The Department of Climate Change isn't buying Tony Abbott's plan.
The analysis, prepared by the deputy secretary of the Department of Climate Change, Blair Comley, says that rather than reduce emissions by 5 per cent by 2020 as the policy claims, it would lead to an increase of 13 per cent.
Mr Comley, an economist who was instrumental in designing the Government's emissions trading scheme, says the Coalition policy underestimates the cost of each tonne of carbon for which taxpayers would pay businesses that reduce emissions.
On Tuesday, Mr Abbott unveiled a policy he said would cost $3.2 billion over four years and more than $10 billion by 2020.
At its core is an emissions reduction fund worth $2.6 billion over four years.
Polluting businesses which chose to reduce emissions could apply for grants from the fund and they would be paid between $10 and $15 for each tonne of carbon they saved.
Here's the follow up to the Coalition's Climate Change policy.
The Coalition's scheme is not all good news for our farmers.
First, farmers will be paid $10 for each tonne of carbon dioxide stored in soil. But $10 is a very low price. Under the government's carbon emissions trading scheme, farmers would be paid two to four times more than the Coalition's offer.
Second, while the focus on storing carbon in soils is welcomed, farmers will not be paid to restore native vegetation on degraded land.
Under the government's scheme, farmers would be paid to plant trees on degraded land and in areas of high conservation value.
Farmers would get an extra income and would help improve the health of degraded river systems in the Murray-Darling Basin, fix land degradation across the south-west of Western Australia, improve water quality in the catchments of the Great Barrier Reef, and address overstocking in our vast rangelands of northern Australia.
The advantage of the government's scheme is that farmers would be paid to optimise terrestrial carbon across the country and it puts a cap on carbon pollution.
But neither side of politics has adopted a cap deep enough to drive the industrial transformation.
The NSW Government pays $25. I don't think $10 cuts it, do you?
The bottom line perhaps is that the Coalition don't believe in Climate Change for reasons that satisfy their own prejudices and not much more, but have cobbled together a policy because they know the electorate have been convinced about it and therefore must come up with *something*/*anything* to mollify a demand.
Here's another critique.
The central element of Abbott's policy is a new Emissions Reduction Fund. A Coalition government would allocate $11 billion to this fund over the 10 years from 2011 to 2020: it would start at $300 million in 2011 and grow to something like $2 billion by 2020.
The fund would give grants to businesses for projects to cut their emissions of greenhouse gases.
Participation by polluters would be entirely voluntary. If businesses chose to do nothing and continued increasing their emissions in line with current trends, they would not face any penalty or cost.
The Coalition reckons its fund will "buy" 140 million tonnes a year worth of reduction in emissions of carbon dioxide and other greenhouse gases by 2020.
A reduction of that size would indeed meet the Federal Government's target of reducing Australia's greenhouse gas emissions by five per cent by 2020.
But the Coalition has used back of the envelope calculations to arrive at its 140 million tonne by 2020 estimate of greenhouse gas abatement under its policy. The calculations are based on estimates from industry lobby groups eager to get their hands on the grants.
Real-world experience with similar schemes suggests these estimates are highly ambitious.
It goes on to say:
The Federal Government's Department of Climate Change has calculated that the current cost of each tonne of carbon abated under this scheme is around $40. Inflation would lift that to $50 a tonne by 2020.
At that price, the $2 billion in Abbott's fund in 2020 would buy only 40 million tonnes of abatement, a long way short of the 140 million tonnes the Coalition has estimated.
I did some calculations of my own based on commercially available project components and couldn't come up with better than $75 per ton unless I had a dedicated, bulk/ mass capture solution. The hidden cost of carbon capture whether it is in trees or slabs of limestone or what have you, is that you then have to transport it somewhere for storage. So $45-$55 per ton for capture makes sense, but it doesn't include shipping & storage and GST. Even the Federal Government's $40 figure is probably based on a hypothetical efficiency gained from scale.
But that's just the numbers. The best understanding of it is here:
The two most reputable market-based policies for cutting emissions are carbon taxes or "cap and trade" schemes like the Rudd Government's Carbon Pollution Reduction Scheme.
Both impose a carbon price on emitters.
Cap and trade schemes fix the quantity of emissions and let the market determine the carbon price. Carbon taxes set the carbon price and let the market determine the quantity of emissions.
Abbott's scheme is effectively a "negative carbon tax." This means it is the worst of both worlds: it does not fix the quantity of emissions nor does it impose a carbon price on polluters.
This means central planners and business lobbyists rather than market forces will determine where emissions reductions are to be pursued. That is hardly likely to deliver the lowest-cost abatement.
And it is a remarkable approach for an avowed pro-market politician.
Magic Pudding indeed. To think that we were so close to an ETS only 2 months ago. The mind boggles.
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