The Emissions Reduction Fund: a critique

The Abbott Government’s response to the problem of climate change is the ‘direct action’ proposal, a fig leaf to cover the gap left by their planned abolition of the carbon price. Its main component is an emissions reduction fund which will be used to pay firms tendering to reduce their CO2 emissions below ‘business as usual’ levels. No credible experts believe the $1.1 billion over four years allocated in the budget will suffice to reduce emissions to anywhere near the promised 5 per cent (from 2000 levels) by 2020, let alone the much larger reductions which would represent Australia’s fair contribution to limiting global warming. Even were it better funded, the current sketchy version of the scheme, changed quite a deal from that taken to two elections, is still flawed in many ways. It fails to limit emissions. By only offering five-year contracts it will not affect long-term investment decisions. Taxes are higher so as to pay polluters. Past bad behaviour is rewarded and administrative expenses will be very high. Unsurprisingly, the overwhelming majority of economists oppose it.