Coalition climate policy forced big polluters to pay $15m for carbon credits in past year | Climate crisis

The Coalition last year required polluting businesses to buy 419,000 carbon credits at an estimated cost of $15m using a policy that Scott Morrison now falsely describes as “Labor’s sneaky carbon tax”.

Government data released last month shows that, under the Coalition’s so-called safeguard mechanism, major polluting companies had to buy 70% more carbon credits last financial year than in 2019-20.

Industry representatives said it showed Australia already had an emissions compliance system that forced major polluters to pay for some emissions despite Morrison claiming its use of the safeguard mechanism involved “incentives”.

Several business groups implicitly called on the government to drop its attack on Labor over climate policy and to join the opposition in promising to use the safeguard mechanism to cut emissions.

The safeguard was designed by then environment minister Greg Hunt and introduced under Tony Abbott to limit increases in industrial emissions that would otherwise wipe out pollution cuts paid for by the government using its $4.5bn emissions reduction fund.

It requires the owners of major industrial sites to buy carbon offsets if they emit above a limit, known as a baseline. Labor has promised if elected to “predictably and gradually” reduce emissions baselines to help meet climate targets, following a recommendation of the Business Council of Australia.

The Coalition had a similar commitment to use the safeguard to cut emissions when Hunt was minister, but dropped it when he left the portfolio.

With opinion polls suggesting the contest is bogged down at the mid-point, Morrison has moved in recent days to reignite the climate wars. It comes as Coalition figures are publicly at loggerheads about whether or not the Morrison government had made a firm commitment to reach net zero emissions by 2050, with the Nationals senator Matt Canavan declaring the policy “all over bar the shouting”.

Morrison suggested on Wednesday the safeguard mechanism would be a “sneaky carbon tax” on “our traditional industries” under Labor.

Asked if that meant the Coalition had introduced a sneaky carbon tax, given it created the safeguard mechanism, he said the difference was “how the thresholds work and the fact we put incentives in place”. “What Labor is doing is binding them on this and issuing penalties on those companies, so they couldn’t be more different,” he said.

Labor frontbencher Jason Clare said Morrison’s claims were “absolute rubbish” and “the important thing here is to have a look at the motivations of the Liberal party”.

“They are all over the shop at the moment,” he said. “We’re in the middle of an election campaign and you’ve got the government at war with itself over climate change. I reckon most people who are watching at the moment have had a gut full of this.”

Morrison’s “incentives” could be a reference to a proposed “safeguard crediting mechanism” that would allow companies that cut emissions below their baseline to earn credits they could sell. Labor has proposed a similar change. It was among the recommendations of an expert panel review in 2020, and the government has consulted with industry and allocated $279.9m over 10 years to buy credits, but it has yet not been introduced.

Industry groups have called on politicians to use the safeguard to cut emissions, not as a political weapon.

“Most businesses will again be deeply disappointed that effective carbon policy and a sensitive debate has been overtaken by partisan politics,” said John Connor, the chief executive of the Carbon Market Institute, an industry association with a membership including most major emitters.

The Business Council of Australia, representing top corporates, said: “The safeguard mechanism is already in place alongside a suite of other measures to reduce emissions, with careful consultation with industry we believe it is the right incentive to drive investment, deliver more jobs and meet our net-zero commitments.”

It was backed by another major business association, the Australian Industry Group. A spokesperson pointed Guardian Australia to previous public advocacy, including a call for the safeguard mechanism to be “built on as a driver of long-term abatement within industry and the wider economy”.

The new data released in March showed the Clean Energy Regulator, the government agency that runs the safeguard, last year required the owners of 14 industrial sites to buy 419,315 credits to offset emissions above their baselines, significantly more than in the three previous years. The sites included Incitec Pivot’s ammonia plant at Moranbah in Queensland (129,955 credits), Alcoa’s Portland aluminum smelter in Victoria (47,541) and Rio Tinto’s Tom Price iron ore mine in Western Australia (32,337).

Connor said the average price of a credit on the small Australian market during the compliance period was about $36 a tonne, suggesting the businesses could have together paid more than $15m for credits.

The increase in what companies have been forced to pay for their emissions follows significant criticism of the scheme’s operation. As Guardian Australia has reported, companies have consistently been allowed to increase their carbon pollution without penalty.

Industrial emissions are up 17% since 2005 and about 7% since the safeguard began operating in 2016. Both industry representatives and climate activists have argued it has made the scheme, as currently operated, a waste of time.

Modeling for Labor has suggested its policy would start to change that by reducing emissions by about 213m tonnes by 2030. It says it would ask the regulator to work with companies to make the cuts in a way that supported “international competitiveness and economic growth” and did not disadvantage exporters in global markets.

Connor said with a full cap and trade carbon pricing mechanism off the table, the safeguard mechanism was “the best place to start a policy that provides clearer investment guidance and guardrails for the task of industrial decarbonisation”. He said that was why it had been supported by the business council and Ai Group.

He said the last Australian climate policy survey in 2021 found 79% of business respondents believed mandatory baselines under the safeguard mechanism should be set to reduce over time, in line with Australia’s 2030 emissions reduction target.

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