The carbon pollution reduction scheme

What are the implications of the CPRS for households?
 
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  • Updated:15 Jan 2009
 

01 .The carbon pollution reduction scheme implications for households

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The government says your efforts to reduce carbon emission don't count! Join our campaign to make them count here.

“Carbon costs will … ultimately be borne by consumers.”
Australian Government White Paper December 2008

The Government’s Carbon Pollution Reduction Scheme is an important first step in making polluters pay for their pollution. But we’re concerned that the current design of the Scheme is going to result in consumers paying now, pay later, and still copping the effects of climate change

 Ten quick facts about the Carbon Pollution Reduction

  1. Australia has proposed 3 possible targets to reduce its carbon emissions to be set in 2010:
     
    5% by 2020 (based on 2000 levels),
    15% by 2020 if an international agreement is set into place;
    25% by 2020 if an international agreement is set into place with strict conditions upon the agreement

    Only the final target (25%) will result in a reduction of emissions sufficient to stop the destruction of many Australian icons, including the Great Barrier Reef.
  2. The CPRS will commence in 2011. Around 1000 companies will participate in the Scheme. These companies are responsible for around 75% of Australia's total emissions. All other companies and all households will not participate in the scheme.
  3. The establishment of the CPRS will raise an estimated $11-$12 billion* per annum for the Australian government – 100% of this money will be used to support business and households in the changes.
  4. The CPRS will increase business costs (in a similar way to the GST) and these costs will be passed onto consumers. In the first year (2011), permits will be $10 flat cost, before moving to full auctioning and trading of permits from 2012.
  5. Under the CPRS the cost of living for Australian households will increase by 1.1%*. The government will support low and middle income households with an assistance package worth $6 billion* which will be rolled out 2011-2012.
  6. The biggest increase in expenses for Australian households will experience be in electricity and gas – estimated at $4 and $2 per week* respectively. This will be on top of other anticipated increases in electricity.
  7. Around 89 per cent of low-income households will receive assistance equal to 120% of the cost of living increase. Around 97% of middle-income households will receive some direct cash assistance. Around 60% of middle-income households will receive sufficient assistance to meet their cost of living increase. These will be rolled out as part of normal assistance payments and tax relief.
  8. The government has not yet outlined a comprehensive package to assist households in their energy efficiency, nor has it yet dedicated sufficient funds to effectively address this issue. The various rebates and incentives (solar, insulation, hot water etc) available across Australia can be viewed here.
  9. Households are not required to participate in the CPRS. There are only two ways households can effectively reduce emissions:

    By 'retiring' or 'ripping up' permits they have purchased, or
    Taking up of GreenPower from 2010 - for which only new sales will be counted. Existing GreenPower sales will not be counted (find out more here).
  10. Emissions Intensive Trade Exposed Industries (i.e. those companies that are will be no longer competitive internationally due to the increased costs of the CPRS) will be given 70-90% of their permits free, valued at over $9 billion* out to 2012. In addition, coal-fired electricity generators will be given a ‘once-and-for-all’ allocation of $3.9 billion* out to 2015.

*Amendments made by the government to the CPRS on 4th May 2009 require amendments to the government budgets. These are yet to be released.

What we're doing

CHOICE is campaigning to bring the CPRS up to scratch, to ensure individual consumer action is valued and to help Australians get a better deal for themselves and their environment.

  • We provide consumers with information to confidently take action to reduce their personal carbon emissions.
  • We provide consumers with an opportunity to make sure their voices are heard.
  • We represent consumers by talking to the government and industry to improve CPRS.
  • We represent consumers on government consultations on voluntary action and energy efficiency.

What you can do

Tell Minister Wong you want your actions to count through GreenPower: Keep it real

 
 

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02.Details of the CPRS

 

The Australian government has announced a scheme to reduce Australia' Greenhouse gas emissions through an emissions trading scheme to be called the Carbon Pollution Reduction Scheme (CPRS).

CHOICE agrees that action needs to be taken to reduce the likelihood of Australian's suffering from the impact of climate change. An emissions trading scheme is in principle and an appropriate way to do this.

But the scheme announced by the government is seriously flawed. CHOICE is lobbying for the scheme to be improved so it works in consumers' interests.

