The release of the Emissions Reduction Fund whitepaper yesterday is the next step in the Federal Government's plan to reduce emissions without a carbon tax.
The whitepaper sets out the final design for the Emissions Reduction Fund, which is the centrepiece of the Abbott Government's efforts to tackle climate change.
However, there is still plenty of uncertainty around the government's Direct Action policy plans and the carbon tax as it struggles to get the votes required for legislation to pass both houses of parliament.
Since the release of the Emissions Reduction Fund greenpaper the abatement task was revised down from 431 to 421 million tonnes of Co2-e over the period to 2020.
Announcing the release of the whitepaper, Environment Minister Greg Hunt said the government is committed to meeting Australia's emissions target of five per cent below 2000 levels by 2020.
The government has already introduced legislation to repeal the carbon tax but continues to face legislative hurdles from the opposition and greens.
This week Clive Palmer joined the chorus of opposition to the government's carbon tax alternatives. Senators in the Clive Palmer United Party hold the crucial balance of power seats after July 1, 2014, and could be the deciding factor in this entire debate.
Palmer has already threatened to reconsider his support for axing the carbon tax. He told ABC radio his party will "methodically" look at the legislation when it is released. He said the government's plan is lacking in detail.
Palmer said he will make his position clear later this week. Despite ongoing opposition Hunt said the government will push ahead with its legislation in the next few weeks.
"We are committed and we will not stop until we repeal the carbon tax, and we are committed and we will not stop until we've implemented the Emissions Reduction Fund," he said.
Hunt said the fund will identify and purchase emissions reductions at the lowest cost and they must make a genuine contribution to reducing Australia's greenhouse gas emissions.
He said fund administration will be streamlined ensuring it is easy for businesses to participate.
As part of the consultation process to design the fund, the government considered more than 290 submissions received on the Terms of Reference released in October 2013, and more than 340 submissions in response to the greenpaper released in December 2013.
"We have listened to business and the community and taken care to develop a streamlined approach to achieving emissions reductions that will help Australia meet its 2020 emissions target," Hunt said.
"The fund will help drive private sector investment to achieve emissions reductions. These reductions must be real, measurable and additional to business as usual."
Since the greenpaper the government has reached decisions on three elements of the fund - crediting, purchasing, safeguarding.
When crediting reductions the government will leverage state and territory-based energy efficiency schemes by building on their methods as a model for the development of nationally applicable energy efficiency methods under the fund.
Reduction methods will be simplified to support participation in the fund. Reduction methods set out the rules for estimating emissions reductions from different activities and will be developed in conjunction with business.
The government will establish an Emissions Reduction Assurance Committee to provide independent and expert advice to ensure methods used meet integrity standards. This will replace the existing Domestic Offsets Integrity Committee under the Carbon Farming Initiative.
In the greenpaper the government set out a commitment to the fund of $300 million, $500 million and $750 million over three years, which is a total of $1.55 billion.
However, Hunt said the forward estimates commitment to the ERF will be $2.55 billion, with further funding to be considered in future budgets.The additional $1 billion will be made available in the May Budget.
Prior to the first auction, government will undertake further consultation with business by conducting a market assessment of projects proposed to be bid into the fund to ensure the right contractual arrangements are in place.
Auctions will start in the second half of 2014 and will be run quarterly. "This will provide regular opportunities for participation as new methods become available and more projects are approved," Hunt said.
"The Clean Energy Regulator will publish an indicative 12-month forward schedule of auctions. He will also publish the weighted average price awarded to successful projects after each auction to provide information to the market."
A safeguard mechanism will be put in place to protect the value of funds spent and create a stable landscape in which businesses can make new investments. It will commence on July 1, 2015.
The safeguard mechanism will apply at the facility level and will be restricted to facilities with direct emissions of 100,000 tonnes of C02-e a year or more. This approach will limit the number of covered businesses to around 130.
"The safeguard mechanism will not impose new mandatory reporting obligations on existing businesses," Hunt said.
"For current facilities, absolute emissions baselines will be set using existing data reported under the National Greenhouse and Energy Reporting Scheme."
The whitepaper is available at www.environment.gov.au/emissions-reduction-fund.
Opposition environment spokesperson Mark Butler said the government is not serious about tackling climate change.
Butler said Direct Action will not deliver any substantial reduction in Australia's carbon pollution.
Acting Greens leader Adam Bandt agrees the policy will not work.
"The first big flaw in the scheme is that it takes money away from ordinary people and gives it to the country's biggest polluters," he said.
"The second big flaw in the scheme is that there's no legal obligation for Australia or Australia's biggest polluters to actually cut their pollution.
"It won't do what it's supposedly designed to do."