KEY ISSUES: SUSTAINABILITY AND ENVIRONMENT
IMPLICATIONS OF A NATIONAL EMISSIONS TRADING SCHEME
In late March 2007, A3P made a submission to the Prime Ministerial Task Force on Emissions Trading.
A3P’s submission argued that any Emissions Trading Scheme must reflect the true impacts of activities on emissions and include 4 points specific to the forest industry.
- Forestry offsets should be included in any emissions trading scheme.
- Carbon accounting rules should reflect that carbon is stored in timber during use, and for many decades after disposal.
- There should be acknowledgement and benefit for the current high levels of renewable energy use in the wood and paper industry.
- There should be mechanisms to maintain the competitiveness of the pulp & paper sector with respect to producers in other countries where no carbon cost is imposed.
Since that time there has been a number of announcements by key business and industry groups and continual media speculation on the establishment of a National Emissions Trading Scheme.
A3P has provided further input on some specific issues with direct implications for our membership.
Inclusion of forestry
One of the most compelling advantages of emissions trading, as a policy response to the challenge of climate change, is the ability of the market to find efficient least cost abatement at the scale required. It follows from this that the market should be set up to allow equal access for all possible abatement opportunities. The sequestration of carbon in new forests is one of these options.
Objections to the inclusion of forests are often spurious or over-stated. The first is that large scale plantations may have other impacts, including water use/interception. The basis of this claim is questionable as the scale of revegetation has been shown to have negligible impacts on water availability. [Read more about plantations and water] It would also only be a valid consideration if all the other impacts of plantations, including positive effects, were considered simultaneously, along with all the other impacts of other options such as the non-renewable nature of gas and clean coal and the social impacts of wind power.
The second objection is that the accounting is difficult, citing the European approach. However, the NSW Greenhouse Gas Abatement Scheme has demonstrated that it is possible to develop and implement a rigorous and conservative approach to carbon accounting in new forests that acknowledges the carbon sequestered without undermining the integrity of the carbon credits or the trading scheme.
The National Emissions Trading Taskforce has proposed to use the NSW GGAS model in its design of an emissions trading scheme.
Complementary measures
A3P believes that emissions trading on its own will not be sufficient to address the challenge of climate change. However, it is important that this consensus does not lead to the erroneous view that any policy is compatible with emissions trading.
As noted above, the strength of emissions trading is to harness the power of the market to address the problem at the scale and timing determined by the science and interpreted by policy. The market does not discriminate between abatement options and is not reliant on the Government’s, or any one individual’s judgement as to the best method of abatement. Emissions trading is an effective instrument for liable parties to choose between abatement opportunities that are commercially available and covered by the scheme.
The efficiency of the market will be reduced, and the cost of abatement increased, if other Government programs discriminate between forms of abatement. The MRET program, for example, favours some type of abatement, such as wind power, over others, such as switching to gas from coal, rather than allowing each player in the market to choose the abatement that suits their situation.
Similarly schemes directed at reporting energy and greenhouse use or encouraging immediate implementation of abatement should not co-exist with emissions trading. All these policy initiatives add costs to business, and Government, without increasing the level of abatement.
However A3P acknowledges there are areas that emissions trading will not effectively cover. These include research and development of low- or no-emissions technology that is not currently commercially viable, regulation to exclude certain activities or products that are deemed inappropriate, and, most importantly, measures to reduce emissions in sectors that may not be covered by an emissions trading scheme. This last point will be particularly crucial if an Australian emissions trading scheme, like many others, does not include transport and agriculture within its scope.
The key challenge to Government with respect to complementary measures is to implement those that support emissions trading by influencing behaviour in areas of the economy where emissions trading is not effective, but avoid those measures that dilute or defuse the power of emissions trading to find efficient solutions by distorting the market that is created.
Emissions-intensive, trade-exposed industry
The potential impact of a domestic emissions trading scheme on emissions-intensive, trade-exposed industry has been acknowledged by many groups. The report of the National Emissions Trading Taskforce notes “a rise in energy prices associated with the introduction of an emissions trading scheme in Australia could mean that firms reduce their production in Australia, or close down and move offshore. Even if existing firms stay in Australia, it is possible that new investments in such industries would not be made in Australia, and would be made in other countries with no equivalent emissions constraint.” [visit the Prime Ministerial Task Group on Emissions Trading website]
The need for measures to maintain the competitiveness of Australia’s emissions-intensive, trade-exposed industry is often talked about in terms of minimising economic damage to critical parts of Australia’s economy, or the need for fairness and equity when introducing major changes in Government policy. Both these justifications are sound and sufficient to warrant action, but they overlook the most important justification for measures to maintain the competitiveness of Australia’s emissions-intensive, trade-exposed industry – will it contribute to the central policy objective of mitigating climate change by reducing global emissions?
We need to differentiate between changes that meet the policy objective – reducing emissions - and changes that don’t meet the policy objective – just shifting emissions to another country.
The introduction of a carbon cost will change the relative competitiveness of competing products or services on the basis of their emissions profile. This is central to the objective of the policy and must be allowed to occur. It creates the market signal that brings about the behavioural change needed to reduce emissions.
However, the introduction of a carbon cost in some countries and not others will change the competitiveness between products based on their country of origin, not their emissions profile. This is contrary to the policy objective, damaging to the economy, and will not lead to reductions in emissions. Measures should be implemented to minimise or eradicate this effect.
The challenge is to design a response that allows the former outcome but prevents the latter. In the context of the plantation products and paper industry, it must reward the lower greenhouse footprint of timber compared to competing building materials but not reduce the competitiveness of Australian pulp & paper producers relative to producers in countries with no carbon cost.
Fairness, equity and the national economy are all sound justifications for measures to maintain the competitiveness of Australia’s emissions-intensive, trade-exposed industry but the most compelling argument is that such measures are needed to reduce global emissions rather than simply reducing Australia’s emissions by shifting production offshore.
Further information
A3P will continue to keep our members informed about any developments on a National Emissions Trading Scheme via our website and weekly electronic newsletter Canopy. Click here to subscribe to Canopy
For further information:
- Read A3P's Submission to the Prime Minister’s Task Group on Emissions Trading (March 07) Adobe PDF I 140 KB
- Visit the Prime Ministerial Task Group on Emissions Trading website.
Timber Information
Free technical information on the source, selection, properties and other atributes of plantation timber based products available for use in building and construction applications.