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Direct Action: Greg Hunt Releases Emissions Reduction Fund White Paper

The Minister for the Environment, Greg Hunt, has released the federal government’s Emissions Reduction Fund White Paper.


A White Paper is an official statement of government policy.

The White Paper sets out the government’s “direct action” policy and what Hunt says is a “cost effective, practical and simple approach to reduce our national emissions without a multi-billion dollar carbon tax”.

The Emissions Reduction Fund is the “centrepiece” of the government’s “efforts to tackle climate change”. Hunt says the government remains committed to the abolition of the carbon tax and a 5% reduction in emissions by 2020.

Legislation will be required to implement the White Paper policies. There is no certainty that the post-July Senate, particularly its Palmer United Party members, will support the legislation. Without their support, and assuming the ALP and the Greens vote against it, the legislation will be defeated.

Hunt’s 3pm announcement on the eve of the ANZAC Day public holiday was made whilst the Royal Tour dominated news from Canberra.

Media release from Greg Hunt, Minister for the Environment.

Emissions Reduction Fund White Paper released

The Government has today released the Emissions Reduction Fund White Paper, setting out a cost
effective, practical and simple approach to reduce our national emissions without a multi-billion
dollar carbon tax.

The White Paper sets out the final design for the Emissions Reduction Fund, the centrepiece of the Australian Government’s efforts to tackle climate change.

At the last election, Australians voted for removal of the carbon tax and a climate change policy that actually reduces emissions.

The Australian Government accepts the science of climate change and is firmly committed to reducing Australia’s emissions to meet its target of five per cent below 2000 levels by 2020.

Since the release of the Emissions Reduction Fund Green Paper, the abatement task has been revised down from 431 to 421 million tonnes of CO2 over the period to 2020.

The target will be achieved without a tax on families and small business. The Government has already introduced legislation to repeal the carbon tax.

The White Paper outlines the detailed design of the Emissions Reductions Fund, which has been developed following in-depth consultation with business and the community.

The design of the Emissions Reduction has been guided by three key design principles:

  • Lowest-cost emissions reductions: the Emissions Reduction Fund will identify and purchase emissions reductions at the lowest cost.
  • Genuine emissions reductions: the Emissions Reduction Fund will purchase emissions reductions that make a real and additional contribution to reducing Australia’s greenhouse gas emissions.
  • Streamlined administration: the Emissions Reduction Fund will make it easy for businesses to participate.

In designing the Emissions Reductions Fund, the Government has considered more than 290 submissions received on the Terms of Reference released in October 2013, and more than 340 on the Green Paper released in December 2013.

We have listened to business and the community and taken care to develop a streamlined approach to achieving emissions reductions that will help Australia meet its 2020 emissions target.

The Emissions Reduction Fund will help drive private sector investment to achieve emissions reductions. The important thing is that emissions reductions are real, measurable and additional to business as usual.

Since the Green Paper, the Government has taken major decisions on the three elements to the Emissions Reduction Fund – crediting, purchasing, safeguarding. These decisions are set out in the White Paper, including:

1. Crediting emissions reductions

  • The Government will leverage the experience of state and territory-based energy efficiency schemes by building on their methods as a model for the development of nationally applicable energy efficiency methods under the Emissions Reduction Fund.
  • Emissions reduction methods will be simplified and streamlined to support participation in the Emissions Reduction Fund. Emissions reduction methods set out the rules for estimating emissions reductions from different activities and will be developed in conjunction with business.
  • The Government will establish an Emissions Reduction Assurance Committee to provide independent, expert advice to ensure emissions reduction methods meet the integrity standards of the Emissions Reduction Fund and are delivering genuine emissions reductions. This will replace the existing Domestic Offsets Integrity Committee under the Carbon Farming Initiative.

2. Purchasing emissions reductions

  • In the Green Paper, the Government set out a commitment to the Emissions Reduction Fund of $300 million, $500 million and $750 million – totalling $1.55 billion – to the Emissions Reduction Fund over three years. In line with the Government’s long standing policy, the forward estimates commitment to the ERF will be $2.55 billion, with further funding to be considered in future budgets.
  • Removing barriers to aggregating emissions reductions by setting up standard arrangements for transferring rights from households and small businesses to a project aggregator.
  • As part of its ongoing consultation with business, prior to the first auction the Government will conduct a market assessment of projects proposed to be bid into the Fund by business to ensure the right contractual arrangements are in place.
  • Auctions will start in the second half of 2014 and will be run quarterly. This will provide regular opportunities for participation as new methods become available and more projects are approved. The Clean Energy Regulator will publish an indicative 12-month forward schedule of auctions.
  • The Clean Energy Regulator will publish the weighted average price awarded to successful projects after each auction to provide information to the market.

3. Safeguarding emissions reductions

  • The Emissions Reduction Fund’s safeguard mechanism will safeguard the value of funds spent under the Emissions Reduction Fund and create a stable and predictable policy landscape in which businesses can make new investments. It will commence on 1 July 2015.
  • The safeguard mechanism will apply at the facility level and will be restricted to facilities with direct emissions of 100 000 tonnes of CO2-e a year or more. This approach will limit the number of covered businesses to around 130.
  • The safeguard mechanism will not impose new mandatory reporting obligations on existing businesses. For current facilities, absolute emissions baselines will be set using existing data reported under the National Greenhouse and Energy Reporting Scheme.
  • The Government has not budgeted for any revenue from the safeguard mechanism.

Work has already begun to identify and prioritise opportunities to reduce emissions and on methods businesses will use to unlock emissions reduction opportunities in their operations.

I look forward to continue working with business and the community as we move towards implementation of the Emissions Reduction Fund.

The White Paper is available at

Media release from Adam Bandt, Greens member for Melbourne.

