Carbon Markets

ALERT: Same same, but different? The short & long-game

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Last night’s change of Liberal Party leadership and the elevation of new Prime Minister, Malcom Turnbull, is likely to have a range of implications for Australian climate policy. We examine these below, with a focus on the short-term negotiation of the Safeguard Rules with the Senate crossbench, and the formation of long-term policy in the lead up to next year’s federal election.

While the left may be craving immediate reform on climate change, no policy review is likely to occur over the short-term, with Mr Turnbull publicly supporting Direct Action and the government’s new 2030 emissions reduction target. The maintaining of the status quo is designed to head off concern from the conservative right within Liberal party room, which remains cautious of any carbon pricing regime.

While Direct Action will remain the cornerstone of the Coalition’s climate policy, ongoing consultation over the newly released Safeguard Mechanism draft rules is likely to provide the first opportunity for any policy adjustment, while providing political coverage via crossbench negotiations.

The short-game: Implications for Safeguard Mechanism rules

As we reported last week, the leniency of the newly released ERF Safeguard Mechanism draft rules has increased the prospect of a disallowance motion being brought forward in the Senate to quash, or strengthen, the government’s new compliance scheme.

A number of amendments are currently being scrutinised by the crossbench in order to tighten the operation of the Safeguard Mechanism. As we examined in our latest Analyst Update, we believe that an opportunity will present for the crossbench to broaden the scope of the government’s 2017-18 policy review (for the use of international credits) to also consider the implementation descending baselines from 2020 in order to meet Australia’s new 2030 emissions reduction target.

“Default baselines” – which would come into operation should the baselines review not be resolved in 2017/18 – are also being discussed

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