The first year’s data is out — Australia’s secret Emissions Trading Scheme is up and running, it’s small, inefficient, and pointless, but all the government needs to do is raise those caps, and the carbon trading monster octopus could wrap around on half our economy.
Australian carbon credits are for sale (called ACCU’s), the price was $14-$18 and the total volume was probably around $7 million. This supposed tiny “free market” marvel could not even match the $11/ton price that Abbott’s direct auctions achieved — proving yet again how inefficient economy-wide incentive schemes on essential molecules are. If the caps were raised the price would rocket. (Remember Labor’s carbon price ended up being $5310 per ton.)
What do you mean, you didn’t know Australia had a carbon credit market?
Obviously, you havent been spending your weekends reading the finer points of our legislative instruments. The legislation for this was voted on in the last sitting of Parliament before Christmas of 2015 while Turnbull was a new PM. There was no public debate, no parliamentary discussion and no news coverage of it til May the next year, and it was barely covered at all during the election which occurred the day after this “market” started. For some reason Turnbull didn’t brag about his master success — achieving what Rudd and Gillard failed to do. This is because he is a self-effacing and humble man … or maybe he knew his voters hated it, and he hoped to deceive them.
The Press Release from the Carbon Market Institute, this week:
Safeguard Mechanism Reboots Australia’s Carbon Market
Data released on Wednesday by the Clean Energy Regulator indicates that under the first year of the Government’s ERF Safeguard Mechanism sixteen facilities have exceeded emissions limits, collectively surrendering 448,097 Australian Carbon Credit Units (ACCUs) to meet compliance obligations.
“Today’s announcement by the Clean Energy Regulator clearly indicates that Australia has a functioning carbon market,” says Peter Castellas, Chief Executive Officer of the Carbon Market Institute.
“Companies that had a liability under the Safeguard Mechanism were able to purchase ACCUs directly from project developers or on the secondary market – and the market was able to meet supply,” says Castellas.
Ben Potter of The Fin Review put some numbers on the carbon price
About a dozen large emitters caught by the safeguard had to buy an estimated 400,000-450,000 tonnes of Australian Carbon Credit Units, pushing the price to $17-18/T as the 28 February deadline for compliance approached. Most of the trade was in the $14-15/T region.
Potter’s article mentions Tony Abbott fully ten times — slavishly trying to pin this as an Abbott creation. The legislation was drafted two weeks before Abbott was ousted. Was Abbott even aware of the details — would he have allowed this to go through to be voted on? (It would be nice to get clarification on this.) Abbott certainly didn’t want this, and we have Gore and Clive Palmer to thank for it.
Coming next — International Credits — Australians to pay money to foreigners for atmospheric nullity
This market appears to be Australian credits only, but the government made it clear they want to accept international credits next. You didn’t know? That news was also released just before Christmas (when all poison news is announced). International carbon markets are loved by large financial houses like Goldman Sachs, and Deutsch Bank who broker the deals. They also serve supranational unaccountable large governmental bodies like The World Bank and the UN.
Turnbull is not called The Member for Goldman Sachs for nothing. Who does he serve?
Whatever you do, don’t tell the voters
Australians voted emphatically against carbon taxes and carbon markets in two elections. Abbott won a landslide 90 seats with a blood oath in 2013. Then Turnbull ran, didn’t mention his carbon-desires, and barely scraped in. Elections turn on this issue. Gillard would have lost in 2010 if she hadn’t lied about a carbon tax (she only won by 400 votes in Corangamite). Would Turnbull have lost in 2016 if it was an election topic? He easily could have, but even if he didn’t — in a transparent campaign he would have been forced to make some public promises or vows. At the very least, minor parties would have grabbed more power as the Liberal base fled, and Turnbull would have had to make deals with them to form government.
Democracy is not supposed to work by keeping voters in the dark.
Who wants a fake, unfree carbon maket?
Some things were never meant to be in a free market — like basic molecules of life. To recap on the features of a “carbon price”: — The government sets supply and demand and enforces it with threats of jail. This is as fake and unfree as it gets.
The players in a carbon market include “every living thing” on the planet plus oceans, dead peat and some rocks. Most players can’t play, and the product is based on the absence of an invisible gas, and sometimes even the “intentions” of the players. Accounting is nigh on impossible — we still don’t even know all the big drivers of natural emissions and sinks.