Direct Action White Paper ‘hip-pocket robbery’ strengthens Greens’ resolve

New detail about the Abbott government’s Direct Action plan has strengthened the Australian Greens’ resolve to protect communities from the fiscal and environmental damage it would inflict.

“Direct Action is a misnomer that’s so drastically inferior to our existing policies that it’s incredible the Abbott government would even try to push ahead with it,” said Greens Acting Leader, Adam Bandt MP.

“Tony Abbott kept this hip-pocket robbery quiet during the election, but now the cat is out of the bag. To fund this Direct Action sham, the government will come after pensioners and everyday Australians in the May Budget.

“The existing carbon price takes money from polluters and gives it to people. With its feeble White Paper, the Abbott government has confirmed it wants to do the opposite, taking money from everyday Australians and giving it to polluters.

“The Greens have said from the start that Direct Action is a dud. There’s nothing in the White Paper’s few paragraphs of new detail that makes us change our minds, and if Clive Palmer’s Senators maintain their resolve, this piece of greenwashing will never become a reality.

“Australians deserve a parliament that will support them in avoiding the worst impacts of climate change. Our jobs, our food security and our personal safety depends upon it.

“Direct Action is just a slogan. There was not a single economist in written submissions or testimony who supported Direct Action over the existing emissions trading scheme. Not Ross Garnaut, not Bernie Fraser, no one.”

Media release from the Australian Industry Group.

Direct Action Taking Shape, But A Piece Is Missing

“The release of the Emissions Reduction Fund White Paper brings Direct Action much closer to fruition, but it is increasingly clear that international abatement is needed to complete the policy,” Australian Industry Group Chief Executive Innes Willox said today.

“Industry needs some certainty about the climate policy framework, and greater clarity about the Government’s intentions is very helpful. In particular, we note that the Government has strongly committed both to reduce Australia’s emissions to at least 5 per cent below 2000 levels by 2020 – and to avoid penalising business for everyday activity.

“That is a big challenge, particularly with domestic business-as-usual emissions projected to rise to 17 per cent above 2000 levels by 2020.

“The best way to guarantee that the ERF can meet the target, stay within its budget and avoid imposing new red tape would be to expand the policy to include low-cost international carbon credits.

“Today’s White Paper brings welcome refinements, including a process to consider abatement contracts that run for longer and match better with commercial requirements; use of established emissions reduction methodologies from existing Commonwealth and State schemes; and confirmation that relatively few businesses will be exposed to the proposed safeguard mechanism.

“However, some concerns remain, including that the make-good requirement will make auction participation unattractive, and most seriously that the principle of least cost abatement cannot be met without taking advantage of international options.

“Passing the legislation needed to underpin Direct Action may not be easy. The Government will have a stronger case to put to the Senate if it makes further refinements. Most critically, it should set aside a part of the ERF to guarantee achievement of the target through purchase of international Certified Emissions Reductions. We estimate this would cost only 4% of the funding committed today. The Fund will be more likely to attract domestic participation if the Government is open to longer-term contracts and manages the risk of under-delivery itself.

“There is more work to be done before the ERF goes into action. We will continue to study the policy design and look forward to further constructive consultation, particularly on the safeguard mechanism that is proposed for 2015 and beyond,” Mr Willox said.

Media release from the Australian Conservation Foundation.

Direct Action plan not up to the task

The federal government’s Direct Action Plan white paper fails to set out a climate policy that is capable of cutting pollution to the extent required, the Australian Conservation Foundation said today.

The Emissions Reduction Fund white paper, the central plank of the government’s Direct Action climate plan, was released at 3pm on the day before Anzac Day.

A key plank of the policy, the ‘safeguard mechanism’, which is intended to stop companies cutting pollution in one area but increasing it in others above a baseline level, is not scheduled to be announced until one year into the scheme’s operation.

The document also indicates the allocated budget to deliver the Emissions Reduction Fund has been increased from $1.55 to $2.55 billion. This remains $450 million short of the government’s election commitment of $3 billion.

“Unfortunately this white paper confirms the government’s proposed plan for tackling climate change is not up to the task of cutting Australia’s pollution to the extent required to deal with the problem,” said ACF’s climate change program manager, Victoria McKenzie-McHarg.

“It’s one thing to offer a carrot to companies to cut pollution, but without a stick to stop them increasing pollution elsewhere this policy will do little good for our environment.

“The document released today does not give us confidence Direct Action could cut emissions by even 5 per cent, let alone higher targets recommended by scientists.

“It does not contain sufficient detail to give Senators certainty that Direct Action is an effective policy that could effectively replace Australia’s operational carbon price.

“It would be a disaster to get rid of a carbon price that is working and replace it with a scheme that gives no certainty it will reduce emissions.

“The new Senate will need to stand up for the public interest by insisting on an effective alternative climate change policy before scrapping the one we have.”

Media release from the Business Council of Australia.

Statement on Emissions Reduction Fund White Paper

The Business Council of Australia (BCA) welcomes the release of the Emissions Reduction Fund White Paper and the opportunity for further consultation on the design of the Australian Government’s policy.

“We are pleased to see a return to proper process in the design of Australia’s emissions reduction policy,” BCA Chief Executive Jennifer Westacott said.

“The BCA will review the White Paper in detail and consult with our members, but we welcome the opportunity for business to have input into the design of the government’s Direct Action policy.

“The proposed scheme has a number of important features such as the principle of lowest cost emissions reduction, keeping the door open on longer-term contracts and the commitment to minimising the compliance burden for industry by building on aspects of the existing institutional and reporting arrangements.

“The consultation process around safeguards is sensible and will allow time to consult to get the policy detail right.

“In its ongoing discussions the BCA will continue to advocate for access to a credible international permits system as it is the lowest cost option to meet the bipartisan commitment of reducing Australia’s emissions to at least 5 per cent below 2000 levels by 2020.

