THE Coalition has pledged to cut red tape to make it easier for farmers to claim credit for offsetting carbon emissions by planting trees and enter into long-term contracts to pay them for those projects.
But Opposition leader Tony Abbott has signalled the Coalition will not spend a dollar more than now budgeted for Direct Action even if it means breaking Australia's commitment to reduce emissions by 5 per cent by 2020.
He has also confirmed companies are unlikely to pay penalties under Direct Action as the level at which they will be paid will be based on their historical emissions intensity rather than total amount of carbon emitted.
"We don't believe any companies will be penalised under the Direct Action Plan because they won't increase their emissions intensity," Mr Abbott told the National Press Club.
"The interesting thing if you look at Australian businesses over the last couple of decades is that they have dramatically reduced our emissions intensity by some 50 per cent."
The Coalition will release the full costings of Direct Action this week but it is expected to do no more than confirm the $3.2 billion climate change policy that was released prior to the 2010 election and they will not be costed by Treasury or the Parliamentary Budget Office.
The Coalition has indicated it will use the Carbon Farming Initiative (CFI) – which currently applies to land sector carbon projects – as the mechanism for its proposed emissions reduction fund. But the CFI has been dogged with complaints about the bureaucratic nature of the approach and the time taken to get approval for projects and their methodologies
Shadow environment minister Greg Hunt told The Australian Financial Review changes would be made to the Carbon Farming Initiative to make it easier to get approval for emission reduction speech.
He said measures would be introduced to increase the speed of project approvals, including allowing companies to use existing rules for abatement projects under the United Nations Clean Development Mechanism.
A Coalition Government will also enter into long-term contract which extend past the current three-year $1.55 billion funding envelope of Direct Action with companies seeking to reduce emissions.
Mr Hunt said contracts would give companies the financial security to invest in a project knowing they had security of payment over a period of years to achieve the emissions reduction.
"I agree absolutely about the bureaucratic nature and pace of methodology approvals under the CFI," Mr Hunt said.
"We will reform the approvals process through giving priority to the rapid development of methodologies. The [Clean Energy] Regulator will issue credit for projects on the basis and for the time deemed to be appropriate."
CO2 Australia chief executive Andrew Grant said the CFI was technically complex and demanding, set a very high threshold and it was expensive to get projects approved.
He said Direct Action could be viable but it was not yet clear whether it would be. The current price of carbon flagged by Mr Hunt – $6 to $12 – was too low for new abatement projects. "I honestly don't know whether it is viable," Mr Grant said. "It can be made to work – conceptually it is possible. The market moves from liable parties [companies] to one buyer – the government. But if the pricing is too low or [contract] term is too short it will really pre-select only a few projects."
Carbon Conscious chief executive Andrew McBain said the price of carbon needed to be $20 to $40 for projects, whether it was through an emissions trading scheme or Direct Action.
"Whether its an ETS or Direct Action it is a little bit irrelevant but at $6 the price is uneconomic for anyone to do CFI projects," Mr McBain said.
"One advantage of Direct Action is having as a counter party a triple-A rated Government but the price the Coalition is planning to buy at is unrealistic."
But after his press club speech Mr Abbott said he would not exceed the amount budgeted for Direct Action.
We are very confident that we will achieve the 5 per cent target that we've set ourselves... but in the end we've told you the money we'll spend and we won't spend anymore.," Mr Abbott said.