s policy was a “comprehensive success”, in contrast to Labor’s carbon tax, which he called a “licence to pollute”.

But the deputy chief executive of the Climate Institute, Erwin Jackson, said a quarter of the $2.55bn emissions reduction fund had been spent to secure just 15% of the reduction of greenhouse gas emissions needed for Australia to meet its target of a 5% cut by 2020, based on 2000 levels.

“Things might get better in future auctions but they’ve already spent a quarter of the money and all the analysis suggests that these prices won’t get significant emissions reductions,” he said. “There is no confidence that we can even meet our woefully inadequate targets with this.

“The broader issue is why are taxpayers footing the bill rather than the big polluters doing any of the heavy lifting? The public is bearing the cost here rather than the big polluters.”

A total of 144 projects will be funded, with the largest single contract, for LMS Energy to reduce emissions from four landfill sites, abating more than 3.5m tonnes of greenhouse gas.

The smallest project, by Ralvimay Enterprises, is a three-year initiative to prevent the felling of native forests, saving 12,000 tonnes.

Terra Carbon, a firm that provides “market-based solutions for conservation”, scooped up 41 of the contracts awarded. The energy firm AGL was awarded contracts for seven landfill projects.

The length of the contracts range from three to 10 years, with seven years being the standard term, according to the Clean Energy Regulator, which oversaw the auctions.

The chairwoman of the regulator, Chloe Munro, said there was a “lot of abatement potential in the economy” but the first auction did not give a clear picture of the fund’s capacity to reduce emissions.

The emissions reduction fund was introduced in the wake of the Coalition’s abolition of the carbon pricing system last year. The government has not conducted any analysis to ascertain whether the policy will ensure Australia meets its target of a 5% cut in emissions, although Hunt has repeatedly stressed his confidence the system will work.

Numerous independent bodies, including the UN and the government’s own Climate Change Authority, have cast doubt on whether the policy will be enough to deliver the 5% cut without additional regulations or a greater level of funding.

Hunt said on Thursday he expected the level of required abatement to fall further due to reducing energy consumption in the economy.

The next emissions reduction auction is expected later this year.