“The BCA is concerned about the inclusion of a make-good provision in the presence of an effective due diligence process. There should also be a renewed commitment at next week’s Environment Ministers meeting to removing duplicative state-based energy efficiency schemes.

“What remains essential as the first priority is to remove the carbon tax and remove the burden on business, and then focus on the design of the government’s emissions reduction policy.

“Getting the design of Australia’s emissions reduction policy right is vital if we are to underpin the competitiveness of the Australian economy, and the government’s commitment to further detailed consultation will be essential to this,” Ms Westacott said.

Media release from The Climate Institute.

Emissions Reduction Fund: no guarantee of emissions reductions

The Climate Institute today described the proposals outlined in the Emission Reduction Fund White Paper as a pollution reduction policy that fails to set a credible guarantee against ever increasing emissions.

“We welcome the release of greater details on the Government’s proposed policy but remain very concerned that the policy does not at all ensure that emissions will fall in line with those of other nations, or that it can help avoid dangerous climate change,” said Erwin Jackson, Deputy CEO of The Climate Institute.

“There are some positive improvements suggested in parts of the White Paper. These include extending actions to improve energy productivity beyond existing state energy schemes and recognition that some kind of absolute limit on emissions from major emitting sectors is needed.”

“We also welcome the Government’s decision not to tie its development of post-2020 emission targets to the review of the Emission Reduction Fund in late 2015.”

“But the fundamental challenge confronting the Government is that in the absence of credible policy, national emissions are projected to grow by 30 per cent by 2030.”

The Government supports the international goal of avoiding dangerous climate change of more than 2°C increase in global temperature, as reiterated by the Environment Minister on the 14th of April.

“If Australia is to drive new multi-billion dollar clean investments to levels consistent with avoiding very serious climate impacts, then total emission reductions to 2030 need to be around five billion tonnes. This is equivalent to eight years of annual emissions at current rates,” said Jackson.

“Taxpayer funds of $1.55 billion over the next few years, and possibly another $1 billion in the future, are not up to this task, particularly given the tight budget situation. Even using the most generous assumptions, the Government would need to be spending $3-$5 billion every year by the end of the next decade to achieve credible emission reduction goals.”

“Without a mechanism to ensure that major emitting companies do their bit in driving new clean technology investments, we risk our economy continuing to fall behind. The USA, China, the EU and other major economies are already implementing carbon pricing, regulations and renewable energy incentives and are in the process of developing plans for steep emission controls beyond 2020.”

Australia’s current legislation, with its system of flexible emission limits and carbon price, can achieve ambitious emission goals. From 2015 the laws would help reduce emissions by at least 15 per cent by 2020 and continue thereafter.

“While some positive improvements have been made, as it currently stands the Emission Reduction Fund will not be an enduring climate policy. It simply can’t meet the long-term challenge of climate change,” Jackson said.

“The Government has deferred key compliance decisions and is unclear on future spending commitments, while at the same time it intends to dismantle the current legislation.”

“In the absence of binding and declining pollution limits, the Government will need to strengthen the existing Renewable Energy Target to 30-40 percent by 2030 and slap new regulatory standards onto industries.”

Transcript of Greg Hunt’s press conference on the release of the Emissions Reduction Fund White Paper.

GREG HUNT: I’m delighted this afternoon to release the Government’s Emissions Reduction Fund White Paper. This is at agreed set of Government decisions on implementing the long-held government plan to reduce Australia’s emissions, to have an impact on and contribution to global action on climate change, but without a costly and ineffective carbon tax, a tax which was rejected by the Australian people, a tax which is costing Australian families in the coming year $550 on average through higher electricity and gas and grocery and other costs, and a tax which we are determined to repeal. Against that background, what this paper does, the Emissions Reduction Fund White Paper, is sets out the agreed design of the Government for the Emissions Reduction Fund.

So at the last election, Australians voted for removing the carbon tax, but for practical direct action in relation to reducing our emissions. I want to re-affirm today the Government’s clear strong support for the science underpinning climate change, recognition of the need for both domestic and global action, and our commitment to the five per cent target as we go forward.

I also want to note that since the green paper was released, the task of achieving that target has been reduced by approximately 10 million tonnes on the basis of a re-calculation of Australia’s Kyoto I period carry-over, so it’s now a task of 421 million tonnes.

We will achieve this target without a tax on families, without a tax on small business, without a tax on pensioners, and without a tax on Australia’s farmers. That’s what we’re proposing, and that’s what we will do. In particular, what the White Paper does is it sets out the detailed design as we go forward, based on three clear principles – first, lowest cost abatement. As has been long discussed, that means that we will hold an auction process to purchase genuine real emissions reduction.

Second, I use the word genuine very deliberately because we will be focused on genuine emissions reduction. What we will have through a clear process of an auction is a contract outcome where we agree with business or community or other providers of emissions reduction that we purchase the reductions. They have a contract to do that and we only pay on proof of delivery, and I think that’s very important for protecting the public monies.

Thirdly, it’s about streamlined administration. Instead of a complex system, we have a simple system. That is there’s an auction process, there’s a contract, and there’s a delivery. That’s how many Australians operate on every day rather than having to deal with complex bureaucracy.

We’ve had a long discussion with the public in relation to this. We of course set out the terms of reference and received more than 290 submissions. We set out a green paper which gave options, and today we’re making decisions. That green paper was subject to 340 odd submissions and responses from the public. So we have listened to the community, we’ve listened to business, and those responses are contained within the white paper today.

Very importantly, what the Emissions Reduction Fund will do is help drive private sector investment in practical actions such as cleaning up waste coal mine gas, cleaning up waste landfill gas, cleaning up methane, energy efficiency on a significant scale, whether it’s industrial, commercial or residential. We will look at cleaning up power stations, and, of course, ways of capturing carbon in the land sector, whether it’s through soil, through revegetation, re-forestation or other proposals that are put forward.

