The beginning of the end of the Carbon Emissions Reduction Fund

A new report by the Australian Conservation Foundation and the Australia Institute shows that some $310 million of taxpayers money were paid under the Carbon Emissions Reduction Fund to landowners for retaining vegetation that was never going to be cleared. This finding is clear evidence of the lack of additionality in emission reduction under this policy. It means that we are paying to avoid emissions that were not going to be generated anyway and are therefore not reducing actual emissions. It shows the failings of the mainstay government emission policy, the Carbon Emission Reduction Fund, which is effectively a subsidy to wealthy landowners.  It highlights the perverse nature of this policy, which was introduced supposedly as superior to carbon pricing.

Back in 2014-2015 the then Abbott Government proposed this policy as an antithesis of the Carbon Pricing Mechanism (CPM). In effect, it meant that a mechanism based on sound economic instruments (emission taxes and tradable permit scheme) was substituted by a much less effective instrument, a subsidy! And somehow this was accepted by the public!  

We now have empirical evidence for the long-held suspicions about the Carbon Emission Reduction Fund. The whole program is not sound, it costs more than it should, and most importantly doesn’t deliver actual reduction of emissions.

This new evidence of the failure of existing policy puts pressure on the current government to rethink its stance on climate change. Australians want net-zero by 2050, but it is now clear that our government’s current policy cannot deliver it. The net-zero by 2050 is also becoming a global goal to which key Australian international partners subscribe.

However, these calls seem to be falling on government’s def ear, as it is preoccupied with its own disputes within the Coalition. The PM has even recently cast doubts over his participation in the upcoming CoP 26 in Glasgow. 

All this signals unwillingness to seriously deal with notable emissions reduction. But, if Morrison’s government continues to ignore the issue, it risks serious disconnect with the voting constituency in the lead-up to elections. And this can be very dangerous! Australians, like most of the world want their government to act on climate change. Pretence polices, like the clearly broken Carbon Emissions Reduction Fund will not deceive anyone anymore! 

Author: Tiho Ancev

Tiho Ancev is a Professor of Agricultural and Resource Economics in the School of Economics, University of Sydney. His main research areas are agricultural, environmental, natural resource and energy economics. Tiho’s main contributions have been in water economics and policy, economics of energy, economics of air pollution and climate change policies, and economics of precision agriculture and agricultural input use. He has published widely on these topics in top international peer reviewed journals. Tiho has led and contributed to national and international research projects in these research areas. He is currently the Managing Editor-in-Chief of the Australian Journal of Agricultural and Resource Economics.