26 April 2010

Australia Shelves Emissions Trading Plan Until 2013

In what is the final act of a prolonged death spiral, the Rudd government has put off its proposed emissions trading scheme until at least 2013. From ABC News:

It was once a centrepiece of the Federal Government's election strategy, but now the emissions trading scheme (ETS) has been relegated to the shelf until at least 2013.

Delaying the scheme means the Government could save $2.5 billion from its budget over the next three years, because it would not be paying compensation to households and industries.

Prime Minister Kevin Rudd recently said climate change remained a fundamental economic, environmental and moral challenge, whether it was popular or not.

But Government sources say it was decided last week to remove the scheme from next month's budget, bowing to the political reality that the Senate is unlikely to pass the ETS any time soon.

The Upper House has already blocked the ETS legislation twice.

The bills are before the Parliament again but the Senate has delayed the debate while it examines the deal that Mr Rudd struck with former Opposition leader Malcolm Turnbull.

The bottom line is that neither the Opposition, now led by Tony Abbott, nor the Greens like the amended legislation, so it remains in limbo.

The targets set forth in the legislation could not have been met in any case, as I show in this paper (it has since been updated and is just about to be submitted), so perhaps the reprieve will enable a rethink. The Rudd government recently admitted that the bulk of the emissions reductions would have had to come from offsets. In any case a lot will happen between now and 2013, in Australian politics, but also with respect to other national climate policies and international negotiations.

I had an op-ed at ABC News on the ETS just last month in which I wrote:
Emissions reductions targets are offered up with little understanding of the implications for energy supply or the economy. Complex legislation is proposed that obscures the simple math of decarbonisation.

When push comes to shove no politician wants to impose economic discomfort on his or her constituents, so they look desperately for magical solutions. Emissions trading has provided that illusion up to now.

Australia, the United States and Japan, in particular are at a crossroads in climate policy. The decisions that they make at this juncture will shape climate policy around the world, leading up to the summit in Mexico at the end of the year and beyond.

Will they continue in pursuit of magical solutions? Or will they start fresh, with an approach grounded in the realities of the simple math of decarbonisation?

The success or failure of emissions reductions efforts depends on their answers.
Does Australia's step-back from the ETS represent a fresh start? Time will tell.