Our response to the proposed Safeguard reforms

The government has now released its proposal for reforming the safeguard mechanism. This will be its primary emissions reduction policy for this term of parliament. It is a welcome step in the right direction, mainly because it is a price on carbon. It begins to reverse the carbon price we have been paying to support fossil fuel production and consumption for many decades. 

It also begins a process of restoring carbon pricing to its rightful place as a vital component of an effective and efficient climate policy. This is critical as carbon pricing has almost disappeared from discussion on climate and energy since it was made a key weapon in the climate wars of the past decade. The government will resist calling it a carbon price to reduce the risk of restarting the war. But we can quietly congratulate them for taking this step. 

Our feedback to government MPs needs to be along the following lines:

• the reformed safeguard is a welcome return to a policy of pricing carbon;

• its intention to reduce emissions towards our 2030 target is also welcome; and

• it begins the process of moving from the negative carbon price Australians currently pay to the positive price we need if we are to reduce emissions quickly and efficiently.  

However,

• it doesn't address the concerns we expressed in our submission to the safeguard reform consultation;

• there is high danger that the use of credits to offset emissions will encourage some industries to increase emissions and others to delay or slow their emission reduction efforts—indeed, the safeguard mechanism does not require a single company to actually begin to decarbonise;

• the safeguard is limited to only a small, albeit significant section of the Australian economy—28% is too small to make a significant impact on Australia’s emissions without significant complementary policies;

• it will have to work against the many subsidies and supports that are driving increased production and use of fossil fuels; and

• the lack of a carbon border adjustment exposes industry to competition from countries without a carbon price—the government's plan to assist them with $600m would be unnecessary if we adopted a CBAM . This is a further burden on the taxpayer and adds to the negative carbon price Australians are paying.

As we advocated in our submission to the reform consultation, a climate dividend is a powerful but simple complement to the safeguard. 

"By progressively pricing the greenhouse gas content of fossil fuels at their source the climate dividend takes much of the emissions reduction burden off the safeguard and will enable it to focus on some of the non-fuel related emissions that constitute 23% of Australia’s emissions (excluding LULUCF)."

We can continue to ask for carbon dividends for all the reasons we outlined in the submission . They can be summarised as follows:

• A tax on the greenhouse gas content of fossil fuels is the one single policy that can quickly end the fossil fuel subsidies that will work directly against the safeguard

• Carbon dividends would be more equitable than the safeguard:
  - by ensuring that the safeguard and other policies do not have to address fossil fuel emissions as well as other sources of greenhouse gases;
  - by spreading the emission reductions across the economy; and
  - ensuring that low-to-middle income households are able to manage the costs of the transition and to actively participate in the decarbonisation of our economy.

• It is efficient. By covering 77% of emissions (excluding LULUCF) and not allowing any leakage, exemptions, profit-taking or gaming, climate dividends is the comprehensive policy that is necessary to reduce emissions quickly. It gives the government the ability to set the ideal rate of annual increments; i.e., fast enough to be effective and meet our targets, slow enough to enable society, industry and the economy to adapt with minimal disruption. 

• It minimises cost, partly due to its efficiency, but also because it redirects over $50 billion of inefficient subsidies that are working against all the efforts of 3 tiers of government, industry and community to reduce emissions, protect the environment and support the health of citizens. 

The reform of the safeguard will help break the taboo against carbon pricing and give CCL volunteers greater grounds on which to advocate for carbon dividends as an essential complement to the limited power and effectiveness of the safeguard.  It is an important building block for what still needs to happen if we are to return to a safe climate.