What America Can Learn from Australia’s New Clean Energy Future Package

by Jennifer Morgan, via WRI Insights

Australia, one of world’s most carbon-intensive countries, recently began implementing a comprehensive national policy to address climate change and transition to a clean-energy economy. Yesterday, WRI had the pleasure of hosting Mark Dreyfus, Australian Parliamentary Secretary for Climate Change and Energy Efficiency, who outlined his country’s plans to a group of business, congressional, and NGO representatives.

One point that came through at the event is that Australia’s recent energy and climate choices can be very instructive to the United States. This post provides a quick look at Australia’s new policy and explores how it can inform and inspire U.S. efforts to move toward a low-carbon future.

Why Did Australia Adopt a National Climate and Energy Policy?

Australia faces a high level of climate risk, with significant vulnerability to sea level rise as well as to extreme weather eventslike drought, heat waves, and wildfires. At the same time, the country is heavily dependent on carbon-intensive resources. Australia has the highest per capita greenhouse gas emissions of any country in the developed world, and it’s the 15th largest emitter overall.

Recognizing the major environmental and economic risks of continuing with business as usual, as well as the opportunities involved in shifting to clean energy, Australia decided to transform its economy toward a more sustainable path. The policy change involved a long and at times acrimonious political debate, but the country’s leaders decided that they could no longer afford not to act.

What Does the Country’s New Climate Policy Look Like?

The Clean Energy Future Package, in effect since July, includes a national emissions reduction target of 5 percent below 2000 levels by 2020 and 80 percent below 2000 levels by 2050. To meet these targets, the Package features a range of policy instruments that will put a price on carbon, promote renewable energy (setting a target of 20 percent of Australia’s electricity coming from renewables by 2020), encourage energy efficiency, and reduce pollution.

The centerpiece of the policy is the carbon price, starting at $23 AUD/ton until July 2015. After that, a flexible phase will begin where the market will set the price. Around 500 businesses – large emitters spanning sectors that cover 68 percent of Australia’s emissions – will be required to pay for their pollution under the carbon pricing mechanism.

Australia has also created institutions to ensure that the system works effectively. A Climate Change Authority will monitor and advise on the level of pollution caps, operation of the carbon price and other initiatives, and progress toward meeting targets. A Clean Energy Regulator will administer the carbon price mechanism, the Renewable Energy Target, a Carbon Farming Initiative, and the National Greenhouse and Energy Reporting Program. A Productivity Commission will monitor and report on what kinds of climate change policies other countries are implementing, as well as focus the effects of the program on jobs and competitiveness. In addition, a Clean Energy Finance Corporation is being created to invest in renewables and energy efficiency. Australia hopes that these elements, as well as others, will help the country meet its emissions and pollution-reduction targets.

Australia has also paid close attention to the issue of fairness across the economy. In particular, the government thought about how to ensure that poorer households were protected from potentially higher energy costs. The country also put in a program to shield energy-intensive industries from the carbon price.

What Is Particularly Relevant for the United States?

As Secretary Dreyfus pointed out at the WRI event, there are many similarities between Australia and the United States in the context of climate and energy policy. For example, the countries share similar emissions profiles, are extremely fossil-fuel dependent, and face highly partisan policy environments in which climate change is a divisive issue. While there are many lessons America can learn from the Australian experience, four key ones jump out:

  1. It’s clear that a mix of policy instruments is needed across the economy. A carbon price is very important, but it’s not enough to actually create the needed transformation. Policies and incentives around renewable energy and energy efficiency are also needed, and creating a specific finance corporation to invest in clean technologies can be an effective part of an overall package.
  2. “Fairness” is a vital component of any policy deal. Australia had a long discussion nationally about how to create a fair approach. The country utilized various tools such as carbon policy and tax policy to protect households from any higher energy costs and shield energy-intensive industries from competitiveness concerns. Like Australia, the United States has a wide divergence of economic circumstances, both in households and on the industry side. The Australian plan shows that with political leadership and time, effective solutions can be found.
  3. We must not lose sight of the science when creating policies. Australia recognized its own vulnerability to climate change and shared that risk analysis with its citizens through town hall meetings across the country. It also created an independent commission to monitor these risks and make recommendations. The United States also faces significant climate risks, from sea-level rise in Florida to forest die-back in the West. It’s very instructive for the United States to understand how Australia assessed its own risk and built institutions to forge a strong link between science and policymaking.
  4. Persistence is essential. The Australian government had been trying to implement a comprehensive climate package for many years, and on the fourth try – despite intense opposition – it finally succeeded. It’s important for the United States to not give up, to learn from past debates, and to keep working to develop an effective approach that can meet the joint goals of economic growth and reduced emissions.