So against that background, I want to set out the decisions taken in the white paper since the green paper, decisions of the Government which we present as we go forward. So these are the formal design principles that have been agreed upon, and which we implement through the Emissions Reduction Fund. And there are three structures which underpin the Emissions Reduction Fund; there is a crediting process, a purchasing process, and then there’s a safeguarding mechanism.

In terms of the crediting process, the first of the decisions is that we will use State and Territory energy efficiency mechanisms and methods. We think that that is a very sensible, simple way to go forward, and I’ll be discussing that with State colleagues. It means that we don’t have to re-invent the wheel, and I think that that’s extremely important.

Secondly, and taking that principle of using State systems, we are simplifying the process and streamlining the process going forward, as we develop our methods for measuring emissions reduction. What’s that mean? Let me give you an example. We are developing a general facilities method to be applied across industrial emissions throughout Australia, as well as focusing on the major areas, whether it’s waste coal mine gas, whether it’s landfill gas, whether it’s re-forestation harvest methods or soil carbon methods.

We are also establishing an Emissions Reduction Assurance Committee to make sure that emissions are real and genuine. This will be the successor of the Domestic Offsets Integrity Committee which deals with just land-based and land sector emissions.

What the Emissions Reductions Assurance Committee will do is deal with emissions right across the economy, and look at ways to make sure that all of the available options are being used, and to make sure that any proposals put forward have absolutely robust methods and most particularly, that emissions proposed are actually delivered and that they are genuine.

The second of our categories is in relation to purchasing of emissions reduction. As everybody here would know, during the election campaign, we set out $1.55 billion in the forward estimates – that was for the first three years of the forward estimates. Today I want to announce that exactly in line with our long-held policy, the additional billion dollars which we set out in 2010 will be delivered in this Budget.

So it will be $2.55 billion, which is set down in this Budget as part of the forward estimates. There are no surprises there. That is what we said four years ago, and that is what we are delivering now. That is a very big vote of confidence for business. It’s a way of ensuring in a difficult Budget time that we are delivering what we said four years ago, and three years ago, and two years ago, and a year ago.

I think it is a sign not just of the commitment of the Cabinet and the Government, but also that the program we set out a long time ago remains exactly the program we are delivering now. The second of the decisions with regards to purchasing is we want to support aggregation. We want to encourage the bringing together, to make it easy, of whether it’s farm projects or energy efficiency projects, so we will be removing barriers to aggregation.

It is a great way to get low-cost emissions in a simple approach. Thirdly, there will be a market assessment over the coming months to work with business, to ensure that they are happy with the contracting arrangements proposed.

And then in addition, auctions will start just as we said in the second half of 2014, and the Clean Energy Regulator will carry out those auctions to purchase the lowest cost genuine emissions reductions and from that contracts will be struck and payment will be made on delivery. The Clean Energy Regulator will carry out those auctions. In addition, the Regulator will also publish the weighted average or the average cost of emissions from each of the auctions.

So we want to be very clear with the public, they can see where their money is being spent and how it is being spent, and what is the average cost of those emissions. Now we then turn to the safeguarding of emissions reduction. The decision that has been taken after consultation with business and which was foreshadowed in the green paper is that the safeguarding process will commence on 1st July 2015, so we have a two-stage process.

We begin the process of purchasing emissions reduction this year after the Budget in the first half of the financial year, and we begin the safeguarding mechanism as of 1st July 2015. The safeguard mechanism will apply to firms and facilities that emit greater than 100,000 tonnes of emissions a year.

So that’s the benchmark which we’ve set, after a discussion with industry, it’s likely to apply to approximately 130 firms or facilities across the economy. And then in addition to that, the safeguard mechanism will not impose any new mandatory reporting obligations. We use the existing structures.

We use the existing Clean Energy Regulator, the existing energy reporting scheme, known as NGERs, and we use the Carbon Farming Initiative so we’re using existing architecture, we don’t have to re-invent things.

And then finally, we are not budgeting a dollar of revenue from the safeguarding mechanism. So what we see today is the commitment of the additional billion dollars to the four years of the forward estimates, as we foreshadowed, but now we are looking at four years of forward estimates, not just the three which were available to us for the first three years of the Emissions Reduction Fund, the full amount of funding is there and additional funding will be considered in future budgets.

But we are not budgeting for a dollar of revenue. So at the end of the day, what’s this about? Practical ways of reducing emissions where every dollar is spent on actually purchasing real means of decreasing Australia’s overall emissions. It’s without a carbon tax. We are
committed and we will not stop until we repeal the carbon tax, and we are committed and we will not stop until we’ve implemented the Emissions Reduction Fund.

JOURNALIST: What’s the implicit carbon price in Direct Action?

HUNT: Well, firstly, we are clearly and absolutely committed to our targets. Secondly, we’ll of course wait to see what the market delivers. This is a market-based auction process. So, for commercial reasons you wouldn’t want me to…

JOURNALIST: Shouldn’t the carbon price be above what the carbon price…

HUNT: For commercial reasons you wouldn’t want me to pre-empt that outcome, but we are committed to achieving the target, and I do want to draw a distinction here because you’re asking about a carbon price. We’re abolishing the carbon tax. And the carbon tax, of course…

JOURNALIST: But there is an explicit carbon price in everything you do. If you’re trying to exact a result, there has to be a price attached to it. What is the implicit carbon price in what you’re presenting here?

HUNT: There is often confusion here, with respect, between two different things. A carbon price which is the price you pay to emit carbon. And across the country, everybody now is paying a carbon tax of $24.15, and if the Labor Party has their way and continues to block repeal of the carbon tax, then that would be $25.40, and that’s covering, roughly, 300 million tonnes of the economy.

