Urbis Think Tank
The emissions debate – Grattan research shows a market is best for reductions
This week, Grattan Institute released its next energy report, entitled, Learning the hard way: Australian policies to reduce carbon emissions.
Because Australian governments have introduced more than 300 programs to tackle climate change since Australia signed the Kyoto Protocol in 1997, we can assess the evidence of what works and what does not in reducing carbon emissions. The evidence shows that what reduces emissions most effectively and cheaply is the creation of a market.
In this report, Grattan analyses these 300 programs and finds that three market-based schemes have produced 40 per cent of Australia’s emissions reductions since 1997, once land clearing is excluded. This is easily the largest amount of reduction produced by any mechanism government has tried.
By contrast, $7 billion of grant-tendering schemes – upfront grants to companies for proposals to reduce emissions – have done very little to reduce greenhouse pollution. Governments have also spent $5 billion on rebate programs to encourage the purchase of low-emission products. Again, the impact on emissions growth has been minimal.
A fourth kind of program – energy efficiency standards – can reduce emissions cheaply and effectively, but is limited in scope. Based on experience, only a market-based model can meet Australia’s 2020 target, endorsed by both main political parties, of reducing annual emissions by five per cent below 2000 levels.
Visit the Grattan website to download a copy of the report
Urbis Sustainability Associate Director, Roger Swinbourne agrees. “A market based system will by its own structure enable the most significant emitters to identify the most significant and cost effective means reducing emissions. It is the ability to leverage actions at the minimal cost rather than trying to back a winner through grant schemes or rebate programs.” This finding is consistent with earlier analysis and forecasting undertaken by McKinsey and Garnaut.
Get your grant applications in quick!
The implications of these findings would typically be a change in the focus from grant funded programs or targeted incentives in favour of a market based trading or tax system, however given the current debate around carbon pricing this may be some way off.
If you are considering using grant funding to support sustainability initiatives for projects you are working on it may be worth prioritising them in the short term. Actions to reduce carbon emissions are currently being managed through a range of carrots (grants and rebates) and sticks (market mechanisms). Taking advantage of the current grants and rebates available in the short term may save you money in the longer term when more onerous market based mechanisms are put in place.