<a href="https://www.greenlifestylemag.com.au/blogs/leon#">The Business of Green</a>

The Business of Green

Money matters in the green world, by Leon Gettler.

Is Turnbull's ETS model really cleaner and greener?

Malcolm Turnbull

Credit: Wikimedia

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Everyone needs to look carefully at Malcolm Turnbull’s carbon plan, detailed here. If you want, you can also watch him explain some of the basics on this video:

Turnbull says the model is "cleaner, greener, cheaper" but there’s just one problem: it’s not Coalition policy. Today, Coalition MPs reportedly agreed to vote against the Government’s Carbon Pollution Reduction Scheme (CPRS) in the Senate on Thursday. But they stopped short of endorsing Turnbull’s scheme.

That’s a problem for the Government. But it’s also a headache for the Opposition leader. Maybe he needed something decisive to divert attention from Godwin Grech. But that’s another story. What about the scheme itself?

In a nutshell, it gives mega-polluters 100 per cent free permits. Under the Rudd Government’s Carbon Pollution Reduction Scheme (CPRS), trade exposed industries get 66 per cent or 94.5 per cent of permits free.

Whereas the CPRS is looking at a minimum 5 per cent emissions cut on 2000 levels by 2020, Turnbull’s scheme doubles that to 10 per cent. People would also pay less for electricity. Under Turnbull’s scheme, the annual bill will be $44 more over five years; under the CPRS it will be $280.

In a bid to win over support of the Nationals, farmers will be excluded from scheme but allowed to generate and sell permits through offsets. The Turnbull scheme also envisages fewer jobs losses and more jobs in regional Australia.

The fine print is worth looking at in the pdf here.

Electricity generators will only have to purchase permits for emissions above a "baseline" of 0.86 tonnes of carbon dioxide per megawatt of electricity. The idea is that because there are fewer permits to buy, the industry wouldn’t have to raise prices so high and the government would not have to use the permit revenue to compensate households and businesses.

One of the key differences between the two schemes is that under the Rudd Government’s model, the 65 per cent and 95 per cent assistance would decline over time. The theory is that this would encourage companies to invest in energy efficient technology. Like the Turnbull scheme, the Rudd Government plan does not cap international permits.

By contrast, the Turnbull model will have all energy intensive industries continually receiving 100 per cent free permits, provided they are using international best practice technology.

All this raises a number of questions. As power emissions grow, would that only encourage big polluters to buy more overseas permits and indeed, increase our reliance on international permits?

If that happens, Australia would not be reducing its emissions. If emissions continue to grow, would we see a taxpayer-funded scheme buying international carbon permits to help Australia meet its national greenhouse cap?

And if Australian companies are being encouraged to buy international permits, what does that do for our balance of trade? Wouldn’t the money be better spent investing in a renewable industry in Australia?

Climate Change minister Penny Wong has described the model as a "mongrel".

"I want to make it clear, it is not greener, it is not cheaper and it is not smarter," she told 2UE breakfast radio this morning.

"It’s not greener because they haven’t put cuts on the table such as the ones we’re proposing at our high end which is a 25 per cent reduction by 2020. It’s not cheaper because it increases uncertainty across the Australian economy; it narrows the opportunities for reducing our carbon pollution. And it is not smarter because it leaves us isolated from the rest of the world where most economies are moving to a cap and trade scheme which is the one the Government is putting forward," she said.

Still, the Government’s problem is that its scheme is expected to rejected in the Senate on Thursday. Wong says the Government is determined to get it through.

Turnbull’s scheme has two problems: First, it is so complex that it will take time for businesses to understand it. But there is an even bigger problem: getting the party room to endorse his model.