What we’re doing is just focusing on the abatement price, of buying back the gap, of buying back what’s needed, and we’re obviously not going to put a dollar figure on that because this is a commercial process we’re entering into through an auction, and we wouldn’t want to pre-empt the auction outcome.

But the really important point here is the carbon tax taxes all the electricity in the economy, by trying to force down demand, by causing pain for pensioners and small businesses and family and industry. We’re not doing that. What we are doing is focusing on incentives for action, and we do that on the lowest cost basis.


JOURNALIST: Two questions if I may. The first one. Your compliance mechanism, your safeguard mechanism, you say it applies to about 130 firms and about 50% of emissions. How can you be sure, then, that you’re not paying for emission reductions over here with the reduction fund and then the other 50% of the emissions in the country aren’t going up over there because there is no safeguard on them at all?

And the second question is about the length of contracts. You’ve said your preference is still for five years, but you will have a look at – you’ll do some market assessment as you go about it. Danny Price, our own adviser and a lot of other people have said you need contracts of up
to 15 years. Is that possible under this scheme? Are you thinking about 15-year contracts, and if not, why not?

HUNT: Sure. So, safeguards and contracts. In terms of the safeguards mechanism, what that does is that puts in place a means of insuring that we don’t have rogue action and spikes from particular firms. The way this operates, of course, is we have presumed that the economy will grow, and we want the economy to grow, and we have actually presumed in our figures the worst case on emissions, or the highest emissions growth.

The advice from the department is that we have taken a conservative bias on that. It may well be, given that our emissions are come down from 431 to 421 in terms of the gap we have to close, that the gap reduces still further. Having said that, we expect the economy to grow and we’ve taken the worst case in terms of our emissions as our base here, anything less than the worse case actually means our job is easier.

There is a very good chance that things will be better than we have proposed or there will be fewer emissions than we’re setting out here, but we’re budgeting for the worst case which includes the maximum growth in the economy elsewhere.

In terms of contract lengths, we have set out a preference for five years, but there is also the market-testing process to indicate whether or not other terms would be needed and required, and that’s very specifically set out as a point of flexibility. So we’ve set out a preference; we will test it through the market testing process.

JOURNALIST: But is 15 years possible?

HUNT: Look, I won’t put other time frames on at this stage. We’ve set out the preference, but there is a market testing process for discussion with business and the broader community.

JOURNALIST: Are you going to introduce any sort of legislation to set up the ERF and if not, why not. Just sort of trying to understand how…

HUNT: Sure.

JOURNALIST: …the CER might be able to hold auctions later in the year. If the carbon pricing mechanism hasn’t been repealed, will this be subjected to parliamentary scrutiny?

HUNT: Sure, of course, there is parliamentary scrutiny. Firstly, we’re releasing the white paper today. Secondly, there has already been a pre-emptive Senate inquiry, but thirdly, the funding, as we have long said and indeed was evident from our inclusion in the mid-year economic forecasts, will be part of the Budget appropriations. That’s the ordinary, normal course of the things to do, and it’s in fact what you would expect us to do.

JOURNALIST: (Inaudible) …legislation?

HUNT: Secondly, what we are looking at is a clear preference for legislation, that we will provide a draft set of additional legislation. The funding will come through the Budget. Our preference is to have legislation, and we will be releasing that.

We have a mandate from the Australian people to repeal the carbon tax and I just want to repeat, we will not stop until that is done, and we have a mandate to implement the Emissions Reduction Fund, so we will be putting forward draft legislation in the coming weeks on the enabling and assisting features.

JOURNALIST: Just, are you implying there, though, that you think that you could do something in regulatory terms without having to go through the Parliament if you can’t get this through what is a very hostile Senate?

HUNT: I’m setting out our first and primary course of action.


JOURNALIST: Some businesses say that they don’t see incentives strong enough to participate in the ERF reverse auctions, partly because of the short-term contracts that Lenore was talking about, and also because especially in the first change of options, they don’t know what the benchmark auction price is going to be because you’re doing it after they take place. So why would a business decide to participate with those conditions?

HUNT: Well, I have to say we already have a very strong pipeline of business interest. So to give you examples by category but obviously not by firm, we have firms with waste coal mine gas reduction, firms with waste landfill gas reduction, we’ve had had firms in the energy efficiency space.

We have great interest from a number of the State Governments who, of course, have the ability to revegetate or reforest marginal State lands which are not effectively being productive at the moment. We have interest from power stations with regards to cleaning up their activities in certain places.

So there is a significant pipeline of interest which has already been shown. We will have the market-testing process just to examine what is effectively an expression of interest with regards to the willingness of business to participate, but I am not just confident, I am exceptionally committed to and completely confident that we will achieve our emissions targets, that we will achieve our reductions, and the Emissions Reduction Fund is the primary vehicle for doing that.

JOURNALIST: Minister, can you…

HUNT: So, I’ll just finish with Joanna.

JOURNALIST: (Inaudible) …compulsory about the ERF, what are you going to do if you don’t get a sufficient level of interest and it looks like you’re not going to make the emissions reduction targets because of that?

HUNT: All the signs are that we’ll not just achieve our targets but we’ll do it easily, on the basis of early indications from business in the community.

JOURNALIST: Minister, can you explain how aggregating emissions reductions would work and what that could mean in practice for households and small business?

HUNT: Sure. Let me give you an example. Let’s say a power company and a building company get together. They might work with 100,000 households, they might work with 1000 commercial premises and 100 industrial premises. They could put forward a million tonnes of emissions reduction or abatement a year, and so they could bring that emissions reduction together, rather than an individual household trying to participate.

