Direct Action vs. ETS: Achieving Our Emissions Objectives

RepuTex today released a research paper titled ‘Direct Action vs. Emissions Trading: Achieving Australia’s Emissions Reduction Objectives’. In this report, RepuTex analysed the ability of the Coalition’s Direct Action Plan and the government’s Emissions Trading policy to achieve Australia’s committed target to reduce emissions to 5-25% below 2000 levels by 2020. Research modelled the Marginal Abatement Cost (MAC) of each policy at the industry level, examining abatement potential and the associated cost of each scenario through to 2020.

Key Findings:

  • The retention of the ETS would deliver the full 146 Mt CO2-e of abatement necessary to meet Australia’s 5 per cent emissions reduction target, with approximately 55 per cent coming from domestic abatement and 45 per cent from international abatement. This would be achieved at an average carbon price of A$22 from FY15-20.
  • Assuming the setting of ‘emissions intensity’ baselines and current funding, the Direct Action Plan is projected to lead to emissions growth of 16% on 2000 levels, driven by higher Power and Industrial sector emissions.
  • Additional funding of A$6 bn is required per year for the Emissions Reduction Fund to achieve enough abatement for Australia to meet its 5% emissions reduction target.
  • Alternatively, the setting of an ‘absolute emissions’ baseline could lead to significant domestic abatement and the meeting of Australia’s 5% emissions reduction target, however this would require a penalty price of $54 per tonne, and additional funding of A$3.3 bn per year.
  • Regardless of the policy mechanism, the Power and Industrial sectors – notably the Mining, Energy and Chemicals industries – will pay for the achievement of Australia’s abatement objectives, either passing that cost to customers (under the ETS) or to government (under Direct Action).
  • Under the latter, businesses will be required to outlay capital and other resources to deliver the abatement. It is then unclear if businesses will be guaranteed payment for abatement under the reverse auction mechanism.
  • To limit emissions growth or drive emissions reductions, a penalty price under Direct Action must be set at A$54 to encourage companies to directly invest in abatement activities.

Download the full report via the link below (automatic download).  

 

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