Turnbull government rules out an emissions intensity scheme

The Turnbull government has slammed the door shut on an emissions intensity scheme for the electricity sector, in a demonstration of the power of the conservative forces in the Coalition.

Environment Minister Josh Frydenberg on Monday left open the possibility of such a plan, in comments on the terms of reference he released for next year’s review of climate policy, to be done by his department.

But, after a cabinet meeting on Tuesday, Frydenberg went on radio to rule it out.

Conservative senator Cory Bernardi had described re-opening the debate about any form of carbon pricing as “the dumbest thing I’ve ever heard”, and there had been angry rumblings among Coalition conservatives more widely.

Former prime minister Tony Abbott on Tuesday night said in a statement: “I’m sure the last thing ministers want to do is to reopen questions that were settled for our side back in 2009. We’re against a carbon tax. We’re against an ETS. We’re against anything that’s a carbon tax or an ETS by stealth. We are the party of lower power prices and should let Labor be the party that artificially increases prices under Green pressure.”

Any sort of carbon pricing is highly sensitive for Malcolm Turnbull. He lost his leadership in large part over this issue in 2009. He had to pledge not to substantially vary the Abbott policy on climate in canvassing votes for the leadership last year and then in the Coalition agreement with the Nationals when he became prime minister.

The hard line against an emissions intensity scheme came despite industry welcoming a look at it.

Frydenberg said on Tuesday night there would not be an emissions intensity scheme under a Turnbull government. “What I’m focused on is how to keep down electricity prices, not to put increased pressure on electricity generators.”

The way such a scheme would work for the electricity industry is that an emissions baseline would be set with producers with emissions above it having to buy credits from those below it.

On Monday Frydenberg was asked whether, given the review would look at reducing emissions on a sector-by-sector basis, that could include for the electricity sector an emissions intensity scheme.

While stressing the government rejected an economy-wide approach, he said: “The electricity sector is the one that produces the most emissions, around a third of Australia’s emissions come from that sector. We know there’s been a large number of bodies that have recommended an emissions intensity scheme, which is effectively a baseline and credit scheme. We’ll look at that.”