The other pressure point is that, while Direct Action Plan remains deeply unpopular, the appropriation of funds for the Emissions Reduction Fund at the end of June provides the government with considerable leverage.
Reputex assumes as a last resort there will be regulatory or ministerial action on the Emissions Reduction Fund to get the scheme up and running, which “may provide the window for a legislative compromise in August, whereby PUP will need to negotiate on Direct Action, or risk being left in the dark as the government begins spending its appropriated funds”
Despite Clive Palmer seeming to thaw on the ERF, the advisory firm notes “uncertainty continues to be the only bankable commodity for Australian emissions market participants”
Indeed it is hard to make sense of Palmer’s positions. Just months ago he ridiculed both the current carbon pricing scheme and Direct Action, but now has come out supporting Direct Action as long as the emissions trading scheme stays on the books, at least nominally ($0 per tonne, scaling up to a floating price only when Australia’s major trading partners introduce emissions trading).
That is not the only uncertainty. Motoring Enthusiasts senator Ricky Muir has surprised everyone by breaking with Palmer to vote down a move to guillotine debate on the issue. It is a small, largely procedural issue, but it will be interesting to watch Senator Muir to see how wedded he is to Palmer. Others have raised questions about the commitment of PUP’s Jacquie Lambie to the flamboyant businessman.
In order to implement its ERF, the government will this week seek support for its Carbon Farming Initiative Amendment Bill (CFI Amendment Bill), which passed the lower house on June 25 and was presented to the Senate the next day.
Should it be blocked, the government will consider the distribution of money to the states for emissions abatement programs under Section 96 of the constitution, whereby the federal government may bypass the Senate and provide tied grants to the states, or distribute funds for specific activities defined by regulation or ministerial guidelines.
There is some legal uncertainty about this after the High Court recently upheld its decision on the 2012 Chaplains Case whereby it deemed that expenditure must be authorised by legislation. A regulated scheme would also have potential restrictions on the Clean Energy Regulator’s ability to operate an auction, or enter into contracts with winning bidders.
Reputex says the ALP’s accelerated linkage to the EU ETS and PUP’s "alternate ETS" appear to be the least likely to progress, with the government highly unlikely to reverse its position on carbon pricing given there is already a perception of "broken promises" on renewable energy, education and health funding.