Is it OK to just write a cheque?

Polluters' blank cheque

• Guy Pearse
• March 30, 2009

Real cuts in emissions are impossible under the Federal Government's scheme.

IMAGINE the scene — you have had a bad day at work, the kids have the flu, and you have just got some nuisance caller off the phone. There's a knock on the door. "Hi, I'm from Alcoa," says a slickly dressed man with a Texan drawl. "We're wonderin' whether you'd care to give us and our fellow emission intensive trade exposed companies $500 a year until 2020 and beyond so we can have free emission permits?" You slam the door in his face.

Then there's another knock on the door, similar bloke with an Oxbridge accent. "I'm from International Power," he says. "Terribly sorry, old chap, but coal-fired power stations will be worth less once emissions trading comes in, so generators are charging all households a once-off fee of $455 to maintain their value for our shareholders." You tell him where to stick his bill.

Then there's yet another knock on the door. "Yah, hi thar," he says with a bitzer foreign accent — Swiss maybe, with some South African speckled through it. 'We're from the Xstrata, and we'd like some cheques from you for the coal industry:

$93 to cushion us from the impact of emissions trading; $62 for new infrastructure to double coal exports; and $62 for work on 'clean coal technology' — $220 all up should cover it for now." You threaten to call the police unless he leaves the property.

Big polluters knew better than to knock on our doors — they knocked on Kevin Rudd's door instead and got a very different reception. Unbeknown to most households, Rudd effectively agreed to write all these cheques and more. His so-called carbon pollution reduction scheme asked the biggest emitting industries to pay for, on average, just one in every five tonnes of their greenhouse pollution — the rest of us would pay for the other four. By 2020, 45 per cent of emissions would be given away free to the worst offenders, maybe more. This makes it mathematically impossible to make deep cuts in greenhouse pollution in Australia, and the Prime Minister's promise of a "blueprint for reducing carbon pollution at home", becomes undeliverable.

The only way of concealing this is to outsource Australia's emission reductions en masse — paying other countries to reduce emissions on our behalf. That's why Rudd's white paper on emissions trading placed no limit whatsoever on how many emission permits and credits generated overseas could be used in place of emission cuts in Australia. One hundred per cent of Australia's emission cuts could be made overseas just as long as outsourcing options are cheap and plentiful. And they will be.

The carbon trade is likely to be dominated by cheap "biocarbon" measures — especially deals in which developing countries pledge not to log rainforests in return for Western polluters getting credit for the carbon emissions prevented. This "reduced emissions from deforestation and degradation" (REDD) could cost as little as

$US1 per tonne of carbon dioxide, and it is plentiful: deforestation accounts for about 20 per cent of global emissions; around three times Australia's annual emissions in PNG and Indonesia alone.

Climate Change Minister Penny Wong has effectively conceded that because the Government proposes no limit on outsourcing emission cuts, actual greenhouse pollution in Australia might not fall irrespective of what 2020 target Australia adopts. After all, if all the cuts can be outsourced cheaply, what comes out of smokestacks and tailpipes here need not change, whether we have a 5 per cent target or a 40 per cent target. Like our manufacturing, our call centres and so much more, it can all be outsourced to developing countries.

The most obvious difficulty with hiding pollution in the rainforests of our near neighbours is being sure the deforestation has been avoided rather than merely shifted. There's no real guarantee the carbon is stored permanently. Moreover, if cheap carbon storage in forests is done instead of cutting emissions, that enables industries to continue on their merry way and delays the hard task of cutting actual greenhouse pollution by another couple of decades.

It's deja vu. John Howard relied on avoided deforestation, mostly in Queensland, to argue that Australia was on target to meet its Kyoto Protocol target even while actual greenhouse pollution rose by more than a third.

Kevin Rudd, with encouragement from Ross Garnaut, plans something similar on a much grander scale. Treasury modelling suggests that even if only 50 per cent of our international obligations are outsourced, actual emissions in 2050 will be roughly what they were in 1990 — about 400 million to 425 million tonnes.

By again hiding the problem in a forest, Australia will claim to be "on track" to meet its Copenhagen targets without cutting its actual greenhouse pollution. Meanwhile, our biggest contribution to climate change — black coal exports — will be conveniently ignored. These exports are on track to generate 1.2 billion tonnes of carbon dioxide annually by 2030 — rivalling the current carbon footprint of Saudi Arabian oil. That coal won't be used cleanly either. Treasury's modelling suggests that "clean coal" technology won't be deployed in Australia until 2033, let alone in our export markets or other developing countries. Protecting Australia's carbon lobby will become harder and harder to get away with.

Now imagine this scene: mayors from the communities where most coalmines, smelters and other heavy polluting facilities are located once again knock on Kevin Rudd's door, accompanied by the same men in suits with thick foreign accents. "Sorry, Mr Rudd. All those cheques you offered us are now not enough. We're doing it a bit too tough in the resources sector just now."

Guy Pearse is a climate policy analyst and Author of Quarterly Essay 33 — Quarry Vision: Coal, Climate Change and the End of the Resources Boom (Black Inc).