Carbon Pollution Reduction Scheme
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The Carbon Pollution Reduction Scheme (or CPRS) was a cap-and-trade
emissions trading Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The concept is also known as cap and trade (CAT) or emissions trading scheme (ETS). Carbon emission t ...
scheme for anthropogenic
greenhouse gas A greenhouse gas (GHG or GhG) is a gas that Absorption (electromagnetic radiation), absorbs and Emission (electromagnetic radiation), emits radiant energy within the thermal infrared range, causing the greenhouse effect. The primary greenhouse ...
es proposed by the
Rudd government Rudd Government may refer to the following Australian governments: * Rudd government (2007–10) Rudd Government may refer to the following Australian governments: * Rudd government (2007–10) * Rudd government (2013) {{Dab ... * Rudd gov ...
, as part of its
climate change In common usage, climate change describes global warming—the ongoing increase in global average temperature—and its effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes to E ...
policy, which had been due to commence in Australia in 2010. It marked a major change in the
energy policy of Australia The energy policy of Australia is subject to the regulatory and fiscal influence of all three levels of government in Australia, although only the State and Federal levels determine policy for primary industries such as coal. Federal policies ...
. The policy began to be formulated in April 2007, when the federal Labor Party was in Opposition and the six Labor-controlled states commissioned an independent review on energy policy, the Garnaut Climate Change Review, which published a number of reports. After Labor won the 2007 federal election and formed government, it published a
Green Paper In the United Kingdom, the Commonwealth countries, Hong Kong, the United States and the European Union, a green paper is a tentative government report and consultation document of policy proposals for debate and discussion. A green paper represen ...
on climate change for discussion and comment. The Federal Treasury then modelled some of the financial and economic impacts of the proposed CPRS scheme. The Rudd government published a final
White Paper A white paper is a report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision. A white paper ...
on 15 December 2008, and announced that legislation was intended to take effect in July 2010; but the legislation for the CPRS (aka ETS) failed to gain the numbers in the Senate and was twice rejected creating a
double dissolution A double dissolution is a procedure permitted under the Australian Constitution to resolve deadlocks in the bicameral Parliament of Australia between the House of Representatives (lower house) and the Senate (upper house). A double dissolution ...
election trigger. A bitter political debate within the Coalition Opposition saw Opposition leader
Malcolm Turnbull Malcolm Bligh Turnbull (born 24 October 1954) is an Australian former politician and businessman who served as the 29th prime minister of Australia from 2015 to 2018. He held office as leader of the Liberal Party of Australia. Turnbull grad ...
lose the leadership to the anti-CPRS
Tony Abbott Anthony John Abbott (; born 4 November 1957) is a former Australian politician who served as the 28th prime minister of Australia from 2013 to 2015. He held office as the leader of the Liberal Party of Australia. Abbott was born in Londo ...
. The Rudd government did not call an election and in April 2010, Rudd deferred plans for the CPRS. After the 2010 federal election, the Gillard Government was able to get the Carbon Pricing Mechanism (CPM) passed into law as part of the Clean Energy Futures Package (CEF) in 2011, and became effective on 1 July 2012. However, after the 2013 federal election there was a change in government, and the Abbott Government repealed the CEF package on 17 July 2014. Due to the great deal o
policy uncertainty
surrounding the scheme, organizations in Australia responded in a rather informal and tepid manner and largely withheld from making any large-scale investments in emissions reductions technology during the scheme's operation.


History

In the 2007 election year, both the Liberal-led Coalition government and the Labor opposition promised to introduce carbon trading. Opposition leader Rudd commissioned the Garnaut Climate Change Review on 30 April 2007, while Prime Minister
John Howard John Winston Howard (born 26 July 1939) is an Australian former politician who served as the 25th prime minister of Australia from 1996 to 2007, holding office as leader of the Liberal Party. His eleven-year tenure as prime minister is the s ...
announced his own plan for a carbon trading scheme on 4 June 2007, after the final report of the Prime Ministerial Task Group on Emissions Trading. Labor won the election on 24 November.


