A new report indicated that Australia’s potential for carbon abatement through its land sector is unlikely to be realised by either the current carbon price laws or the conservative Liberal-National governments proposed Emissions Reduction Fund (ERF).
The analysis prepared by carbon advisor RepuTex indicates that only two to 15 per cent of Australia’s 2020 abatement is likely to be delivered through the Carbon Farming Initiative (CFI).
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nvironmental lobby group WWF Australia commissioned the RepuTex analysis, titled Unlocking Land Sector Abatement – An Outlook for the ERF.
It indicates that as currently proposed, the ERF is likely to drive only 2-10 million tonnes of abatement per annum through to 2020.
This equates to only 2-15 per cent of Australia’s 2020 abatement challenge and is due to competition from cheaper sources of non-land sector abatement.
RepuTex says these could control ERF bidding, crowding out other more costly forms of abatement.
Along with the energy sector, the land sector has the potential to play a significant role in Australia’s transition to a low-carbon economy by protecting existing carbon stores, boosting rates of carbon sequestration, and implementing low-carbon farming practices.
The primary policy mechanism for unlocking this potential is the CFI, which enjoys bipartisan support.
The conservative government’s ERF, contained within its Direct Action policy is due to start on July 1, but is dependent on the conservative government repealing the current carbon price laws, a move being blocked by the Labor Party opposition and the Australian Greens Party in the upper house Senate.
Environment Minister Greg Hunt has proposed to commence the ERF through direct regulation should support for the Direct Action legislation not be forthcoming in the Senate.
According to RepuTex, as currently proposed the ERF is unlikely to drive significant levels of abatement in the land sector.
“The land sector is a large source of emissions abatement for the Australian market, but has a slow return on investment, meaning that it is unlikely to compete for government funds against larger and cheaper sources of emissions reductions, such as efficiency projects undertaken by large corporations” Bret Harper, head of research at RepuTex, is reported to have said.
“Industry abatement is likely to control much of the bidding within the Emissions Reduction Fund, crowding out other more costly forms of abatement from the land sector,” Mr Harper said.
Increasing the price paid for abatement under the ERF via a range of demand side measures, such as allowing use of CFI offsets by companies that exceed their emissions baselines, or bid banding in the ERF, would boost abatement from the land sector, with supply likely to increase from of two million tonnes (Mt) under an auction price of $5, to more than 10Mt at an auction price of $20.
However, even under high auction price scenarios, the land sector is projected to deliver only a small fraction of the total abatement required to achieve Australia’s 2020 emission reduction goals because of a lack of long-term certainty.
“The most important driver of land sector abatement is for climate legislation to provide long-term certainty. In order for the ERF to unlock more substantial levels of abatement from the land sector, potential investors and project developers require funding certainty.
“There need to be payments for at least the next 10 to 15 years in order to make changes to land use practices economically viable,” Mr Harper said.
“If well designed, a secondary market would help to provide longer-term price certainty to justify land managers changing long-term land- use practices,” he added.
