Australia is calculating that its big industrial emitters will be forced to reduce greenhouse pollution by 200m tonnes between 2020 and 2030, an assumption experts say will require major changes to the Direct Action policy which is not designed to force cuts from existing plants.



The environment minister, Greg Hunt, has revealed the 2030 emissions reduction target Australia will take to Paris in December – a cut of between 26% and 28% of 2005 levels – is based on an assumption that the so-called “safeguards” mechanism will deliver 200m tonnes of emission reductions between 2020 and 2030, or almost a quarter of the total cuts required.

The confirmation that Australia’s long-term target will require cuts to industrial emissions stands in contrast to the current stated objective of the “safeguards” mechanism, which is to impose caps that stop “rogue” companies from dramatically increasing emissions, but not to force them down.

Analysts like Reputex say the very lenient baselines proposed will allow big emitters such as brown coal-fired power stations to significantly increase emissions. Major business groups have complained they cannot see how the government can meet the new target, and have been privately assuming that the government must be intending to use a 2017 review to toughen the rules. Given that the policy also allows businesses who exceed their baselines to buy permits from businesses who come in under their limits, this would also potentially set up a version of an emissions trading scheme.

But Hunt refused to say whether achieving 200m tonnes of greenhouse gas cuts from the companies covered by the safeguards scheme would require tougher rules than those he has on the table for existing plants.

He said the government would “allow for adjustment of the best practice rules [which say new plants must use best available technology] and technological change” but “any other changes would be a matter for future governments”.

“I would not want to bind the hand of future governments,” he said.

Asked whether tougher baselines could usher in a type of emissions trading scheme, he said: “We are not mandating an ETS. I do not see any circumstances in which this government would create an ETS.”

Under the safeguard rules, companies which exceed their baseline can pay a penalty or buy carbon offsets from other companies. Hunt said that “what private companies do is entirely a matter for them within the law. By definition they own their own units and they can acquire them and dispose of them as they see fit.”

Experts are clear that a 200m tonne cut could be achieved only with much tougher safeguard rules.

“The draft rules we have seen would not deliver that,” said Bret Harper, head of research at Reputex. “Most new plants, we should assume, would be built using best practice in any event, so they aren’t likely to deliver much abatement. To get that result would require much tighter baselines.”

Elisa de Wit, who heads the climate law practice at law firm Norton Rose Fulbright, said, “The only way to get substantial cuts like that would be to change the baselines so they reduce over time.

“We assume this will happen after the review in 2017-18. But the safeguards, as they are currently designed, won’t drive any significant emission reductions.”

The chief executive of the Australian Industry Group, Innes Willox, said, “To date the safeguard has been designed to catch ‘rogue emitters’, not as a constraint on ordinary business activities. The draft rules certainly reflect that.

“If the government wishes to evolve the safeguard over time into a major driver of abatement, that will be complex and need deep consultation, particularly on dealing with trade competitiveness issues and avoiding excessive administration and compliance costs.”

The independent senator Nick Xenophon has criticised the safeguard rules and promised to use the threat of Senate disallowance to give them more teeth.

But Hunt said Xenophon was proposing “only minor changes”.

“I am engaged in discussions with Nick and his office and there may be minor technical changes,” Hunt said. “No major changes have been proposed although I am not presuming to know Nick’s final position.”

In a wide-ranging interview Hunt also said:

He wanted the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (Arena) – both of which have been transferred into a new unit in his department – to “bring forward’ the widespread deployment of battery storage to help households store energy from solar panels. He sees this both as an emissions reduction policy and a productivity policy, since storage would help reduce the huge “peaks” in electricity demand which force spending on additional capacity in electricity “poles and wires”, with the costs passed on to consumers.

The environment department deputy secretary, Rhondda Dickson, former head of the Murray Darling Basin Authority, will head the new office of climate change and renewable innovation, which will include Arena and the CEFC.

The new investment mandate for the CEFC would meet a promise made to crossbench senators, that the investment bank would concentrate on emerging technologies, but this would not preclude some investments in wind power or solar as had been suggested by the previous responsible ministers, Joe Hockey and Mathias Cormann. “The final mandate for the CEFC will reflect the language of the letter to the senators. There was a draft mandate which is not operative. The final draft will reflect faithfully and fully the letter to the Senate,” Hunt said.



Australia was likely to be one of the very first countries to adopt new Montreal protocol rules on the phase-out of greenhouse-potent refrigerant gases, which are estimated to deliver another 75m tonnes of emission reductions between 2020 and 2030.