Green Paper

The draft Garnaut Report, issued on 4 July 2008, was only one of many inputs into the policy-making process. The Labor government also issued a "
Green Paper In the United Kingdom, the Commonwealth countries, Hong Kong, the United States and the European Union, a green paper is a tentative government report and consultation document of policy proposals for debate and discussion. A green paper represen ...
" on 16 July 2008 that described the intended design of the carbon trading scheme. The Carbon Pollution Reduction Scheme, was a market-based approach to greenhouse gas pollution, to be implemented in 2010 (Department of Climate Change, 2008, 9). The main concern for the
Australian government The Australian Government, also known as the Commonwealth Government, is the national government of Australia, a federal parliamentary constitutional monarchy. Like other Westminster-style systems of government, the Australian Government i ...
was getting the design of such a scheme correct, so that it would have complemented the integrated economic policy framework, and would have been consistent with the Government's commercial strategy (Department of Climate Change, 2008, 10). The objective of the Carbon Pollution Reduction Scheme was to meet Australia's emissions reduction targets in the most flexible and cost-effective way; to support an effective global response to climate change; and to provide for transitional assistance for the most affected households and firms (Department of Climate Change, 2008, 14). The basis of a Carbon Pollution Reduction Scheme was a cap and trade system, and was a way of limiting greenhouse gas pollution, as well as giving individuals and businesses incentives to reduce their emissions (Department of Climate Change, 2008, 11). The Australian Government would have set a cap on carbon emissions, consistent with longer-term goals of reducing Australia's emissions by 60% compared with 2000 levels by 2050 (Department of Climate Change, 2008, 11). There were two definite elements of the cap and trade scheme: the cap itself, and the ability to trade (Department of Climate Change, 2008, 12). The cap is the limit on
greenhouse gas emissions Greenhouse gas emissions from human activities strengthen the greenhouse effect, contributing to climate change. Most is carbon dioxide from burning fossil fuels: coal, oil, and natural gas. The largest emitters include coal in China and lar ...
imposed by the Carbon Pollution Reduction Scheme. The system aims at achieving the environmental outcome of reducing greenhouse gas emissions, the idea being that capping emissions creates a price for carbon and the ability to trade ensures that emissions are reduced at the lowest possible price (Department of Climate Change, 2008, 12). Setting a limit means that the right to emit greenhouse gases becomes scarce, and scarcity entails a price. The Carbon Pollution Reduction Scheme would have put a price on carbon in a systematic way throughout the economy (Department of Climate Change, 2008, 13). The 'covered' sectors are sources of emissions subject to the cap, which were specified in the Carbon Pollution Reduction Scheme (Department of Climate Change, 2008, 12). After setting the cap, the Government would have then issued permits that are equal to the cap. The Green Paper gives the example "if the cap were to limit emissions to 100 million tonnes of CO2-e in a particular year, 100 million 'permits' would be issued that year" (2008, 12). For every tonne of emissions emitted, a source of emissions would have been required to acquire and surrender a permit (Department of Climate Change, 2008, 12). About one thousand firms were expected to have obligations from the Scheme. The price of emissions would increase the cost of those goods and services that are most emissions-intensive (Department of Climate Change, 2008, 13). This means that there will be a change across the prices of goods and services across the economy, reflecting how emission-intensive the goods or service is. That therefore provides businesses and consumers with incentives to use and invest in low-emissions technologies. The second essential element of a cap and trade scheme is the ability to trade. Since carbon pollution permits will be tradable, the price of permits will be determined by the market (Department of Climate Change, 2008, 13). The main idea behind this part of the scheme is that a firm who can undertake abatement more cheaply than the permit price will do so, and that a company will pay for permits if the cost to it of lowering its emissions exceeds the cost of the permits. By trading among themselves, firms achieve the scheme cap at the least cost to the economy (Department of Climate Change, 2008, 13). The cap would only achieve the desired environmental objectives if it is enforced. This means that firms responsible for emissions covered by the Carbon Pollution Reduction Scheme must monitor their emissions and report them accurately to government (Department of Climate Change, 2008, 12). The reported emissions data would need to be monitored and verified.


