Labor’s climate plan would have ‘little financial impact’ on coal, Grattan Institute says

“Those two things can’t be true at the same time.”


At issue is the impact on exporters from a Labor plan to require gradual cuts to emissions from 215 big emitters (including 62 coal miners) in an existing federal government scheme called the Safeguard Mechanism, which imposes few obligations today but would be adjusted by Labor to meet its 2030 climate target and its goal of net zero emissions by 2050.

Prime Minister Scott Morrison warned on Wednesday the scheme would be a “carbon tax” because it would require companies to pay for carbon credits to offset their emissions.

“As we know Labor has their sneaky carbon tax on their carbon credits scheme,” he said while campaigning in Rockhampton. “A sneaky carbon tax which is going to punish and cost our traditional industries not just coal, by the way, oil and gas and many other sectors that will be hit with that measure.”

But the Labor policy is not a tax, does not put a fixed price on carbon, and does not force companies to trade in carbon credits. It proposes instead that the Clean Energy Regulator would consult with companies on new benchmarks to reduce their emissions.

Greens leader Adam Bandt will heighten the debate over coal on Thursday by announcing a policy to phase out coal exports by 2030 and apply a levy of $1 per tonne on thermal coal and $3 on coking coal to raise $21.7 billion over the period before the exports are halted.

Greens leader Adam Bandt will outline his party’s plan to phase out coal on Thursday.

Greens leader Adam Bandt will outline his party’s plan to phase out coal on Thursday.Credit:Paul Jeffers

Labor is not proposing that coal miners would pay the government directly. Labor has not finalised the approach to using carbon credits or how industries might be helped to reduce their emissions. If miners pay for credits, the proceeds would go to farmers or others who generate the reduction in emissions.

The Business Council of Australia expressed no concern about the Labor policy given both major parties have promised to cut emissions to net zero by 2050.

“The safeguard mechanism is already in place alongside a suite of other measures to reduce emissions, with careful consultation with industry we believe it is the right incentive to drive investment, deliver more jobs and meet our net zero commitments,” the peak business group said.


Labor climate spokesman Chris Bowen rejected the “carbon tax” claim and said the modelling for the Labor policy, conducted by research firm RepuTex, showed there would be no job losses at coal mines due to the Labor policy, separate from any impact from changes to global demand for coal.

The Labor policy only makes mining companies responsible for about 33 million tonnes each year of “fugitive emissions” and other carbon produced in the process of mining.

The policy does not make miners pay for the emissions when coal is burned for power, heating or steelmaking. Given that 86 per cent of Australian coal is exported, most of these emissions are the responsibility of countries that take those exports.

Wood said the fugitive emissions varied by coal mine but the average was around 0.05 tonnes of emissions for every tonne of coal.


“It makes sense to offset these emissions somewhere else and for the coal miners to pay for those offsets,” he said.

“A Labor government could allow the coal miners to meet their reduction obligation this way.

“The government would have to decide what, if any, limits to place on the type of offsets. And this would determine the cost.”

With Labor treasury spokesman Jim Chalmers noting a price of around $24 per tonne of emissions under existing government policies, the Grattan Institute calculation suggests a cost of $1.20 per tonne of coal on the conservative assumption that all emissions had to be offset immediately.

However, Wood noted the cost of the offsets could vary greatly when the government’s Emissions Reduction Fund paid less than $20 per tonne to offset carbon while overseas offsets cost less than $2 per tonne.

As well, the cost would only apply to some of the emissions under the Labor proposal to tighten the benchmarks in the Safeguard Mechanism at a gradual pace of about 3.3 per cent each year.

“It would be a small rounding error for quite some time,” Wood said.

“I understand that Labor would look to other ways to work with individual companies and the circumstances.

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