LULUCF, the ‘Australia Clause’ and how the Australian Government has used up its emissions ‘fudge factor’

Since the treaty was negotiated, Article 3.7 of the Kyoto Protocol, a paragraph that relates to the treatment of emissions from land-use and forestry, has been colloquially dubbed the “Australia clause”.

Article 3.7 was added to the agreement at the insistence of then Howard era environment minister Senator Robert Hill. In short, the clause allows countries that had net emissions from land-use change, usually land clearing, to include those emissions in their baseline calculation.

This was of great benefit to Australia as at the year when the baseline was determined, 1990, Australia was undertaking significant amounts of land clearing. Almost immediately after 1990, as part of an initiative lead by the Hawke Government, land-clearing was reduced considerably.

Instead, the country established policies like the highly successful Landcare program, and emissions from land-clearing provided a significant credit to Australia’s emissions budget under the Kyoto Protocol.

Ever since, Australia has relied on this credit to meet its commitments to the Kyoto Protocol. The credit was so large in fact, that Australia has been able to significantly increase its emissions from other sources, particularly from electricity generation and transport fuels, while technically remaining within the emissions limits specified by Kyoto.

When Australia officially ratified the Kyoto Protocol in March 2008, under the Rudd Government, emissions from LULUCF had fallen by over 80 million tonnes CO2-e. This represents an almost 15 per cent reduction in Australia’s emissions. This was enough to offset the significant growth in emissions from electricity generation over the same period, which had added 82 million tonnes CO2-e by 2009.

However, it appears that credit has dried up.

The latest Greenhouse Inventory Accounts from the Department of the Environment and Energy show that emissions from Land-use, Land-use Change and Forestry (LULUCF) have almost entirely been eliminated.

While the quality and additionality of these reductions are subject to debate, the reduction allowed Australia to claim compliance with both the first and second phases of the Kyoto Protocol. However, with the Paris Agreement coming into force, the Government faces an uphill battle to meet the more ambitious targets agreed to under that treaty.

With the LULUCF credit exhausted, the Government will need to seek reductions from other sources, to reach the 26 to 28 percent reductions in emissions Australia subscribed to under the Paris Agreement.

Investments will need to shift towards more substantive sources of emissions and will require either a significant cleaning up of the electricity sector, or wholesale changes to practises in the agricultural, transport, mining or industrial processing sectors.

In its review of Australia’s policy options, the Climate Change Authority recommended the introduction of an Emissions Intensity Trading Scheme. This would cover the electricity sector and would work to incentivise lower emission generation to enter the market while facilitating the transition of more emissions intensive generation out of the market.

The Climate Change Authority also recommended the expansion of the Emissions Reduction Fund to other sectors, seeing the Government paying industries to reduce their emissions. The Emissions Reduction Fund has been the main driver of reduced LULUCF emissions to date, but questions remain over the value for money that can be achieved by such a mechanism.

With the current Turnbull Government so hesitant to restart a conversation about establishing a price on carbon emissions, there are no clear policy options that would allow the Government to achieve the Paris targets.

The mere suggestion of an emissions intensity scheme being the subject of consideration as part of a long flagged review of climate policies in 2017 was squished by the conniptions of conservative backbenchers with such efficiency.

2017 may represent just another front to the now many-year battle for sensible and coherent climate and energy policy in Australia.