On May 4, the Government announced its decision to defer the introduction of mandatory obligations under the Carbon Pollution Reduction Scheme (CPRS) until July 2011.
The initial starting date was set for July 2010.
Liable companies will now be required to meet their emissions liabilities from 2011-12, with emissions units being surrendered for the first time in December 2012. As a transitional measure, an unlimited number of permits will be available at a fixed price of $10 per tonne, compared to the initially proposed $23 per tonne.
Furthermore, the Government will make adjustments to the assistance programs for emission-intensive trade-exposed (EITE) companies in form of a so-called Global Recession Buffer. Operating for 5 years, the Buffer increases free permit allocation to EITE entities.
The Government also holds out the prospect of committing to reducing Australia's greenhouse gas emissions by 25 per cent by 2020, subject to an international agreement to limit the concentration of greenhouse gases in the atmosphere at 450 parts per million at the COP15 in Copenhagen in December. Otherwise the Government's previously announced target range of 5 to 15 per cent would apply.
The 5-15 per cent GHG emission reduction targets to which the Government recently committed are well below those recommended by the IPCC and the Garnaut Review. In fact, GHG reductions of 5-15 per cent are equivalent to a stabilisation at about 510-550ppm, not the 450ppm the Australian Government is lobbying for.
Also, the new price of carbon has to be seen with scepticism. The Australian Treasury modelling on the economics of climate change mitigation recommends an initial price of $23 per tonne of CO2-e under the CPRS. Stabilising at lower concentration levels requires stronger cuts in emissions and higher emission prices. In Australia, the starting price would have to be set at $52 to contribute to a stabilisation at 450ppm.
Are these emission reduction targets and the price of carbon adequate in light of well-recognised climate science? Do they help frame Australia as a leader in global climate change mitigation?
It remains questionable if the necessary turnaround to shift towards a low carbon economy can be achieved through postponing determined action. Preliminary work at the UQBS Sustainable Business Unit indicates that cutting edge private companies and executives are willing to leave behind lagging government policy in their search for carbon reduction strategies for their business. The Sustainable Business Unit is led by Professor Andrew Griffiths, Chair in Business Sustainability and Strategy at UQ Business School.
Early and drastic cuts in GHG emissions over the next decades are required if the risk of a runaway effect of unmitigated climate change is to be avoided. Proactive managers and executive realise this, and are attempting to climate proof their organisations and develop new value adding products and services.
An unconditional minimum commitment to a 5 per cent reduction by 2020 is unlikely to unleash the technological innovation and commitment that is necessary to shift towards a low carbon economy. Our research is demonstrating that organisations with substantive leadership commitment are already investing in these technologies. However those organisations that are more compliance oriented are less inclined to take action.
Unfortunately, most of the debate - if not all - around the CPRS has focused on who should bear the economic burden of an ETS in Australia, rather than how best to effectively tackle climate change. There has been a general reluctance amongst political leaders to accept that somewhere along the line, consumers and organisations need to wear the costs of the structural adjustment to a low carbon economy.