On Tuesday, RepuTex released its February Carbon Market Update, which analysed domestic emissions abatement under the government’s proposed Direct Action Plan versus the Carbon Price Mechanism, accounting for new design elements discussed in the recent Emissions Reduction Fund (ERF) Green Paper.
Specifically, the analysis focuses on the impact of establishing “absolute” emissions baselines under the Direct Action Plan, along with a “make-good” mechanism for companies to offset any emissions increases beyond business as usual (BAU) levels, as discussed in the government’s Green Paper.
Whether these new design elements make the final cut remain to be seen, however, how decisions are made on their inclusion stands to go a long way in determining the environmental effectiveness of the government’s policy, and how closely Direct Action resembles a true ‘baseline and credit’ market.
DIRECT ACTION – MORE ABATEMENT THAN THE CPM?
Modelling of the Green Paper’s potential mechanics indicates that the Direct Action Plan may result in similar – or even more – domestic emissions reductions than the currently legislated Carbon Price Mechanism, depending on the role of the secondary market and the methodology used for setting baselines.