Treasury report on the economics of climate change mitigation

The Australian Treasury's report on the economics of climate change mitigation was released on 30 October 2008. The report was a key input in determining the structure and targets for the Carbon Pollution Reduction Scheme. The Treasury's modeling demonstrated that early global action to reduce carbon emissions would be less expensive than later action and stated that a market-based approach allows robust economic growth into the future as emissions fall. The report also stated that: * many of Australia's industries would maintain or improve their competitiveness under an international agreement to combat climate change * even ambitious goals would have limited impact on national and global economic growth * Australia and the world can continue to prosper while making the emission cuts required to reduce the risks of dangerous climate change. * Households would face increased prices for emission-intensive products such as electricity and gas, however real household income would continue to grow. * Strong coordinated global action would reduce the economic cost of achieving environmental objectives, reduce distortions in trade-exposed sectors, and provide insurance against climate change uncertainty. * There are advantages to Australia acting early if emission pricing expands gradually across the world: economies that defer action face higher long-term costs, as global investment is redirected to early movers. * Australia's aggregate economic costs of mitigation are small, although the costs to sectors and regions vary. Growth in emission-intensive sectors slows and growth in low- and negative-emission sectors accelerates. * Allocation of some free permits to emission-intensive trade-exposed sectors, as the Government proposes, eases their transition to a low-emission economy in the initial years. * Broadly based market-oriented policies, such as emissions trading, allow the market to respond as new information becomes available.


White Paper

The White Paper was released on 15 December 2008. The White Paper included the Rudd Labor government's targets for Greenhouse gas emission reductions, 5% below 2000 by 2020 on a unilateral basis or up to 15% below 2000 by 2020 if also agreed by the other major emitters. This compares to the 25 to 40% cut compared to 1990 emissions recommended by the
IPCC The Intergovernmental Panel on Climate Change (IPCC) is an intergovernmental body of the United Nations. Its job is to advance scientific knowledge about climate change caused by human activities. The World Meteorological Organization (WMO) ...
as needing to be made by developed countries to keep CO2 below 450 ppm and to have a reasonable chance of keeping global warming at less than a 2-degree Celsius increase above pre-industrial times. The White Paper also set an indicative national emissions trajectory for the first few years of the scheme: * in 2010–11, 109% of 2000 levels; * in 2011–12, 108% of 2000 levels; * in 2012–13, 107% of 2000 levels. For comparison, in 2006, Australia's emissions were 104% of 2000 levels (under Kyoto accounting). Some of the features of the
emissions trading scheme Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The concept is also known as cap and trade (CAT) or emissions trading scheme (ETS). Carbon emission t ...
proposed were: # an output as opposed to consumption based scheme # A modelled carbon price range of AUD 20 to AUD 40 per tonne of carbon. # Less than 1,000 businesses will have to account for their emissions and buy or be allocated free permits. # AUD 4.8 billion of assistance (in the form of free permits) for the most polluting electricity generators. # Financial assistance to compensate low and middle income families from increased costs. # Free permits to emissions-intensive, trade-exposed businesses - such as aluminium producers, iron and steel makers, petrol refiners and LNG producers, initially totaling 25% to 33% of permits and rising to 45% by 2020. # There will be total offset of the impact on fuel prices on households for 3 years. # Agricultural emissions are not included initially but may be included from 2015. # There will be a price cap on emissions, that will start at AUD 40 per tonne of carbon dioxide equivalent. # Firms will be able to purchase unlimited quantities of emissions allocations (including CERs under the
clean development mechanism The Clean Development Mechanism (CDM) is a United Nations-run carbon offset scheme allowing countries to fund greenhouse gas emissions-reducing projects in other countries and claim the saved emissions as part of their own efforts to meet internat ...
) from the international market, but will not be able to sell them during the initial years. # Reforestation can count as carbon credit, but deforestation and
forest degradation Forest degradation is a process in which the biological wealth of a forest area is permanently diminished by some factor or by a combination of factors. "This does not involve a reduction of the forest area, but rather a quality decrease in its c ...
do not count as a liability.


Criticism

The national Climate Action Summit of 500 participants representing 140 climate groups Australia wide has condemned the CPRS and agreed to campaign to prevent it becoming law. Major concerns included announced targets, granting of property rights to pollute and providing free permits to major polluters. Summit participants were joined by 2,000 other people in surrounding parliament house to express dissatisfaction with the Rudd Government climate change policies.