You could have a Mirvac or an Energy Australia that brings together all of those savings and they say, we’ll provide a million tonnes a year. The contract price which they might put forward, and this is just a hypothetical, could be at $8 per tonne of abatement over 5 years and then, they will be paid on delivery. And so this is where the use of the State energy efficiency methods becomes very, very valuable, because we’ve already got in place well understood methodologies, we don’t have to reinvent them, and an aggregator could also work in the farm sector.

You could have somebody who brings together 100 different farms where they’re offering to make savings and emissions through revegetation or reforestation of marginal lands which they’re effectively decommissioning, which is why we’ve put a lot of work over the last six months into developing methodologies for the farm sector.


HUNT: One, two.

JOURNALIST: Minister, can I take you to the safeguard mechanism stuff. You say you’re not- haven’t budgeted for any revenue…

HUNT: Correct.

JOURNALIST: …to raise from it, but what exactly is going to be the stick for business if they do go over their abatement? You talk about having this flexible compliance stuff, and you haven’t finalised it yet, but what exactly is the stick?

HUNT: Sure. So over the next 12 months, stage one begins with the purchasing – so the crediting and the purchasing, so the actual Emissions Reduction Fund activity. And then as of the 1 July 2015 we bring in place the safeguard mechanism.

We’re using the time between now and then to establish and agree with business the parameters. The preferred model, which we’ve set out, is to look at their long-term emissions, and to look at, potentially, the highest point in the last five years, and if they start to – if they breach that, then that may then be the cause for discussion or activity.

But I’m not setting out a compliance mechanism today. That will be determined within the second stage. Today what we’re setting out is the clear parameters, what we’ll be introducing for 1st July and onwards of this year, and the steps we’re taking with regards to developing and completing the safeguard mechanism with business over the coming year.

But we don’t seek to raise any revenue, and my hope in fact is not to raise a dollar of revenue, and we’re not budgeting a dollar of revenue, which of course in a tight Budget is the real test of our intent.

JOURNALIST: You may be not budgeting, but is there going to be provision for financial penalties?

HUNT: Look it is likely that there will be provision, always we’ve said that. But our expectation and our design, and our approach with business is not to seek any revenue, and this is not a revenue-raising mechanism. And the test of that, as I say, in a very tight budget environment, is there will be a figure of zero in the Budget.


JOURNALIST: So that was my question, too, but another one: Is there any scope to go beyond five per cent at a later date under this policy, because five per cent isn’t going to do a whole lot.

HUNT: Look, five per cent is an important step, and when you look at it on a like-for-like basis with other countries, you see that it is actually a very significant contribution because, of course, since 1990, not just 2000, our emissions have barely changed. We are fractionally above where we were in 1990 despite a very significant growth in population and the economy. So over a 30-year period, not just a 20-year period, what we will see is a very significant reduction in emissions per capita, and emissions intensity for the economy.

Now, in terms of going forwards, the white paper expressly sets out that during the course of 2015, as we approach the Paris International Climate Conference, we’ll review our targets going forward, both in the period to and following 2020. I don’t want to pre-empt any of that.

It will be based on strong, comparable international action by the major economies of the world. So our commitment is to the five per cent, nothing has changed on this front, no surprises, exactly the same process as we’ve set out, and it’s the five per cent with a review in 2015. But the key test there is strong, comparable action by the major economies.


JOURNALIST: You will introduce legislation which you would hope to get through when, by when? But if you have to go by regulation, or by other mechanisms, how difficult will that be? And secondly, have you made any approach to try to have some discussions with Clive Palmer and explain your position more?

HUNT: Sure. Well, let me actually jump to the second and then I will come to the first in terms the crossbenchers and then legislation. Actually, just 45 minutes ago I casually bumped into Mr Palmer and we actually had a very, very friendly conversation. And what we agreed was to catch up in the coming weeks, and he was very keen to read the paper. I will let him speak for himself, but we historically have a very good relationship, and I am hopeful that we’ll have very constructive discussions.

I respect all of the crossbenchers, both in the House and in the Senate, and we’ll be writing now to all of the crossbenchers offering to meet, and to discuss the carbon tax repeal and the white paper with them. And I am confident that we will be able to both repeal the carbon tax, and to pass the funding and any enabling legislation for the Emissions Reduction Fund.

Now in terms of the legislation, as we go forwards that will be released within the coming weeks, it will be given as an exposure draft for comment, and then we’ll introduce it during the Budget sittings, and seek to pass it quickly.

JOURNALIST: Can I ask you just a couple of detail questions?

HUNT: Sure.

JOURNALIST: If I’m reading page 43 correctly, it looks like you will be releasing a benchmark price before the auction starts, is that right?


JOURNALIST: But if that’s the case, can I ask do you envisage that being above or below $25.40? And on page 15 why is it that there’s a sudden spike at 2014 for the benchmark for the business-as-usual emissions for 2014? Are you – is this a fudge to make the task look harder?

HUNT: No. So, look those are the figures developed by the department independently. I’ve got to say, the modelling capacity in the department is outstanding, and that’s been their, been their estimate of emissions.

JOURNALIST: (Inaudible question).

HUNT: No, it’s the estimate of the emissions. The second- and I would add this, that what we may well see over the coming years because of the loss of international support for some of our manufacturing is a drop in emissions below what we’ve budgeted here. But I’ve always
approached this, and the department has approached it with a conservative bias, to presume and budget for the worst-case scenario.

Now, in terms of the benchmark price, the practise going forward is that the clean energy regulator will publish the weighted average at the end of each auction. The Clean Energy Regulator will effectively hold a reserve price or a benchmark price beyond which they won’t buy, and then in any one auction they’ll reserve the right to purchase up to 80 per cent of the bids.

With regards to the first auction, the Regulator will have the discretion as to whether she will publish a benchmark price, so I won’t pre-empt the Regulator’s decision.

JOURNALIST: (Inaudible)…about $25.40 above or below?

