'Bastard child': Review of controversial emissions fund finds 'significant risk'

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'Bastard child': Review of controversial emissions fund finds 'significant risk'

By Peter Hannam
Updated

Some of the carbon offsets operating under a controversial $2.5 billion fund set up by the Abbott-Turnbull government are at "significant risk" from bushfires, according to a review by the Climate Change Authority.

The audit of the Emissions Reduction Fund, released by the authority on Monday, released by the authority on Monday, found that evidence of systemic problems had yet to emerge, but that there were questions over whether some of the carbon stored under the scheme would have been stored anyway.

The report noted the fund had so far paid out $2.23 billion for 189 million tonnes of emissions reductions, or about $11.80 per tonne. Some 26 million tonnes had already been delivered.

"Overall, this review has found that the ERF is generally performing well," the report said. "It has successfully incentivised new domestic abatement at low cost that will help contribute to Australia meeting its international target commitments."

Australia's emissions problems aren't going away.

Australia's emissions problems aren't going away.Credit: AAP

However, critics such as Clive Hamilton – an academic at Charles Sturt University who resigned from the authority's board in February –dismissed the review as giving "a veneer of legitimacy to a discredited scheme".

"The federal government has stopped talking about the ERF," he said. "It's like bastard child whose existence no one wants to acknowledge."

Tim Baxter, a researcher at Melbourne University's Australian-German Climate and Energy College, described the report as "a light touch" that failed to address the many systemic problems with the fund.

"Pretty much in every methodology you look at there's some fundamental accountability issue," Mr Baxter said. "This is almost big enough that 30, 40, 50 per cent of the abatement you're claiming under this methodology doesn't exist."

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Bushfires pose a threat to the carbon sequestered under the $2.2 billion spent so far under the Emissions Reduction Fund.

Bushfires pose a threat to the carbon sequestered under the $2.2 billion spent so far under the Emissions Reduction Fund.Credit: Craig Abraham

The report's release comes ahead of a review of the government's overall climate policies is scheduled to be released before the end of the year.

Josh Frydenberg, Minister for the Environment and Energy, welcomed the report's view that the ERF was "performing well".

"The government will carefully consider the review's recommendations and table its response in due course," he said.

Forest issues

Among the issues the report did highlight was the fact 139 million tonnes of the abatement paid for was in vegetation and soil, and at "significant risk" of reversal.

"[T]he Authority recommends that scheme participants submit plans to the Clean Energy Regulator (CER) outlining how they will maintain carbon in their projects and deal with the risk of fire," it said.

Of the vegetation projects, 75 per cent were located in the Cobar Peneplain and Mulga Lands of south-west Queensland and western NSW.

The current buffer of 5 per cent "may need to be reviewed to take into account increasing risk of natural disturbances, particularly if sequestration projects are geographically concentrated", it said, adding any changes should not affect existing projects to avoid creating investment uncertainty.

Mr Baxter also questioned the discounting by only 25 per cent projects that were earmarked to run for 25 years compared with those meant to store carbon for a century.

The discount rate seemed more to do government borrowing costs rather than natural processes.

"A 25-year permanence period is very, very different - and a lot more than a 20-25 per cent difference - to a 100-year permanence period in terms of emissions," Mr Baxter said.

"The odds of a government stepping in and purchasing that future abatement…if one project fails through from fire or drought …seem pretty slim."

Landfill issues

Similarly, he queried the report's findings that landfill projects had met the "additionality" conditions even when ample evidence existed –such as reported by Fairfax Media – that many such ventures would have happened without the ERF.

Almost all landfill operators had joined the bidding for funds even though they got money from the Renewable Energy Target, didn't have to comply with the newness requirement, and "a decent percentage are required by law in their home state" to deal with emissions, Mr Baxter said.

"You've got things like that which are really, really problematic," he said.

Another issue raised in the report was the market concentration. Just two firms – GreenCollar and Corporate Carbon – control 55 per cent of the abatement supplied by Carbon Service Providers.

The authority did not recommended any specific steps to address the domination of a few companies.

It did, however, call for the government to seek to amend the Carbon Credits Act 2011 so that agents be required to pass a fit and proper test to address concerns such as those raised by the National Farmers' Federation about CSPs "behaving unscrupulously".

By international standards, the ERF was "reasonably good" and had problems that could be fixed if governments were serious, Mr Baxter said.

"There are loopholes there you can drive a truck through but they can be closed over time," he said.

Political view

Adam Bandt, the Greens climate change spokesman, though, said the previous Labor/Greens program had resulted in "real emissions cuts with polluters paying the public $24 a tonne".

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"Under the Liberals, pollution is rising and taxpayers are paying $12 per tonne for forest schemes that might go up in smoke," Mr Bandt said. "Real climate policy shouldn't be reversible.

"We can plant all the trees in the world but until we cut pollution from coal and petrol, we won't stop climate change and the bushfires it will bring," he said.

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