Criticism of the targets

Several organisations criticised the choice of emission reduction targets in the CPRS. Greenpeace, the World Wildlife Fund, the Wilderness Society and the Climate Institute were joined by the Greens and other environmentalists in calling for more ambitious 2020 targets of 25 to 45 per cent reductions. Professor Andy Pitman described the targets as inadequate. Professor Barry Brook, the Director of the Research Institute for Climate Change and Sustainability at the University of Adelaide, stated that "the 14% cut in our total emissions by 2020 announced today is such a pitifully inadequate attempt to stop dangerous climate change that we may as well wave the white flag now." Dr Regina Betz, Joint Director of the Centre for Energy and Environmental Markets at UNSW, stated "The proposed 2020 targets of emission reductions of 5 to 15% are, according to the climate science, entirely inadequate for an equitable global response to avoid dangerous global warming." Dr Frank Jotzo, deputy director of the ANU Climate Change Institute, and former advisor to the Garnaut Climate Change Review, said "ruling out a 25% reduction is a mistake, since Australia's overwhelming interest is strong global climate action. An international agreement with deep cuts has just become a little bit more unlikely, as a result of Australia not putting a compatible offer on the table" and "the Treasury modelling has shown that even deep cuts won't carry big economic costs for Australia, if the policies are sound."


Industry criticism

Australian industrialists were concerned about cost impacts. Australian Chamber of Commerce & Industry chief executive Peter Anderson said his members were "apprehensive" about the scheme because it was "too risky" and warned the costs would be borne not only by emissions-intensive, trade-exposed industries but also by "small and medium businesses through higher energy costs and the flow-on from restructuring of larger industries". Australian Industry Group chief executive Heather Ridout said the scheme was "a big ask and will have a big impact on the Australian economy" and estimated it would add about $7 billion to business costs by 2010.


Other criticism

Other sources of criticism included concerns over coverage of agriculture, impacts on the minerals sector and implications for international agreements. Dr Hugh Saddler, Managing Director of Energy Strategies Pty Ltd, stated "the white paper does not include measures to reduce emissions from the major non-energy sectors such as agriculture and land clearing. While it is a good decision not to include these emission sources within the CPRS, it is essential that there be other strong programs specifically directed at these sectors."Mitch Hooke
the head of the Minerals Council of Australia, said his organisation was "profoundly disappointed that the white paper was not better aligned with progress towards a global agreement on reduction commitments, new low emissions technologies and emissions trading schemes in other countries" South Africa's environment minister, Marthinus Van Schalkwyk, described the scheme as an inadequate "opening bid", and warned that it is not "nearly good enough to bring developing countries to the table". Professor
Ross Garnaut Ross Gregory Garnaut (born 28 July 1946, Perth) is an Australian economist, currently serving as a vice-chancellor's fellow and professorial fellow of economics at the University of Melbourne. He is the author of numerous publications in schol ...
, previously an adviser to the Government on climate change, 'damned' the Rudd Government's carbon policy because of the gross over-compensation of coal-fired electricity generators; the possibility of taking 25% emission reduction targets off the table when they are in Australia's best interest; the lack of a principled basis for support of trade-exposed industries and the potential threat to public finances of the proposed compensation to industry.


Support

Statements of support included: The United Nations climate negotiator
Yvo de Boer Yvo de Boer (born 12 June 1954) is an advisor and consultant on international environmental policy. De Boer is the former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), a position he held from 2006 until ...
told ABC Radio "Australia's now put a figure on the table, something countries have been calling for a long time".
Gerard Henderson Gerard Henderson (born 1945) is an Australian author, columnist and political commentator. He founded and is executive director of The Sydney Institute, a privately funded Australian current affairs forum. Education and earlier career Henders ...
, the former Chief-of-Staff to
John Howard John Winston Howard (born 26 July 1939) is an Australian former politician who served as the 25th prime minister of Australia from 1996 to 2007, holding office as leader of the Liberal Party. His eleven-year tenure as prime minister is the s ...
, has described Rudd's
emissions target A climate target, climate goal or climate pledge is a measurable commitment for climate policy and energy policy with the aim of limiting the climate change. Researchers within, among others, the UN climate panel have identified probable c ...
s as "responsible". After changes announced in May 2009, some business and environment groups announced that the CPRS, although weak, was now worth supporting.


Other

Whether or not the Federal Opposition will support the proposed legislation will depend on an independent assessment of the Government's carbon emission scheme it will commission. Without support of some Opposition members in the Senate there is a possibility the enabling legislation may not be passed unless it gains the support of the Greens, Family First and independent senators. If the enabling legislation is not passed, there is a chance that it could be passed if the Government uses it as a trigger for a
double dissolution A double dissolution is a procedure permitted under the Australian Constitution to resolve deadlocks in the bicameral Parliament of Australia between the House of Representatives (lower house) and the Senate (upper house). A double dissolution ...
election.