HUNT: I certainly would not speculate on the price, because it’s a commercial auction process and that wouldn’t be a responsible thing.

JOURNALIST: (Inaudible) …situation when the argument has been that an effect by the carbon price or a carbon tax of $25.40 or less, wouldn’t it be – isn’t it critical to the whole political argument whether this is above or below $25.40?

HUNT: No, it’s not, for a reason. And, again, this goes back to the initial question and the mistake which the Labor Party makes, and I can understand any confusion in the community, the Labor Party talks about a price on carbon without acknowledging that it’s effectively a tax right across the economy, and that’s effectively a $7.6 billion scheme in its first year, which is why it’s dealing with over 300 million tonnes of emissions.

What we’re focusing on is a much smaller part of the economy. We’re focusing on the reduction tasks. So to give you a water example, it’s the difference between taxing all water use, adding a 10 per cent tax to water use, or water buybacks which just focus on the gap.

We’re only focusing on the gap, and so a way to think of it is this, because it’s as if the Labor Party wants to pretend that everything is the same here. Over a four year period, if you look at the first three years of the tax with fixed price and then what might be the case in the fourth year, using their modelling, you’re looking at a $30 billion tax. Over our first four years, you’re looking at $2.55 billion.

So $30 billion versus $2.55 billion, that’s the difference to the economy. It’s…

JOURNALIST: So we could expect the price to be much, much more than $25.40?

HUNT: No, that’s a completely false statement. I’m actually…

JOURNALIST: Well what’s a correct statement?

HUNT: A correct statement is our system will be a $2.55 billion system over the first four years as opposed to a $30 billion tax. The presumption you make, with great respect, is, however, false. It doesn’t deem anyway – all of the signs are that we’ll be able to achieve our purchasing at a very low cost per tonne, but I won’t speculate on an individual price when we’re going into a competitive auction.

JOURNALIST: Let’s talk about the – you do a section here on page 57, which suggests that a separate approach may be preferable in applying a safeguard mechanism to the electricity sector. Now it’s a submission suggestion to the green paper.

HUNT: It was a submission, yeah.

JOURNALIST: Yeah, it was. Yeah. Given that significance of the electricity sector as the largest source of emissions in the country, wouldn’t it be pertinent for the success in the future of this scheme to ensure that that sector does have a strong safeguard to ensure that it doesn’t continue to grow as you say the economy could emissions go up?

HUNT: Electricity is fully and utterly part of the Emissions Reduction Fund, it’s just as we go forward, we’re identifying the fact that we’ll work with each of the sectors in relation to the appropriate safeguard mechanisms.

JOURNALIST: (Inaudible).

HUNT: Sorry, I’ll just speak to…

JOURNALIST: I understand that it could be split from the rest of the economy and the design of the ERF, can you guarantee here today that there will be strong safeguards to ensure that these massive emissions generating sectors will not be able to just release as much as they want?

HUNT: Yes. The electricity sector is within the Emissions Reduction Fund, it will remain within the Emissions Reduction Fund, and will be covered by the safeguards mechanism.

JOURNALIST: You’ve spoken about the review, whatever targets it comes up with, it seems pretty obvious that this 5 per cent target won’t be the end of the story for Australia’s emissions reduction forever, and lots of people and lots of studies have questioned whether this approach can be scaled up for higher emissions reductions down the track in the future.

Do you think it can be? Is this model the model that you pursue right out into the future or would you think about other mechanisms after 2020?

HUNT: Yes, I do think it will last the test of time. You only need to look at a lot of the hype around the carbon tax to realise that in the end, they went through multiple systems in a short number of years. They made 10 changes within the first year. It was never going to be a stable system.

You have to have something which can work in the real world economy, and if you’re substituting a system which is about incentives for one which was about a punitive tax, that does have a durability. And my belief and my expectation is that this is for the long term. It’s a system which we’ve set out until at least 2020.

But my belief and expectation is that this is a system which was designed to be flexible, to deal with changing international circumstances, and which has the capacity to last for a very, very long period.

JOURNALIST: And it will be more affordable to be able to do much more post-2020 using this method, in your view?

HUNT: Correct.

JOURNALIST: Could I just…

HUNT: Sorry, I’ve got – up the back?

JOURNALIST: So, you mention that what you’re focusing on is targeting the gap. This 421 million tonnes of…

HUNT: Correct.

JOURNALIST: …carbon emissions. So if you put aside $2.55 billion for the Emissions Reduction Fund and you’re paying for 421 million tonnes of CO2 to be removed, I guess, aren’t you effectively paying these companies $6.05 per tonne over a five year period?

HUNT: Well, I think the other thing there, of course, is when you look at the white paper, it says that there will be additional funds considered for the later years between now and 2020 in subsequent budgets. And so I am not just confident but, as I say, completely committed to achieving our targets and we will achieve our targets.


JOURNALIST: (Inaudible question).

HUNT: Sorry.

JOURNALIST: What role do you see the recycling centre playing in the…?

HUNT: Actually, I’m very hopeful. We’ve had good discussions with the recycling sector.

To put all of this in practical terms, where do you reduce emissions in Australia? Because that was never answered under the carbon tax. They talked about power stations and other things, but then gave $5.5 billion to Victoria’s brown coal power stations. They effectively gave what’s potentially the largest transfer in Australian history from the government to one sector whilst talking down that sector.

What we’re proposing is in areas such as recycling, in areas such as cleaning up power stations or energy efficiency, actually going and reducing emissions and only paying for those emissions. Now, there’s a reference in the findings to alternative waste technology and the fact that it’s – there are crediting mechanisms there, which we are developing as we speak.