Australia currently has the highest greenhouse emissions per person of any country in the world. Excess greenhouse gas emissions, like carbon dioxide, result in an overall warming of the earth’s atmosphere. This warming will change the balance of the earth’s climate bringing bigger weather events, longer droughts and higher sea levels as ice caps melt.

Since the industrial revolution greenhouse gas emissions have grown globally. Currently, industry and consumers pay nothing to emit greenhouse gas pollution (often referred to as carbon pollution). There is no incentive to avoid emissions, nor to develop less polluting alternatives.

In the 2007 election, Australians voted for a government provide that promised leadership on climate change.

Learn more about climate change at www.climatechange.gov.au and www.bbc.co.uk.

Learn more about the risks for Australia.

Details of the Carbon Pollution Reduction Scheme

Like many other governments, the Australian government has decided to introduce a ‘cap and trade’ emissions trading scheme which will be known as the “Carbon Pollution Reduction Scheme” (CPRS). The CPRS is scheduled to commence 1 July 2011.

The CPRS works by setting a national limit, or ‘cap’, on the number of tonnes of greenhouse gases that polluters can emit. A limited number of ‘permits’ are then issued up to this cap. Each permit allows its owner to emit one tonne of greenhouse pollution.

The Australian Government has said it will legislate a target that by 2020 will see Australia emissions be 5%-25% less than what was emitted in 2000.

The scheme is mandatory for Australia’s biggest polluters, those 1000 companies responsible for about 75% of all of Australia’s emissions. These big polluters will be required to present a permit for each tonne of pollution they emitted in a given year. Some permits will be sold and some will be given away for reasons explained below.

In the first year of the scheme, 2011, an unlimited number of permits will be sold at $10 per tonne of emissions. From 2012, permits will be auctioned onto a newly established carbon market. This market will enable companies to trade permits like the share market. This encourages these companies to find the cheapest possible ways to cut pollution. Some companies will find it cheaper to find ways of reducing the amount of pollution they emit by installing new technologies or changing their behaviours. By cutting their pollution, these companies won't have to buy as many permits. For other companies, who find it hard to reduce their emissions, it will be cheaper to buy permits. Regardless of who's doing the work cutting pollution, the overall target level of pollution will still be met.

The scheme includes a number of other features to assist particular industries and households, including free permits issued to ‘trade exposed’ industries and coal-fired power stations; and compensation to households for likely increase in prices of goods and services.

Read the proposed legislation.

Understand more about the CPRS and the different viewpoints ('Heat on the Hill' - a Four Corners report).

What the CPRS means for households

Under the proposed target and Scheme, the following impacts can be expected for households following its launch in 2011:

  • Household costs will increase by 1.1%* on average. This impact will be offset for low and middle income earners to through direct payments and tax relief
  • There will be no increase to petrol as a result of the CPRS because of a cent-for-cent tax relief for any increase experienced through the CPRS by oil producers
  • Limited incentives, through the government's Energy Efficiency Homes Package, provides Australian households with insulation and solar hot water, reducing their energy consumption. However no comprehensive strategies have been announced by government to assist Australian households in reducing their energy consumption.
  • Voluntary action taken by households will not improve Australia’s total emissions but will put money back into the pocket of big business - read more here.

Read how the CPRS will affect consumers.

What you can do

Email Minister Wong through GreenPower: Keep it real!

*Amendments made by the government to the CPRS on 4th May 2009 require amendments to the government budgets. These are yet to be released.

03.Our concerns with the CPRS

 

CHOICE has been campaigning for change on behalf of consumers since the government announced the development of an emissions trading scheme in 2007. These are our demands following the launch of the CPRS White Paper in December 2008.

We have four primary concerns with the scheme:

  • the weak target
  • consumer’s voluntary actions are rendered meaningless
  • insufficient support on energy efficiency measures for households
  • poor design of the scheme weakens its effectiveness

The Target

The 5% - 15% emissions reduction target by 2020 does not demonstrate international or domestic leadership on climate change. A clear majority of Australian consumers want a stronger role in delivering on climate action, and actively support the country’s bid to become an international leader on this issue. A stronger upper target will increase the chance of an effective international agreement that stands some chance of protecting consumers’ long term interests in avoiding harmful climate change.

What we want

  • Lift the upper target for 2020 to a 25% reduction on 2000 emissions levels, securing a low carbon future and demonstrating leadership on an international stage.
  • Advance Australia as the world’s first truly green economy, and commit to the development of green jobs.