May 2009 changes

On 4 May 2009, the government announced a number of modifications to the proposed Scheme, including a delayed start, a deeper conditional target (25% by 2020, in the event of a global agreement aiming at 450 ppm), more assistance for industry, and a "carbon trust" to enable voluntary action by households.


November 2009 changes

There were a number of significant changes made to the scheme in November 2009 after Malcolm Turnbull negotiated with Prime Minister Kevin Rudd. These changes included large increases in compensation for polluting industries, including the coal and aluminium smelting industries. $4 billion was proposed for the manufacturing sector and $1.5 billion was proposed for electricity generators.


Withdrawal of bill

On 30 November 2009, the Senate failed to pass the CPRS (Senate Hansard page 9602), giving Kevin Rudd a potential reason for calling a
double dissolution A double dissolution is a procedure permitted under the Australian Constitution to resolve deadlocks in the bicameral Parliament of Australia between the House of Representatives (lower house) and the Senate (upper house). A double dissolution ...
election. On 27 April 2010, the Prime Minister Rudd announced that the Government had decided to delay the implementation of the CPRS until after the current commitment period of the
Kyoto Protocol The Kyoto Protocol was an international treaty which extended the 1992 United Nations Framework Convention on Climate Change (UNFCCC) that commits state parties to reduce greenhouse gas emissions, based on the scientific consensus that (part ...
(which ended in 2012). The Government cited the lack of bipartisan support for the CPRS and slow international progress on climate action for the delay. The Prime Minister announced that the CPRS would be introduced only when there was greater clarity on the actions of other major economies including the US, China and India. In June 2010, the Minister for the Environment, Heritage and the Arts,
Peter Garrett Peter Robert Garrett (born 16 April 1953) is an Australian musician, environmentalist, activist and former politician. In 1973, Garrett became the lead singer of the Australian rock band Midnight Oil. As a performer he is known for his sign ...
, told
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that he first learned of the scrapping of the CPRS when he read about it in a newspaper after it was
leak A leak is a way (usually an opening) for fluid to escape a container or fluid-containing system, such as a tank or a ship's hull, through which the contents of the container can escape or outside matter can enter the container. Leaks are usually ...
ed by a Government source. The delay in implementing the CPRS drew strong criticism of Rudd and the Labor Party from the Federal Opposition, and from community and grassroots action groups such as GetUp. On 5 April 2011, Rudd stated that he believed it had been a mistake to delay the ETS during his term as Prime Minister. In February 2011, the Gillard Government announced the
Clean Energy Bill 2011 The Clean Energy Act 2011 was an Act of the Australian Parliament, the main Act in a package of legislation that established an Australian emissions trading scheme (ETS), to be preceded by a three-year period of fixed carbon pricing in Australia ...
, an emissions trading scheme to replace the CPRS. This bill was passed into law later that year, paving the way for a
carbon price Carbon pricing (or pricing), also known as cap and trade (CAT) or emissions trading scheme (ETS), is a method for nations to reduce global warming. The cost is applied to greenhouse gas emissions in order to encourage polluters to reduce the co ...
to be introduced on 1 July 2012.


See also

*
Carbon pricing in Australia A carbon pricing scheme in Australia was introduced by the Gillard Labor minority government in 2011 as the '' Clean Energy Act 2011'' which came into effect on 1 July 2012. Emissions from companies subject to the scheme dropped 7% upon its i ...
*
List of climate change initiatives This is a list of climate change initiatives of international, national, regional, and local political initiatives to take action on climate change (global warming). A Climate Action Plan (CAP) is a set of strategies intended to guide efforts for ...
*
Department of Climate Change and Energy Efficiency The Minister for Climate Change and Energy is a portfolio in the Government of Australia. The current Minister is Chris Bowen. The minister administers his or her portfolios through the Department of Climate Change, Energy, the Environment and W ...
(Australia) * Energy policy of Australia#Green paper on Carbon Pollution Reduction Scheme * Asia-Pacific Emissions Trading Forum


Notes


Bibliography

* * {{Renewable energy by country Emissions trading Climate change policy Political history of Australia Climate change in Australia Rudd Government