I’ve also met with the landfill sector about their potential to participate in the Emissions Reduction Fund, and there’s even a technical working group on this area. So that means the firms are coming together and people are developing proposals as we speak, not just in recycling but in the land sector, in the energy sector, in the energy efficiency sector, in the methane capture sector, in the coal mining sector, and elsewhere.

JOURNALIST: (Inaudible) the 100,000 tonnes of greenhouse gas threshold. That’s half what applies, as I understand, I think, under the carbon pricing mechanism.

HUNT: No, that’s a 25,000-tonne threshold.

JOURNALIST: Whatever. A hundred and thirty companies are covered. I would imagine that would cover most electricity generators, steel producers, aluminium producers. But about 200 companies that are paying the carbon price right now would be allowed to then pollute freely unless they choose not to. Correct?

HUNT: Well, what happens is that remember, we are abolishing the carbon tax. Let’s be absolutely clear, we went to the election to seek to abolish the carbon tax because it’s expensive and it doesn’t do the job. And so that is an absolutely crystal clear commitment, and under us there is no carbon tax and we’re not imposing a tax on businesses.

What we’re looking at here is what are the areas that are covered? And what you find is when you move from a 25,000 to 100,000 tonne threshold, it reduces the number of firms that are covered significantly, but it doesn’t reduce the volume in a significant manner because the vast volumes are covered by the 130 firms.


JOURNALIST: One of your backbenchers, George Christensen, is expressing his doubts about human-caused climate change. Are there people, do you think, in the Coalition who want direct action to fail?

HUNT: No, I don’t believe anybody would want this to do anything other than succeed. Look, some folks have their views on this, and they do in the Labor Party, and right across the country. Of course many people were of the view that behind the scenes Martin Ferguson and Simon Crean had expressed their doubts over the years. I’m not, the government’s not, the country is committed, the government is committed, and the test of that is with the additional funding provided today – that’s an additional billion dollars. That’s a pretty big vote of confidence.


JOURNALIST: Minister, I…

JOURNALIST: Does this mean that they’re not given enough education about the science behind climate change, perhaps?

HUNT: No, it means we live in a democracy.


JOURNALIST: Could I take you back to the administration of this? If you can’t get that legislation through, are you confident that you have the powers and the mechanisms to put this into effect? And would it be open to any sort of challenge?

HUNT: I am confident that we can get the legislation through, and I look forward to working with all of the crossbenchers and making contact directly with them, having made contact with a number of them so far. But let me also say this – that my view is that we will be implementing the Emissions Reduction Fund, and we won’t stop until it’s done.

JOURNALIST: Regardless of legislation?

HUNT: And I won’t speculate on the other mechanisms, but I am extremely confident that under every circumstance we will implement the ERF, and we will be able to implement the ERF.


JOURNALIST: Won’t you need legislation to establish the baselines, for instance. Can you do that by regulation?

HUNT: Look I’m respectfully not going to contemplate other alternatives.

JOURNALIST: But that’s a key part of the…

HUNT: Look, I’m respectfully not going to contemplate other alternatives. Our preference, our clear preference is to legislate, and we will be releasing draft legislation in the coming weeks for consultation. But right now I am very confident that this will be the policy that takes Australia forward and reduces our emissions without a carbon tax.

Up the back?

JOURNALIST: You just mentioned that…

HUNT: And then I’ll take two more and I think…

JOURNALIST: …large projects will be able to enter out of auction contracts with the government. Will that include aggregated projects such as multiple coal mines working together in a consortium?

HUNT: So what that provision sets out is the capacity for bids of over 250,000 tonnes of abatement or emissions reduction a year over a number of years to be considered out of sessions. And particularly we’re also looking at States.

A number of the States, and I’ll let them speak for themselves, have expressed significant interest in providing major emissions reductions, and it will be up to the Clean Energy Regulator to determine whether or not she enters into any of those discussions for the extremely large abatement projects.

JOURNALIST: Do you think that the Clean Energy Finance Corporation could work hand-in-hand with your Direct Action program?

HUNT: Look we have a policy of abolishing it, and that legislation has been reintroduced to the parliament. So our proposal is to abolish and disband it. And…

JOURNALIST: Would you – put it this way: do you believe the evidence that the Chief Executive put forward that they could actually turn a profit with the money that’s put through the CEFC?

HUNT: Look I won’t comment on figures that are within Joe Hockey’s portfolio. I will say that our plan, our policy, and our commitment, as expressed in legislation, which has now been reintroduced to the parliament for the second time, is to abolish it.

JOURNALIST: You said that you think power stations, for instance, might be eager to do some sort of cleaning up of their emissions.

HUNT: Yes.

JOURNALIST: Could they do that on a five-year contract?

HUNT: Look we will look at that through the market testing process, but I’ve actually had early signs that there is the very real potential for that sort of change in that sort of period. Individual firms will make their own decisions. And I’ll take one last question.

JOURNALIST: The integrity of these emissions reductions, these projects, is absolutely critical to this scheme…

HUNT: Absolutely.

JOURNALIST: …working and being respected, but you’re replacing the current committee of scientists that advise on that. I’m wondering why – are you unhappy with the advice they’re getting or would they be staying in part of your new- why are you replacing them?

HUNT: No it’s – what’s happening is that the Domestic Offsets Integrity Committee – which I think does a tremendous job – is only land sector focused. So there will be members kept, and I believe we’ve got a tremendous chair of that, and there will be continuity between some of the membership.

Beyond that as well what we have to do is realise that for the first time, a body which has been an agricultural body, will now have to deal with industrial emissions, with the electricity sector, with energy efficiency, so we need a range of additional skills. And so this is going to be a body of hard technical capabilities.

JOURNALIST: And it will cover the CFI as well as…

HUNT: CFI plus.

JOURNALIST: …a whole lot.

HUNT: Correct.


HUNT: Alright. Look thank you very much, I appreciate it.

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Malcolm Farnsworth
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