Carbon Pollution Reduction Scheme Research Articles

Narratives and counter-narratives of political strategy: revisiting Australia's carbon pollution reduction scheme

ABSTRACT In 2009, the Australian Senate rejected the government's ambitious Carbon Pollution Reduction Scheme. In the prevailing narrative surrounding these events, the Labor government, under Prime Minister Kevin Rudd, made a series of strategic errors that led to the scheme's – and ultimately, Rudd's and the Labor Party's – downfall. However, by taking a closer look at of some aspects of Australia's parliamentary system, including the norms of partisan voting and the numbers game in parliament, a different story is apparent. A counter-narrative is that the Rudd Labor government's approach was reasonable at the time, but that institutional factors and election outcomes presented significant obstacles to passing climate legislation of any kind. Correcting this narrative will enable a better understanding of the political circumstances in which environmental policies are enacted in Australia, a country with the potential for regional policy leadership on climate change.

Carbonvestments: Appraising Investments in a Carbonomics Environment

In 2011, Australia introduced a Carbon Pollution Reduction Scheme (or CPRS) that was a cap-and-trade emissions trading scheme for anthropogenic greenhouse gases. It clearly indicated to companies that polluting the environment with carbon emissions will no longer be free. Companies subject to carbon caps under a carbon trading scheme can either invests in carbon sequestration project and or buy carbon credits to offset their carbon liabilities. While Net Present Value (NPV) has been recorded as the most popular appraisal technique used across the globe for project valuation purposes, finance theorist suggests that using real options (RO) analysis is a more superior techniques to value investment opportunities. Using case study data of an early mover in a CPRS scheme, this paper reveals how RO approach provides more strategic insights than traditional NPV in valuing carbon sequestration investments (termed carbonvestments).

Are the Greens ‘Neither Left nor Right but Out in Front’? What the Carbon Pollution Reduction Scheme Debate Reveals About Ideological Divisions Between Labor and the Greens

Are the Greens ‘Neither Left nor Right but Out in Front’? What the Carbon Pollution Reduction Scheme Debate Reveals About Ideological Divisions Between Labor and the Greens

Feed-In Tariffs in Australia - Fiscal Incentives and Regulatory Regimes - Current Developments - Policies for the Future

Australia’s governments have and continue to implement measures to lower green house gas emissions. The two principal federal policies are a Renewable Energy Target which aims to source 20% of electricity from renewable energy sources by 2020, and the Carbon Pollution Reduction Scheme, which will centre on an emissions trading system operating from mid-2011. This paper examines the issue of whether feed-in tariff schemes can make a significant contribution to the abatement of greenhouse gases in Australia. The present and planned Australian feed-in tariff schemes are designed to encourage (by resort to a premium tariff) the installation of renewable generation technology in the premises of small power consumers such as households. This power would substitute for power that would otherwise be sourced from the grid, which power is (predominantly) sourced from non-renewable energy sources. Power surplus to the user’s needs could be exported to the grid. By way of background, the broader strategies for decarbonising Australia’s electricity industry, and the progress made, will be examined.

How does the stock market react to the announcement of green policies?

We investigate the impact of 19 announcements of environmental regulation on the equities listed on the Australian Stock Exchange over the period 2005–2011. Using a well-established event study methodology, we assess whether these announcements are value constructive or destructive for equity investors. Additionally, we estimate the change in systematic risk following the announcements. Our results show that the Australian market was particularly sensitive to the carbon pollution reduction scheme (CPRS) announcement. A cumulative abnormal return of −31% was recorded in the alternative energy sector after Australia submitted its target range to the Copenhagen Accord. We observe that a move towards a greener nation has a mixed effect on abnormal returns with apparent sector-by-sector differences. Green policies appear to affect the long-term systematic risk of industries, leading to the diamond risk phenomenon.

RETRACTED: An efficient distribution factors enhanced transmission pricing method for Australian NEM transmission charging scheme

The implementation of the Carbon Pollution Reduction Scheme (CPRS) and the expanded Renewable Energy Target (RET) which drive to a smart grid application are likely to have a significant and ongoing impact on energy markets in Australia. One of the key issues is the transmission pricing scheme. The main task in the development of the transmission service charges are it must be non-discriminatory, transparent, economically efficient, and allow full recovery of costs. Most importantly, the pricing strategies should implement fairness and practicality. Currently, the National Electricity Market (NEM) has been using the Cost Reflective Network Pricing (CRNP) and Modified Cost Reflective Network Pricing (MCNRP) method for allocating the transmission service charges among the load. The drawbacks of both methods are: (1) the load will be burdened with high TUoS charges as this charges are only paid by load (2) inaccurate transmission usage evaluation as the contributions of counter-flows are totally being neglected. Therefore, in this paper, a novel transmission pricing method which is called Distribution Factors Enhanced Transmission Pricing (DFETP) method is introduced in order to increase the utilization efficiency of the network as well as to promote the green technology in a market environment. The proposed approach is tested on the 10-machine IEEE 39-bus (New-England) system and 59-bus system of the South East Australian power system using Matlab simulation program to prove its effectiveness.

