This is the second part in a series about the Caps and Targets Review being conducted by the Australian Government’s independent Climate Change Authority (CCA) this year. Part 1 summarized the global climate crisis. This part explains the importance of the review and how CCA should approach it.

As a new and respected independent body, CCA has an opportunity to be a strong advocate for climate action, and challenge the assumptions that Australian governments have made about climate policy to date. The Caps and Targets Review should be treated not as a box-ticking exercise but as part of a vitally important global effort to avert climate catastrophe.

As currently designed Australia’s carbon price  is full of holes which render it ineffective, and Labor still clings to its meaningless target of a 5% reduction by 2020 (as I will expand on in later installments). However, assuming Gillard remains in power, CCA may provide an avenue for climate campaigners to persuade the government to set a real target and plug the holes.

This review is pivotal because it will recommend emissions caps for 2015-16 to 2019-20. The government will have to justify any deviation from CCA’s advice, and Parliament will have the chance to scrutinize and the power to disallow the government’s emissions caps (with a default one-year cap to apply if they are disallowed). At that time the Senate will still have its current composition, but Labor might be able to pass weak targets if the Liberals support it. If that happens, it is unclear whether it would be constitutionally possible to later reduce the number of emissions permits; any attempt to do so might be legally challenged as an acquisition of property.

Anthropogenic global warming is a complex and interconnected problem, so many issues technically outside the scope of the Caps and Targets Review are nevertheless relevant to its recommendations, hence are covered in this series. CCA’s thinking on emissions targets should be framed by crucial background and principles including the scale and urgency of the climate crisis, the political obstacles to climate action, the role which Australia should play, the baselessness of economic justifications for inaction, and the role which the carbon price should play. Even if CCA recommends ambitious targets, their effectiveness will be determined by other decisions about the design of the emissions trading scheme (ETS) which the carbon price will become in 2015, whether it is complemented by other climate policies, and whether other Australian contributions to climate change are also addressed.

There are several ways in which CCA could consider advice beyond the scope of the Review. Firstly, CCA’s mandate allows it to have regard to any relevant matter in deciding its recommendations. Secondly, there is nothing to stop the Review discussing topics outside its scope without making specific recommendations on them, to put its recommendations in context. Thirdly, I understand unscheduled reviews can be commissioned at any time and CCA can commission its own report if necessary, to research and make recommendations on vital matters outside the scope of scheduled reviews. Fourthly, a scheduled review could be brought forward. In particular, CCA is scheduled to review the carbon price mechanism in 2016. A 2016 review is too far away given the importance and urgency of getting climate policy design right, and the likelihood that emissions caps will be locked in until 2020. Therefore the date of that review should be brought forward to coincide with the Caps and Targets Review. CCA reviews should be as frequent as possible in order to accelerate climate action in the required timeframe. 

There are two possible sources of political interference that could prevent the completion of the Caps and Targets Review. Firstly, the Liberal Party has clearly stated it will abolish CCA if it wins the September election.[i] Also of concern is that Kevin Rudd has hinted that if reinstated as Labor leader he would consider an earlier transition to an ETS[ii], which could be construed as an intention to abolish CCA and set emissions caps without its advice. 

If climate change is not adequately addressed, the resulting impacts will almost certainly outweigh all other attempts to make Australia and the world a richer and/or more equitable society. Thus CCA’s main objective in all its reviews must be strengthening climate policies to accelerate the transition to a zero-carbon economy, not weakening them to reduce alleged short-term costs. The goal of accelerating mitigation of climate change must be paramount, overriding policy certainty, cost-effectiveness, efficiency, equity, foreign policy, and trade objectives where they are perceived to conflict.

Because of the need for fossil fuel phaseout, the fossil fuel industry cannot be trusted to participate in the design of climate policies. Misleading, self-serving arguments will be made to CCA by the fossil fuel lobby and the broader business lobby. While it could be argued these organizations have a right to lobby in their self-interest, their interests should not be put ahead of the public interest. They have known for many decades about climate change and the risk it poses to fossil fuel investments, and they should now face the consequences of the investment choices they have made without special treatment by governments. Past experience (eg. with carbon price compensation) shows that when the fossil fuel lobby secures concessions from government, however arbitrary, they become entitlements that are difficult to remove.[iii]

There is little point in trying to minimize policy uncertainty for investors. The reality is that climate policy will be subject to uncertainty for the foreseeable future, because it challenges powerful interests. However well climate policies are designed today, there is a danger they will be sabotaged by vested interests tomorrow, further emphasizing the need for decisive, rapid, and transformative action. The present focus on 2020 and 2050 targets makes it too easy for present governments to delay the heavy lifting and for future governments to undermine the policies of present ones (consider Australia’s failure to meet the Hawke government’s target of a 20% emissions reduction below 1988 levels by 2005[iv]).

Within this context, the best way to design climate policies is not to aim for investment certainty, but to send the strongest signals possible to penalize fossil fuel use and incentivize investment in zero-carbon technologies. CCA must not shy away from recommending policy changes to this end. The reason for the existence of a Climate Change Authority with regularly scheduled reviews is to provide regular opportunities to strengthen Australia’s climate policies and thus accelerate decarbonization over time.[v] If CCA continues to take the light touch approach it took in its Renewable Energy Target Review, it will be making itself irrelevant.

In Part 3, I will outline the role Australia should play in climate action.