The economist who helped devise the Coalition’s climate policy says Labor’s new-style electricity emissions trading scheme is exactly what he designed for Malcolm Turnbull in 2009 and mirrors what the Coalition’s Direct Action plan is likely to become to meet Australia’s greenhouse targets.



But despite the policy similarities, the government is persisting with a Tony Abbott-style anti-carbon tax scare campaign, which a leading climate thinktank has labelled “misleading” and “dishonest”.

Labor is now proposing a separate “emissions intensity” trading scheme for the electricity sector in which generators with higher emissions than an industry-wide baseline would have to buy credits from those with lower emissions. This is a major shift from the “cap and trade” scheme it previously introduced.

Danny Price, the chief executive of Frontier Economics, told Guardian Australia “the emissions intensity part of Labor’s plan appears to be exactly what we were proposing for Malcolm Turnbull and Nick Xenophon in 2009”.

Xenophon modelled the scheme for Turnbull and Xenophon when Turnbull was the opposition leader and considering his response to the then Labor government’s cap and trade ETS.

Turnbull lauded it as a “cheaper, greener, smarter scheme” and said it could deliver deeper cuts to greenhouse emissions but impose far lower increases in electricity prices. But the then prime minister, Kevin Rudd, dismissed it as a “magic pudding”. The then climate minister, Penny Wong – now the leader of the opposition in the Senate – also dismissed the scheme that now forms part of Labor’s policy.

“It is not a hybrid, it is a mongrel. It is not a credible alternative, it is a smokescreen,” she said. “[It] has the distinct taste of magic pudding.”

Price said the new Labor policy was “a bit light on detail but it looks pretty much the same [as the Turnbull 2009 plan]. Malcolm Turnbull thought it was a good idea then. I’m delighted the Labor party is proposing it now.”

And Price – who the government recently appointed to the Climate Change Authority and who acted as an adviser on Direct Action – said the Coalition would probably have to move to a similar scheme itself in order to meet its own emissions reduction targets.

“The government’s Direct Action plan – its safeguard mechanism – could be modified to create exactly this same type of scheme,” he said. “I’ve always thought that was the most likely way for them to go after the review they have scheduled for 2017, because they are obviously going to have to make changes to meet even their existing targets and this is a low-cost way to do it.

“It is actually emerging as an idea with the potential to be adopted by both major parties.”

Under Direct Action the “safeguards mechanism” is supposed to ensure that increased emissions from heavy industry and electricity generators do not undo the reductions bought through the government’s $2.5bn scheme, by setting baselines for their emissions.

At the moment the baselines are lenient, ensuring industries don’t “go rogue” but not seeking to reduce their greenhouse emissions. But many observers, including business groups, expect they will have to be tightened after 2017 to gradually reduce industrial emissions. And that would turn Direct Action into much the same scheme as Labor is proposing.

As well as the electricity-sector scheme, Labor is proposing an emissions trading scheme for heavy industry. In its first stage, from 2018 to 2020, polluters would buy international permits, currently trading at less than $1, for emissions over a yet-to-be-determined cap. Details of the second stage are yet to be determined.

Despite the similarities between Labor’s electricity scheme and its own policy direction, the Turnbull government has continued to use Abbott’s lines to attack it. The treasurer, Scott Morrison, called it a “big, thumping electricity tax” and the deputy prime minister, Barnaby Joyce, said Labor, the Greens and the independents wanted to “make people poorer because it’s good for you, because it’s righteous”.

But John Connor, CEO of the Climate Institute, said the scare campaign was “disappointing” and some of the government’s claims were “misleading” and “dishonest”.

He pointed to recent modelling by the institute that showed Australia faces significant economic disruption unless it moves quickly to implement clear policies to meet the Paris goals. The institute recommended a carbon price and regulations to phase out coal-fired generators and additional subsidies to encourage clean energy investment.

The Business Council of Australia said Labor’s policy could “build a platform for bipartisanship”.