The fall (and rise) of carbon pricing in Australia: a political strategy analysis of the carbon pollution reduction scheme

In April 2010, Prime Minister Kevin Rudd announced the deferral of his flagship climate-change policy, the Carbon Pollution Reduction Scheme, after it twice failed to gain the support of the Australian Senate. The decision contributed to the curtailment of Rudd's premiership and confirmed climate change as one of the most toxic issues in Australian politics. Although deficits in policy design and structural obstacles caused by Australia's carbon-intensive economy were major obstacles for the Carbon Pollution Reduction Scheme, it could have passed into legislation had more effective political strategies been used to counter political opposition. A policy network framework is used to explore these political obstacles and how alternative political strategies may help to counter political obstacles to and public concern about new climate policies. In conclusion, the wider merits of policy network and political strategy approaches for the analysis of national climate politics are considered.

Gentrifying Climate Change: Ecological Modernisation and the Cultural Politics of Definition

Gentrifying Climate Change: Ecological Modernisation and the Cultural Politics of Definition

After 20 years of creating Australian climate policy: was the proposed carbon pollution reduction scheme a change in direction?

This article presents an analysis of past and present Australian climate polices, starting with the Hawke Labor government (1983–1991) and finishing with the unsuccessful implementation of an emissions trading scheme (ETS), the Australian Carbon Pollution Reduction Scheme (CPRS) by the Labor government under Rudd and, subsequently, Gillard (2007–current). The study reveals that Australia's position was climate proactive only under the Hawke government. Subsequent climate change policy retreat (1996–2007) resulted in a range of ‘no-regrets’ and symbolic actions taken domestically and internationally. Arguably, this was due to strong political influence stemming from the fossil fuel industry and coal producers. Climate change was a key Labor policy promoted in the 2007 federal election and is attributed to Labor gaining power. One of the government's first actions was ratification of the Kyoto Protocol, but attempts to legislate a proposed CPRS were unsuccessful. An analysis of the proposed CPRS demonstrates that 97 per cent of the funds potentially generated from the scheme would have doubtfully served any carbon pollution reduction. The CPRS proposal offered a continuation of previous federal governments’ lack of action on climate policy, and favoured the interests of the fossil fuel industry.

Farming carbon: taxation implications of the Carbon Farming Initiative

The Government’s clean energy strategy, to commence from 1 July 2012, departs from the former Carbon Pollution Reduction Scheme (CPRS) in a number of ways. One key departure is the Carbon Farming Initiative (CFI). The CFI signals a change in approach to land use issues from the previous CPRS, as the Government has decided agriculture and other land-based activities will not be covered by the carbon pricing mechanism. Rather, changes in land use will be incentivised by way of the CFI. The CFI also goes well beyond the forestry-based activities included in the CPRS to cover many and varied project types. This article explores the tax implications of key elements of the CFI. It describes the link between the CFI and the carbon price that forms the basis for the inclusion of units issued under the CFI in the taxation rules. It also outlines the key operation and taxation elements of the revised clean energy scheme and highlights key departures from the CPRS.

Carbon Pricing Options for a Post-Kyoto Response to Climate Change in Australia

This paper critically analyses the policy options for establishing a carbon price in Australia in the post-Kyoto context in the light of the Henry Review and other developments. The paper considers some of the key literature in support of market based instruments including a critical analysis of the relative merits of carbon taxes and emissions trading. The pre-Abbott Government history of regulatory responses to climate change in Australia is reviewed, including the Carbon Pollution Reduction Scheme ('CPRS'). A range of 'barriers to change' within the Australian taxation system likely to undermine the operation of carbon pricing options is identified. The paper concludes that the removal of barriers to change is a vital part of any attempts to introduce a carbon price, and that tax expenditure reform should be a key element of all market based responses.

