Decades of a “hodgepodge” of measures on climate have cost the community and failed to cut greenhouse gas emissions, a federal review has found.
The existing safeguard mechanism for managing industrial emissions should be Australia’s principal economy-wide tool for abatement, according to the productivity report released on Friday.
Pursuing a “least-cost” approach to net zero emissions and adapting to a changing climate will be a key productivity challenge for Australia, the report found after a five-year review.
Failing to keep pace with climate policies of the world’s major economies risks reducing demand for key Australian exports, the report warned.
The mechanism designed to cap emissions must be broadened and strengthened, the commission recommended in the 1000-page report.
Across the economy, 215 industrial facilities each producing more than 100,000 tonnes of emissions a year must comply with the existing safeguard mechanism scheme.
“Decades of competing approaches to climate policy have left Australia with a hodgepodge of narrowly applied, sometimes inconsistent sectoral abatement measures,” the report said.
These measures not only impose an unnecessarily high cost on the community but often are ineffective in achieving abatement, it found.
“Investments in key sectors like electricity generation have been delayed and distorted by the lack of clear policy direction.”
The commission said the safeguard mechanism should be progressively recalibrated to achieve national abatement targets.
This would mean strengthening the integrity of offsets, expanding sectors covered, allowing the transfer of emissions rights within and between covered sectors, and phasing out other abatement policies.
The centrepiece of Australia’s abatement policy should be a safeguard mechanism that is broadened to include the electricity sector – measuring each facility rather than sector-wide – and transport, the report said.
Lower greenhouse gas emission thresholds are recommended, along with expanding the regime to more facilities.
Credits for abatement that go deeper than set baselines are also recommended, which is a key part of reforms before parliament that have failed to secure bi-partisan support.
The report said with climate-related investments over coming decades to be measured in the hundreds of billions of dollars, settings that distort even a small proportion of this investment will significantly impact productivity growth.
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