Will Australia’s new climate policy work?

Samantha Hawley: Hi, I’m Sam Hawley, coming to you from Gadigal Land. This is ABC News Daily. We’ve suffered through devastating bushfires and floods. But while we’ve been bearing the brunt of climate change, Australia hasn’t even had a climate policy. Until this week, with the Greens striking a deal with the Albanese Government on a bill that’s meant to force the big polluters to slash emissions. Today climate scientist Frank Jotzo on how it will work and why it shouldn’t mean consumers will pay more.

Adam Bandt, Greens leader: There will be in law for the first time in this country, a limit on the amount of pollution that these corporations, including the coal and gas corporations, can pollute.

Anthony Albanese, Prime Minister: After a wasted decade under the coalition, today is a very good day indeed, a great day for our environment, for jobs and for the economy.

Samantha Hawley: Frank Jotzo, we’ve travelled a very long way to get to this point where we actually have a climate policy. It’s something that politicians have tried to achieve, isn’t it, for a very long time?

Dr Frank Jotzo: Indeed it is, and we have come a very long way on this. Of course, we did have a climate policy in Australia in the in a period between 2012 and 2014, quite comprehensive in fact. But of course that did not last politically.

Tony Abbott, former Liberal Prime Minster: Today, the tax that you voted to get rid of is finally gone. A useless, destructive tax which damaged jobs, which hurt families, cost of living.

Dr Frank Jotzo: I guess we’re slowly getting back to a point where we’re reintroducing effective climate policy federally in Australia.

Samantha Hawley: So it’s a pretty big moment, isn’t it? This has happened because the Greens have jumped on board. Adam Bandt was adamant for a long time that he wouldn’t support this unless there was a guarantee that there were no new coal and gas projects in this country.

Ted O’Brien, Shadow Minister for Climate Change and Energy: And we want to see climate action. But this key question of new coal and gas mines is proving to be a sticking point. And again, I come back to the point. What is Labor’s justification…

Patricia Karvelas: Is it just sticky, or is it a deal-breaker for you? Would you actually stand on the side with the coalition and vote this down?

Adam Bandt, Greens leader: Well, the question is, why is Labor prepared to let this whole thing fall over because they want to open new coal and gas mines?

Patricia Karvelas: And I’ll ask that to the minister.

Samantha Hawley: Because he argued, Adam Bandt, that that would actually push our emissions up, not bring them down.

Dr Frank Jotzo: Well, yes, I mean, a new industrial project of any kind using conventional technologies will tend to put push emissions up and new coal, oil and gas projects almost always result in some greenhouse gas emissions within Australia. Of course, the larger, much, much larger part of emissions that occur through new fossil fuel projects occur elsewhere. If that fossil fuel is for export, as the majority of Australian fossil fuel production is of course. And so that’s where it gets really complicated. And that’s the point about most climate policy actually applying to emissions within one country and not applying to emissions that are inherent in fossil fuels that are produced for export.

Samantha Hawley: Now the Greens, they’ve struck a deal and I want to unpack the details of that deal with you in just a moment and what that does mean for emissions. But briefly, we’ve got to explain again or remind me about the Government’s safeguard mechanism, what it originally hoped for. It’s that term the safeguard mechanism, I think, that turns people off. But just explain to me what it set out to do. What the government hopes to do with that.

Dr Frank Jotzo: Yes. And the government will get pretty much exactly what it set out to do with that mechanism.

Chris Bowen, Climate Change and Energy Minister: The opportunity before the Parliament over the coming weeks is either to seize the opportunity to reduce emissions by 205 million tonnes or to squander it. That’s what the Parliament has to opportunity to …

Dr Frank Jotzo: So safeguard mechanism covers the the largest emitting facilities in Australia. You’ve got the coal mines, oil and gas industry, cement, glass, steel, other other types of of heavy industry production. And they will have a carbon trading scheme within that sector.

Chris Bowen, Climate Change and Energy Minister: A lot of different industries, 215 different facilities, 84 of which are, you know, fossil fuel facilities. But many are different types of facilities with varying degrees of capability at the moment to reduce their emissions on site. Take cement, for example. It’s complicated and difficult.

Dr Frank Jotzo: Inherently, they will be required to become 5% more emissions effective or, you know, reduce the amount of emissions produced per unit of output by 5% per year. That’s pretty steep. Now all of these companies are allowed to trade with each other, so those that are doing better will be able to sell credits to those that don’t do as well. And it’s a financial transaction, of course. And out of that arises a very direct financial incentives to reduce emissions by as much as you can or in fact to reduce emissions by more than you require to and sell the surplus credits to others. And that’s precisely what you’re getting under emissions trading. So it’s a form of emissions trading where government doesn’t take any money.

Reporter: The Federal Government’s signature climate policy is set to pass through the Parliament with the support of the Greens. The bill, which reforms what’s known as the safeguard mechanism, is a major step …

Samantha Hawley: Let’s have a look now, Frank, at what the Greens have managed to change. You say it’s limited, but what have they managed to change in this safeguard mechanism?

