With 83% of the fund spent, the government’s central climate policy is almost exhausted, with no further funding committed

This article is more than 3 years old

This article is more than 3 years old

The federal government’s Direct Action carbon reduction policy appears to be running out of steam, with participation from industry dropping, the cost of the program rising and the budget for emissions reduction nearly exhausted.

The Clean Energy Regulator announced on Thursday it would pay a further $367m to polluting industries, in return for a commitment for them to reduce carbon emissions by 34.4m tonnes.

It is the smallest of four auctions held by the regulator, and leaves about $440m left in the emissions reduction fund for further carbon abatement contracts.

With about 83% of the fund now spent, the federal government’s central climate policy is almost exhausted, with no further funding committed to the program.

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At the previous auction in April 2016, the government awarded $516m worth of carbon abatement contracts under the scheme, and achieved a slightly cheaper price per tonne of carbon abatement – $10.23, compared with today’s $10.69.

The reduced amount of money spent in the latest auction, and the higher cost of abatement, appeared to reflect a lack of interest from the industry, with the regulator receiving about half as many bids in this round as it did in April 2016 – 52 bids compared with 103 in the previous auction.

Hugh Grossman, executive director of energy advisory firm RepuTex, said the results showed high emitting companies were losing interest in the scheme.

“Results indicate that interest in the ERF has fallen, with low supply and reduced competition leading to a nominal increase in the average price of abatement, in line with our earlier outlook,” Grossman said.

He said the lack of interest was driven by administrative complexity, a diminishing ERF budget, and the low price being paid for carbon abatement. “This is unlikely to change until compliance obligations are placed on industry to offset their emissions” Grossman said.

The majority of the projects – 24 out of 47 – were for vegetation projects, where farmers are paid to either plant trees, or to not cut them down.

An analysis from earlier this month by the environmental group the Green Institute, found that they would not have cleared the land anyway.

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They also found the price paid to the farmers to not clear each acre of land, was sometimes more than that acre of land was worth.

The scheme is also occurring alongside skyrocketing land clearing by other farmers in Queensland and New South Wales. Wilderness Society national director Lyndon Schneiders said: “It would be far cheaper just to stop tree clearing and spend that money on hospitals and schools. The Turnbull government’s climate policy is completely illogical and a waste of taxpayers’ money.”

According to Reputex, Australia’s emissions are likely to rise despite the money spent through the Emissions Reduction Fund.

In a media release, minister for energy and the environment Josh Frydenberg said: “The ERF provides a broad range of opportunities to reduce emissions right across the economy while generating income and employment for rural and Indigenous communities and improving biodiversity.”

Erwin Jackson, deputy chief executive of the Climate Institute said the ERF was only effectively addressing emissions in the land sector, which is a “tiny fraction of Australia’s contribution to climate change”. “Emissions from the burning of coal, oil and gas are the real drivers of escalating climate change impacts,” he said.

“As the world switches to clean energy, global emissions from fossil fuels have now been flat for the last few years, and falling in major economies like China and the United States. But they’re rising in Australia, because we have no national strategy to replace our ageing coal plants with clean energy.

“This highlights how crucial it is that next year’s federal policy review produces a credible and scalable decarbonisation strategy that can get Australia to net zero emissions.”