In the end, every country has to find its own way to address climate change risks and position itself in the clean-energy economy. The United States is currently a step behind Australia in determining its own pathway. Hopefully some inspiration from Down Under will motivate U.S. business and government to join the growing number of countries that are tackling climate change one step at a time.

Jennifer L. Morgan oversees the Institute’s work on climate change issues and guides WRI strategy in helping countries, governments, and individuals take positive action toward achieving a zero-carbon future. This piece was originally published at WRI Insights and was reprinted with permission.

12 Responses to What America Can Learn from Australia’s New Clean Energy Future Package

  1. Sou says:

    It’s a start but not all roses. Our dreadful Minister for Resources, Energy and Tourism is working to undermine efforts such as through allowing exploratory drilling in the pristine Great Australian Bight – by BP of all companies.

    We’re not getting rid of the dirtiest coal plants as promised – they couldn’t agree on a buyout price.

    Some states are doing really well with wind energy (eg South Australia), others are doing really badly hiking coal extraction and working to undermine the fledgling wind industry (arguably the dirtiest state, Victoria – to my shame, my own home state).

    However, I hope that the program will succeed in the medium term and that it will give impetus to any nation that is looking to adopt a similar national policy. It was very hard going to get it through with a big fear campaign by the opposition leader. But now that it’s in place few seem bothered about it. And the popularity/credibility of the opposition leader has sunk to new lows since his fears were seen to be hollow.

  2. Merrelyn Emery says:

    As temperatures rise again, it is time to re-emphasize the climate change dimension of the policy to capitalize on the inevitable coming disasters, although the El Nino appears postponed, ME

  3. David B. Benson says:

    As I understand it, Queensland plans to export even more coal.

  4. Mulga Mumblebrain says:

    How long, Merrelyn, do you think that thinking in terms of El Ninos, La Ninas and ENSOs etc will be relevant? Surely we are entering a new climate regime, where such paradigms will be replaced by new, and rapidly changing, ones? A stalling El Nino may herald something new, unanticipated and not necessarily benign.

  5. Merrelyn Emery says:

    I think the new unpredictable regime is already here Mulga and this predictive failure is but one sign, ME

  6. Merrelyn Emery says:

    More? – the understatement of the year, ME

  7. Gillian King says:

    Point 3, we must not lose sight of science, is a vast overstatement. The govt actually avoided talking about the science, choosing instead to ‘brightside’ the issue. Most govt communication has been about the benefits that will be paid to low income households and small businesses to offset increased costs. This left plenty of room for the opposition to keep hammering away at ‘the big new tax’.

    I have the feeling that most Australians do not recognise the urgent need for action on climate change, or the virtues of the Clean Energy Legislation. The Opposition promises to undo the legislation and they are still well ahead in the polls, though their lead has shrunk a bit in recent weeks.

    The four lessons are good ones, but the US should try to do better on #3 than Australia has managed so far.

    BTW, look what Bangladesh has promised …

  8. Merrelyn Emery says:

    The govt had to emphasize the compo to counteract the opposition’s economic fear campaign as Sou mentions. Now they can return to the main concern as the Climate Commission has been doing all along, ME

  9. jake says:

    I (from oz) did not notice the introduction of the carbon price (nor has anyone i have spoken to). not one bit. it seems our economy doesnt seem to notice either.

    as Sou said “the popularity/credibility of the opposition leader has sunk to new lows since his fears were seen to be hollow”. dont believe the “economic sky will fall down” rhetoric

  10. Gillian King says:

    In my view, it was a tactical mistake on the part of the govt to be silent on the need for the legislation. The result is that there’s no compelling reason to have it – which puts Abbott on good ground in his promises to repeal it.

    I want to see the govt put effort into explaining why we need strong action on climate change. As you say, some messages are beginning to seep out.

    Going back to this article, it’s true that Point 3 is needed, and at least Australia’s policy is based on mainstream science. I just wish they had been more confident in standing up for the science.

  11. Merrelyn Emery says:

    Our memories appear to differ Gillian, ME

  12. Privi Izumo says:

    Export industries are not covered by the carbon price.