Dr Frank Jotzo: So the deal with the Greens is that total emissions under the industry scheme shouldn’t rise and in fact need to fall over time irrespective of the link to the credit market. And so it will effectively limit the extent to which new heavily emitting industrial projects will be able to come into that mechanism. So what’s agreed is the intent to create a hard limit of emissions, but to leave it open just exactly how that will be achieved if and when it comes to the point where where something needs to be changed to rein in emissions.

Samantha Hawley: Okay. So just so I’ve got this straight, Frank, because it can get confusing. It’s pretty complicated. But under Labour’s initial plan, new coal and gas projects could open without restrictions because they could buy offsets or carbon credits. But now with this Greens deal, they will face a hard cap on the amount of emissions that they produce.

Dr Frank Jotzo: Yes that’s right.

Adam Bandt, Greens leader: It puts a limit on coal and gas expansion in this country.

Samantha Hawley: Adam Bandt says this is a huge win for the Greens because even though it won’t end new coal and gas projects, he says it will make about half of them unviable.

Adam Bandt, Greens leader: Our initial calculations, this means that the equivalent emissions from about half of those 116 projects is prevented. That means about half of those 116 projects won’t be able to go ahead..

Samantha Hawley: So how many gas and coal projects won’t go ahead, in your view?

Dr Frank Jotzo: Look, I think it’s really difficult to make definitive statements about these things. And of course, any of the political players will be claiming a huge win out of this. I think that’s to be expected. There is, of course, a list of of planned or anticipated or possible future coal, oil and gas projects. That list keeps getting expanded. But, you know, the historical experience is that only a fraction, often a small fraction of that long list ever comes to fruition. There will be some that that will be pushed to completion, but certainly not all of those projects on the list. And so any claim as to how many projects or how many million tonnes of fossil fuel, etcetera, etcetera will be prevented through the safeguard deal, also need to be seen with a big grain of salt in that light.

Samantha Hawley: Well it has the Opposition really worried. Peter Dutton and Ted O’Brien, the Opposition’s climate and energy spokesman, say that it will lead to higher prices for consumers.

Ted O’Brien, Shadow Minister for Climate Change and Energy: It will make the Australian economy weaker and the Australian people poorer. They’ll be seeing higher prices because of the plan that has been announced today.

Samantha Hawley: Anthony Albanese, of course says that’s totally untrue. So Frank, tell me who is right on that one.

Dr Frank Jotzo: Yeah. So first of all, the safeguard mechanism is designed principally as a revenue neutral mechanism. And so it’s really industrial players buying and selling credits from each other and spending some amount of money on improving their operations to be more emissions efficient. Right. And so in terms of the overall cost impost on Australian industry, that would overall be really quite low. And you know, the best measure you have of that is that the major industry associations are very clearly in favour of the policy. So it can’t be that bad, can it? In terms of cost impost, most of this is for export of course, in any case. And here it’s just a question of the amount of profit that companies are able to make. The Australian Safeguard Mechanism will not make a palpable difference to coal prices or to gas prices. These things are fundamentally determined in international markets and what we do in Australia by way of climate policy will really not move the needle very much at all on fossil fuel prices. And so any, any fear in that regard is really not well placed.

Samantha Hawley: So, Frank, the Greens didn’t get a blanket ban on new coal and gas, which is what they initially wanted. But we can see there are growing calls for that from the International Energy Agency, from the UN Secretary-General. They’re saying if we want to prevent the world warming by more than 1.5 degrees, we need OECD countries like Australia to stop developing these new projects.

Antonio Guterres, UN Secretary General: No new coal and the phasing out of coal by 2030 in OECD countries and 2040 in all other countries.

Samantha Hawley: So I think the big question here is will this number one, actually help us meet our target of 43% reduction by 2030? Will that mean we’ll meet it and will it prevent warming from exceeding 1.5 degrees? Two pretty big questions.

Dr Frank Jotzo: Yeah. So first of all, domestically will. Absolutely. A safeguard mechanism will help achieve the 43% domestic emissions reduction target. That’s what it’s designed to do. But it won’t guarantee it because it covers only, you know, a quarter or so of Australian emissions. And so a lot more will need to be done in electricity, in transport, in agriculture and the building sector and so forth. Now the bigger question. Global 1.5. degrees and so forth. And it’s absolutely correct. If we were to keep global temperature rise to 1.5 degrees, it would mean that there’s really no room for any expansion of coal, oil and gas globally anywhere, not just the developed country issue. It’s an issue for everyone. So yeah, if the world took 1.5 degrees seriously, then we would not see any new fossil fuel projects. And the fact that we are still seeing new fossil fuel projects tells you something about how seriously the world is taking 1.5.

Antonio Guterres, UN Secretary General: Humanity is on thin ice and that ice is melting fast. The rate of temperature rise in the last half century is the highest in 2000 years. Concentrations of carbon dioxide are at their highest in at least 2 million years. The climate time bomb is ticking.

Samantha Hawley: Dr. Frank Jotzo is an expert in environmental and climate change economics and a lead author of the UN’s latest climate change report. The government hopes to have the safeguard mechanism passed through the Parliament this week. This episode was produced by Flint Duxfield and Chris Dengate, who also did the mix. Our supervising producer is Stephen Smiley. I’m Sam Hawley. Thanks for listening.