Tony Abbott’s ‘Direct Action’ ineffective as a curb on carbon emissions
Direct Action subsidies: wrong way, Abbott, go back
Crikey, FRANK JOTZO AND PAUL BURKE | MAR 25, 2014 Nothing has happened since the election to challenge the view that the Coalition’s Direct Action plan for carbon reduction is vastly inferior to carbon pricing, write economists Frank Jotzoand Paul Burk at INSIDE STORY. Direct Action is often perceived as an exercise in keeping up appearances: a fig-leaf policy from a government that has expressed little enthusiasm for serious action on climate change. But with the possible neutering of the Renewable Energy Target, Direct Action subsidies are set to be the main pillar of Australia’s climate change mitigation effort as well as a new drain on our scarce fiscal resources.
The cornerstone of Direct Action is a system of subsidies for emissions-reducing projects, channelled through an Emissions Reduction Fund. In a nutshell, government will pay companies to implement specific projects that are thought to reduce emissions. It will “buy up the cost curve”, purchasing the lowest-cost emissions reductions first.
Not much more detail is available about the policy than was sketched before the election. The government’s December 2013 green paper leaves many of the most crucial questions open, including how baselines would be set, whether there would be a penalty for companies that exceed their baselines, and whether projects in all parts of the economy would compete directly or there would be separate pots of money for sectors such as agriculture, forestry and industrial energy efficiency.
The consultation process is under way and will no doubt reveal the competing interests of different groups. It is also no foregone conclusion that the Senate will vote in favour of the scheme.
When examined under a bright light — as we have done so inour submissions to the recent Senate inquiry on Direct Action — Direct Action doesn’t hold up at all well. Yes, it’s an attractive political phrase, the combination of two very positive-sounding words. Yes, the Coalition’s negative strategy surrounding carbon pricing has been politically successful. But as a piece of public policy for use in achieving either short- or long-term emissions reduction goals, Direct Action is fundamentally flawed.
From an economic point of view, the first weakness of Direct Action is that, unlike carbon pricing, it doesn’t offer the potential to pick all of the “lowest hanging” emissions reduction opportunities….. http://www.crikey.com.au/2014/03/25/direct-action-subsidies-wrong-way-abbott-go-back/
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