Climate change policy should use all available means – including internationally recognised Kyoto credits – to reduce emissions and to meet our international obligations at least cost to Australians.
The MCA has always supported an economy-wide, pragmatic approach to minimise the cost of meeting Australia’s international emission reduction commitments while delivering required mitigation outcomes.
As a major resources and energy exporter and a large country with a relatively small population, Australia needs a climate change policy which recognises the high relative emissions intensity of our economy.
Labor’s commitment to use international offsets to reduce emissions is not enough in reducing the overall cost and impact of climate change measures on Australian households and businesses, especially in regional communities.
The use of Kyoto carryover credits has long been accepted and is allowable under the Paris Agreement.
Critical questions raised by Labor’s policy include:
- How much of the national cost burden of emissions reduction will be imposed on Australian industry, given that the safeguard mechanism will exclude large portions of the economy from the requirement to deliver on a very stringent emissions target over a short period?
- Which industries will need to do a disproportionate amount of heavy lifting to reduce emissions while remaining internationally competitive?
- How many offsets will Australian industries need to buy to meet the proposed tightening of emissions baselines, and what will be their cost?
The MCA notes that currently Australian Carbon Credit Units are currently trading at A$15 per tonne of CO2, while European carbon units are trading at around €22, or just under A$35 per tonne. The cost of these offsets is only likely to rise over time as demand strengthens.
If offset prices increase – as appears very likely – this will significantly increase the cost to Australian businesses of meeting the opposition’s 45 per cent emission reduction target.
MCA supports Labor’s proposed $300 million Strategic Industry Reserve Fund, while noting that it is not an appropriate substitute for addressing the very real impact of an increased carbon price on emissionsintensive trade exposed sectors.