Results (as at May 09)

Following immense pressure from a range of stakeholders, the Government has announced a new target of 25% on 2020 levels, conditional on many factors including an international agreement to stabilise emissions to 450ppm.

Voluntary action

The CPRS renders most voluntary consumer action meaningless. It thus denies consumers the opportunity to act to further reduce Australia’s emissions, and in doing so also threatens the viability of a number of emerging industries.

What we want

  • define what is meant by voluntary action;
  • Ensure all GreenPower is accounted for, not simply new sales of GreenPower from 2010
  • identify a system by which voluntary action can be accounted for;
  • set a realistic timeframe for measuring emissions saved through voluntary action. An annual reporting timeframe is proposed as it would to inspire consumers and business to take even more voluntary action;
  • commit to retiring CPRS permits and AAUs for the voluntary action taken by consumers and business; and
  • commit to ensuring that the retirement of permits results in savings over and above the 2020 end point target, rather than simply shifting the trajectories.

Results (as at May 09)

Following pressure from CHOICE and other groups, the government announced that new sales of GreenPower from 2010 will be counted as additional to the mandatory targets. This will not account for existing sales to one in ten Australian households.

Have your say here.

Energy Efficiency Measures

Neither the White Paper nor other Commonwealth policy decisions announced to date include adequate measures or funding to promote household energy efficiency. Effective energy efficiency policies provide direct benefits to consumers through lower energy bills and increased energy security as well as reducing greenhouse gas emissions.

What we want

  • Divert revenue raised from the sale of permits to make comprehensive and strategic investments in energy efficiency for both households and industry.
  • Introduce and fund a set of comprehensive policies to encourage and assist households (and industry) to become significantly more energy efficient as per the recommendations of the report Energy and Equity, a copy of which is enclosed. The program should aim to retrofit five per cent (5%) of existing homes a year and should include:
    • Effective and regularly evaluated education campaigns on the most effective means to achieving, and subsequent benefits of, energy and water efficiency.
    • Home audits of energy and water use that result in recommendations for behaviour change and physical improvements and referral to sources of assistance.
    • Financial and other assistance for low income households to implement measures that improve water and energy efficiency.
    • Improved labelling on products and appliances so that initial and second hand purchasers can make informed decisions about energy efficiency at the point of purchase.
    • Financial and taxation incentives to encourage landlords to retrofit properties to improve energy and water efficiency.
    • Improving energy and water efficiency in public housing.
    • Mandatory energy efficiency standards in all new buildings.

Results (as at May 09)

In December 2008, the government have introduced a $3.9 billion package for household energy efficiency, but it doesn’t go nearly far enough.

In May 2009, they announced an additional web-based tool to assist households understand and measure their energy use and identify energy savings.

But this still doesn’t go far enough, we want to see a strategy that is comprehensive and extensive.

Strengthening the architecture of the CPRS

The current architecture of the CPRS exposes households to the unnecessary risk of additional costs being spent on supporting polluting industries. The government needs to strengthen the architecture of the CPRS. In doing so it should take into account the long term implications of an emissions trading scheme on households in a rapidly changing environment. In particular:

  • emissions-intensive trade-exposed industries (EITEI) should be provided free permits only on the condition that they commit to and implement significant emissions reductions measures; and
  • there is no sufficient policy justification to issue free permits to coal-fired electricity generators.

What we want

  •  Compensation to EITEI should be short-term and conditional on investment in energy efficiency programs and renewable energy generation so as to minimise the need for ongoing assistance and thus the impact of the CPRS on consumers. Free permits should not be permitted to be sold on for a profit, without introducing significant carbon reduction programs. This should be independently audited annually and reported publically.
  • The CPRS legislation should require an independent review of EITEI assistance as and when any new international agreement is negotiated and entered into force; or where the international market exceeds the interim price cap, with changes flowing from the review immediately.

No free permits should be provided to coal-fired electricity generators, rather funding raised should be diverted to energy efficiency and renewable energy within business and households, so as to reduce the demand for high carbon electricity generation; build household resilience against future higher energy costs; and even begin to prepare households for inevitable temperature rises. Compensation provided to coal-fired power generators should be in the form of funding grants for research to assist the generator in reducing carbon emissions.

Results (as at May 09)

The government has not acted on any of these demands. In fact, they have increased the free permits to industry and they still have no energy efficiency requirements