Household perceptions of climate change and preferences for mitigation action: the case of the Carbon Pollution Reduction Scheme in Australia

The study aims to reveal Australian households’ perceptions of climate change and their preferences for mitigation action. A web-based survey was conducted in November 2008 in which over 600 households from the state of New South Wales were asked for their willingness to bear extra household expenditure to support the ‘Carbon Pollution Reduction Scheme’, an emissions trading scheme proposed by the Australian government. The results of the study can be summarized in four key findings. First, respondents’ willingness to pay for climate change mitigation is significantly influenced by their beliefs of future temperature rise. Support for the policy increased at a decreasing rate as the perceived temperature change rose. Second, perceptions of policy failure have a significant negative impact on respondents’ support for the proposed mitigation measure. The higher the perceived likelihood that the measure would not deliver any outcome, the lower was the likelihood that respondents would support the policy. Third, respondent preferences for the proposed policy are influenced by the possibility of reaching a global agreement on emissions reduction. Sample respondents stated significantly higher values for the policy when the biggest polluting countries implement a similar scheme. Finally, respondents’ willingness to take action against climate change, both at the national and household level, is found to be influenced by their level of mass-media exposure. Particularly, those respondents who watched ‘An Inconvenient Truth’ were significantly more likely to act for climate change mitigation than others.

The Intergenerational Report 2010: A double‐edged sword

The Intergenerational Report 2010: A double‐edged sword

Climate Change and Regional Identity in the Latrobe Valley, Victoria

The recent Australian federal election results suggested that climate change remained on the agenda of the Australian electorate even if it had slipped off the agenda of the major federal political parties. It is generally accepted that the Federal Labor Government, under the previous Prime Minister Kevin Rudd, after becoming a signatory to the Kyoto Protocol and proposing a Carbon Pollution Reduction Scheme, failed to implement policy or develop a new policy platform to address issues of climate change. The election results are believed to reflect this with the Green vote showing an increase of 3.97 per cent with Labour losing 5.41 per cent of the votes they held in the 2007 Election. The first Green member has been elected to the House of Representatives and the Green Party will hold the balance of power in the Senate from July 2011. The most significant election platform of the Green Party is in relation to climate change.

An assessment of greenhouse gas emissions from the Australian vegetables industry

Recently, partly due to the increasing carbon consciousness in the electorates and partly due to the imminent introduction of the Australian Government's Carbon Pollution Reduction Scheme (CPRS), estimating carbon footprints is becoming increasingly necessary in agriculture. By taking data from several sources, this study estimates the national greenhouse gas (GHG) emissions from a variety of farm inputs, for the 23 key vegetables crops grown in Australia. For the 121,122 ha of land occupied by vegetable farms, there are 1.1 MtCO2e GHG emissions or 9.2 tCO2e ha− 1. In total, 65 % of total GHG emissions from the vegetable industry are due to electricity use for irrigation and post-harvest on-farm activities, 17 % from soil N2O emissions due to N fertiliser use, 10 % from agrochemicals, 7 % through fossils fuels and 1 % from on-farm machinery. The top four vegetables (by area), potatoes, lettuce, tomatoes and broccoli account for 29.1 %, 7.9 %, 5.9 % and 7.2 % of total GHG emissions from vegetables, respectively. However, the ratio of GHG emissions between the highest and lowest-emitting crops per hectare and per tonne, are different. Therefore, care must be exercised in carbon footprint labelling vegetable products to ensure that the labels reflect carbon emissions on a per tonnage basis.

Creating institutional meaning: Accounting and taxation law perspectives of carbon permits

Abstract Emissions trading schemes based on the idea that markets are an efficient means to allocate resources have created the need for a tradeable right, the carbon permit. The measurement and recognition of this right has the potential to significantly affect the financial reports and cash flows of entities and is therefore of interest to market participants. The purpose of this paper is to analyse the different meanings attached to the term, carbon permit, from two institutional frameworks, accounting and taxation, using discourse analysis of identified key documents available during the design and public discussion of the proposed Carbon Pollution Reduction Scheme in Australia.

The implications of Australia’s carbon pollution reduction scheme for its National Electricity Market

This paper assesses the major implications for the National Electricity Market of the introduction of a domestic cap-and-trade carbon pollution reduction scheme in Australia. The electricity sector is the largest source of emissions in the Australian economy, and it is this sector, therefore, that will bear the brunt of the impact of the proposed scheme. The paper addresses core issues for the electricity market up to 2020 operating under the scheme. It focuses specifically on its impact on electricity prices and generation technology mix. These two variables have been assessed using a number of models, each applying different assumptions about key impact factors. In this paper we present a comparative summary of the results of the three highest-profile models and compare their assumptions in order to explain differences in projected outcomes. This comparison will give an indication of the likely range of impacts on the market of the current design of the scheme.

