Australia opposition eyeing voluntary CO2 cuts plan

SINGAPORE/CANBERRA (Reuters) - Australia's main opposition coalition, which has repeatedly blocked attempts to pass carbon trading laws, is eyeing a voluntary scheme based on buying up cheap offsets as a way to break the deadlock.

SINGAPORE/CANBERRA (Reuters) - Australia's main opposition coalition, which has repeatedly blocked attempts to pass carbon trading laws, is eyeing a voluntary scheme based on buying up cheap offsets as a way to break the deadlock.

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According to documents obtained by Reuters, the scheme, funded with public money, would buy carbon offsets from energy efficiency and forestry projects, among others.

The idea, crafted ahead of elections this year in which climate shift will be a big issue for voters, has sparked concern it will not drive deep emissions cuts by industry and risks putting too much pressure on the public purse as sole buyer.

The government of Prime Minister Kevin Rudd, who made a 2007 election promise to push for emissions trading to fight climate change, plans to reintroduce its package of carbon trading laws into the Senate after parliament resumes next week.

The package was agreed with the coalition of conservatives before a change of its leadership in December which hardened opposition to Rudd's preferred emissions system.

"We believe it's necessary for the parliament to consider this integrated proposal that we agreed ... with more than half the coalition last year," Rudd told local radio on Wednesday.

While his government has turned up the pressure on the opposition to deliver a viable alternative, the chances of Rudd's carbon pollution reduction scheme (CPRS) laws passing look slim after two rejections last year. The conservative opposition, Greens and two independents hold a majority in the Senate.

Analysts say much hinges on the content of a plan by new opposition leader Tony Abbott, to be announced before parliament resumes, and industry's reaction to gauge whether the government will win the bruising carbon trade debate.

"The real determinate as to what will happen to the CPRS policy comes down to how effective the government are in the next few months in their efforts to promote the CPRS," said Martijn Wilder, a leading climate change lawyer from Baker & McKenzie.

Also crucial was containing Abbott and his election-fighting mantra of "a great big new tax," he said.

The opposition says Rudd's mandatory trading scheme, which aims to put a price on every tonne of carbon emitted from 1,000 of Australia's top emitting companies and operations, is an unfair burden on industry and a costly tax for consumers.

The Greens, who control five key swing votes, say it won't lead to deep emissions cuts. They announced their own scheme last week based on a two-year fixed price of around A$20 a tonne of carbon from July 2010.


The opposition has been testing a number of ideas and soliciting feedback, with the offset fund seemingly a key focus.

According to confidential correspondence to the office of Greg Hunt, the shadow minister for climate change, some organizations have called for clarity on how the carbon fund scheme could be ramped up to force greater industry efficiency.

Feedback to Hunt's office also lays out worries about limited access to the international carbon market, and how to set a stronger price signal if Australia decides to take on a tougher emissions reduction target for 2020 and beyond.

"Nothing...I repeat nothing has been determined and there were hundreds of ideas considered and submitted and numerous requests for comments on possible ideas," Hunt told Reuters in response to emailed questions.

Wilder said the idea seemed similar to the previous Howard government's A$400 million Greenhouse Gas Abatement Program, which was criticized as ineffective in a 2008 government report because it failed to create sufficient offset projects.

"Hunt is reported to have been advocating setting up a large fund backed by government money to in effect buy voluntary emissions reductions from business," said Wilder.

"The idea is that you would start off buying reductions from the least cost areas," he said, such as energy efficiency and forestry and predicted a carbon price of A$10 to A$14 a tonne.

"It sounds very much like central planning," said Connell Burke, head of power trading for Westpac, adding it would be a wider tax on the economy because the government would have to pay for it somehow.

"I think the only advantage this scheme has is that the wider electricity prices are not increased and therefore it isn't a tax on the pricing of all power generators," he said.

(Editing by David Fox)