Climate change, Economics, Latest, Policy, Politics

368. Serious weaknesses in the Emissions Reduction Fund

An unfortunate thing about environmental policies is how easy it seems to be to do them badly. It’s all too common to find that an expensive and prominent policy is not actually achieving what it is supposed to achieve in terms of environmental protection or enhancement. Australia’s main climate change policy, the Emissions Reduction Fund (ERF), is an example.

Serious weaknesses in the ERF have been highlighted by Professor Andrew Macintosh from the Australian National University. He’s in a good position to know as he was chair of the Government’s Emissions Reduction Assurance Committee for seven years.

In an interview with the ABC, he said, “I’m a big believer in these schemes and the ability to use offsets to help cut emissions and to help lower the cost of doing so. But what we’re seeing is a real inability to operate schemes like this with high integrity. An environmental market without integrity is not an environmental market, it’s a rort. And I feel that Australia’s carbon market is just that – it’s degenerated to become a rort.”

Of his time on the committee, he said, “People didn’t want to admit the mistakes that they made, and they sought to bury what we had found. There’s a lot of denial, there’s a lot of money at stake. And there’s also an incredibly politically charged space.”

As if trying to confirm this, both the Emissions Reduction Minister Angus Taylor and the Emissions Reduction Fund have come out and flatly denied all of Professor Macintosh’s claims. But they’ve mostly attacked the messenger rather than really addressing the issues he has raised. The Minister has also used completely irrelevant arguments to defend the integrity of the scheme, such as that people are buying the carbon credits so they must be good. He says that, “it’s seen as one of the best crediting schemes in the world”.

Even if that is true, it doesn’t follow that Andrew Macintosh’s claims are false. The Minister’s claim just implies that other countries have schemes that are even worse than ours, which could well be true.

Minister Taylor and the ERF should be taking Andrew Macintosh far more seriously. It’s not as if he’s saying there are minor faults with the scheme. His assessment is that “somewhere in the order of 70 to 80 per cent of the credits that have been issued are markedly low in integrity.”

The problems he’s identified are exactly the sorts of things I would have flagged as being high risks in this type of scheme. “Payments are being made to people to not chop down forests that were never going to be chopped down, to grow forests that are already there, to grow forests in places that will never sustain permanent forests”. If the agency is not extremely determined and serious about avoiding these problems, they will inevitably arise.

The problem is money. There are hundreds of millions of dollars available in the scheme, so there is an enormous incentive for people to try to get a share of that treasure. It’s always the case that there are some people who explore the boundaries of a scheme and exploit any weaknesses in the rules about who qualifies to receive the money. There’s nothing at all surprising about this. It’s always an issue in schemes that offer money in the hope of influencing people’s actions.

It is up to the agency responsible for distributing the money to be aware of this and to be extremely diligent and alert to the risks of giving funds to projects that do not contribute to achieving the scheme’s objectives. Clearly, the Emissions Reduction Fund has not been exercising sufficient rigour and care.

I’m not saying that we should expect them to get it perfect first time. The history of environmental policies shows that there are always problems, and some of them are hard to anticipate. But I do think we should expect the ERF and the Minister to adopt an approach of actively learning from the things that go wrong so that they can improve the scheme.

The importance of doing this has been emphasised by Andrew Knight and his colleagues, who have published a series of papers on learning from failure in environmental management, including “Learning from published project failures in conservation” and “Black swans, cognition, and the power of learning from failure”.

Unfortunately, from the way they have responded so far, it seems that the Minister and the ERF have no intention of using Macintosh’s critique as a learning opportunity. They will just deny that there are problems, leaving us with a weak climate policy that wastes taxpayers’ money.

Further reading

Catalano, A.S., Lyons-White, J., Mills, M.M., Knight, A.T.(2019). Learning from published project failures in conservation, Conservation Biology 238, Article number 108223. Journal web page

Catalano, A.S., Redford, K., Margoluis, R., Knight, A.T. (2018).Black swans, cognition, and the power of learning from failure, Conservation Biology 32(3), pp. 584-596. Journal web page

Pannell, D.J. (2017). Additionality can be tricky to assess, Pannell Discussions 310

Pannell, D.J. (2021). Soil carbon is a highly flawed climate policy, Part 1, Pannell Discussions 346.