Like all markets that were never meant to be, carbon markets feed crime and corruption, fraud, and financial sharks. It’s prone to cronyism where exemptions are granted according to marginal seat status or the whim of a politician. Australia needs one like we need a massage from the mafia.
The Press Release from the Carbon Market Institute, 14th March, 2018
Safeguard Mechanism Reboots Australia’s Carbon Market
Data released on Wednesday by the Clean Energy Regulator indicates that under the first year of the Government’s ERF Safeguard Mechanism sixteen facilities have exceeded emissions limits, collectively surrendering 448,097 Australian Carbon Credit Units (ACCUs) to meet compliance obligations.
“Today’s announcement by the Clean Energy Regulator clearly indicates that Australia has a functioning carbon market,” says Peter Castellas, Chief Executive Officer of the Carbon Market Institute.
“Companies that had a liability under the Safeguard Mechanism were able to purchase ACCUs directly from project developers or on the secondary market – and the market was able to meet supply,” says Castellas.
The Safeguard facility reported emissions data for the first year of the Safeguard’s operation to 30th June 2017, shows that of the 154 responsible emitters covered by the Government’s Safeguard Mechanism, sixteen facilities emitted higher CO2-e levels than permitted by their legislated baselines, and so engaged in carbon market activity to purchase and retire ACCUs to acquit their respective liabilities by the 28th February 2018 deadline. This first compliance and reporting period has seen 100% compliance by responsible emitters.
Companies need to be warned, worse is coming:
“This successful carbon market trading under the first year of the safeguard mechanism augers well for a time when the demand for carbon credits increases. Safeguard Mechanism baselines will inevitably have to decline if we are to meet below business as usual emissions required under Australia’s Paris Agreement commitments,” says Castellas.
“The Safeguard Mechanism in its current form was not expected to result in a liability for covered entities. I think the data released today will alert many large greenhouse gas-emitting companies to existing climate risks, and that they are going to increasingly need to look at a carbon liability hedging strategy in anticipation of Safeguard Mechanism baselines declining at some point,” he says.
Most voters don’t want Australia to meet the Paris agreement if it costs much. Unless they elect a government that openly agrees to ignore the Paris agreement like the largest economy on the planet does, big costs are coming:
“It is now more important than ever that the government define the conditions and criteria on how Safeguard baselines will decline to align with the trajectory of our Paris targets. Business needs clarity to manage future liabilities under the Safeguard Mechanism,” says Castellas.
“The purchasing of ACCUs in the first compliance year of the Safeguard sends an important private sector market signal to suppliers and developers of carbon abatement projects. This transition from government funded carbon abatement under the ERF to a private carbon abatement market is underway,” he says.
“It now brings into focus the key questions of how the market will evolve, and how domestic supply will meet demand,” says Castellas.
“Demand for carbon offsets is likely to come from numerous potential sources: future ERF auctions; the Safeguard Mechanism; the National Energy Guarantee; the voluntary market; new funds like Queensland’s Land Restoration Fund; international demand from the aviation sector; and other international markets,” he says. “The ERF’s $2.55 billion fund has been critical to ensuring the longevity of Australia’s domestic offset scheme, but the transition to a Safeguard-led private demand signal is the critical turning point that will begin to drive increased demand for ACCU supply,” says Castellas.
“It will be crucial for government and the private sector to work together to ensure our domestic offset supply can meet this demand by investing in new abatement methods, more R&D, innovative financing, and engaging stakeholders on the land,” he says.
“Australia has a well-designed, well-governed domestic offset scheme and deep project development capabilities. With clear market and policy signals the industry could scale up to meet increasing domestic demand and potentially develop an export market for ACCUs,” says Castellas.
The Carbon Market Institute views a market-based approach to emissions reduction as providing an effective and efficient framework to meet emissions reduction goals and challenges at lowest cost. The primary policy instruments to reduce emissions across the economy should involve emissions trading and putting a price on carbon.
h/t Jim Simpson
Information and References
The details of the Safeguard Mechanism are set out in the following legislative instruments:
- National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015(link is external);
- National Greenhouse and Energy Reporting Act 2007(link is external);
- National Greenhouse and Energy Reporting Regulations 2008(link is external); and
- National Greenhouse and Energy Reporting (Audit) Determination 2009
The SafeGuard Mechanism Clean Energy Regulator
Emissions Reduction Fund Safeguard Mechanism Dept of Env and Energy