Editorial

This special issue on climate change in 2010 comes at a time of much change and considerable uncertainty about climate policy and mitigation. In Australia, the failure in December 2009 to pass the Carbon Pollution Reduction Scheme (CPRS), its own version of an emissions trading scheme, has become a major political issue. Internationally, the failure of countries at Copenhagen to agree to binding emissions reductions beyond 2012 has created a great deal of angst among those who argue for rapid stabilisation and then reduction in global greenhouse gas (GHG) emissions. Behind this backdrop economists are trying to provide evidence-based policy advice so that if there are to be reductions in GHG emissions, they can be achieved at least cost. The volume provides six insightful articles on the economics of climate change from various angles. All contribute to the public policy debate on climate change mitigation, both within Australia and internationally. Clarke provides a game-theoretic view of international climate change negotiations that suggests possible mitigation pathways. Ergas dissects Australia’s CPRS from the perspective of the hypothecation (earmarking) of revenues from the sale of emissions permits. Using standard economic arguments, he correctly argues that hypothecation is inefficient. He also points out that the CPRS has the potential to distort public policy making in the future. Pezzey, Mazouz and Jotzo evaluate the choice of CPRS targets, and the size and method of CPRS free permit allocation to emission-intensive, trade-exposed emitters. They show that these free permits will badly skew sectoral incentives for abatement and forego billions of dollars of government revenues. Betz, Siefert, Cramton and Kerr, in general, provide a favourable review of the CPRS in terms of the mechanism design of the auction of permits. Lambie, however, provides further cause for concern about the CPRS with his assessment of the potential impact on the investment decision of carbon-intensive electricity generators. The closing paper by Seo examines the issue of climate change from the perspective of land use in Africa. In particular, it provides important insights of the effects on African agriculture of climate change, and also upon development programs designed to promote on high-yielding crop varieties.

Is Australia’s EAP a Prohibited Export Subsidy?

The Carbon Pollution Reduction Scheme (CPRS) is the centrepiece of Australia’s climate change policy. It requires that all major emitters of greenhouse gases (GHGs) hold a permit for every tonne of GHG that they emit each year. Although the CPRS is designed to have a broad economy-wide coverage, a particular class of emitter is given special treatment. Emitters that qualify as being ‘emissions-intensive trade-exposed’ (EITE) entities are eligible to receive free emissions permits under a component of the CPRS known as the EITE Assistance Program (EAP). The objective of this article is to examine whether the allocation of free emissions permits under the EAP is policy measure that constitutes a breach of Australia’s international obligations under the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (hereinafter ‘SCM Agreement’) and the Kyoto Protocol to the United Nations Framework Convention on Climate Change (hereinafter ‘Kyoto Protocol’). The EAP is explained and subsequently examined in relation to Australia’s commitments under the WTO SCM Agreement to determine whether the EAP constitutes either a prohibited export or an actionable subsidy. A further question considered is whether an affirmative subsidization finding under the SCM Agreement is evidence of a breach of Article 2.1(a)(v) of the Kyoto Protocol. There is a strong likelihood that the EAP constitutes a violation of both obligations.

Understanding the effect of an emissions trading scheme on electricity generator investment and retirement behaviour: the proposed Carbon Pollution Reduction Scheme

The objective of a greenhouse gas (GHG) emissions trading scheme (ETS) is to reduce emissions by transitioning the economy away from the production and consumption of goods and services that are GHG intensive. A GHG ETS has been a public policy issue in Australia for over a decade. The latest policy initiative on an ETS is the proposed Carbon Pollution Reduction Scheme (CPRS). A substantial share of Australia’s total GHG reduction under the CPRS is expected to come from the electricity generation sector. This paper surveys the literature on investment behaviour under an ETS. It specifically focuses on the relationship between the design of an ETS and a generator’s decisions to invest in low emissions plant and retire high emissions plant. The proposed CPRS provides the context for presenting key findings along with the implications for the electricity generation sector’s transition to lower emissions plant. The literature shows that design features such as the method of allocating permits, the stringency of the emissions cap along with permit price uncertainty, provisions for banking, borrowing and internationally trading permits, and the credibility of emissions caps and policy uncertainty may all significantly impact on the investment and retirement behaviour of generators.