Labor’s climate bill is mostly symbolic – the big questions are about what comes next

Last week was a big deal for anyone who cares about faltering efforts to live up to the Paris agreement and tackle the climate crisis. It’s possible that it will come to be seen as something of a landmark. The major step forward was not in Canberra, where an increasingly circular debate is playing out over Australia’s first piece of climate change legislation in more than a decade.

That’s not meant to dismiss the Albanese government’s climate change bill or the crossbench MPs working to strengthen it. The Australian legislation matters, primarily as a confidence boost for investors looking to get behind clean energy and other climate solutions. It sets minimum targets – a 43% cut by 2030 compared with 2005 and net zero by 2050 – and includes some useful transparency and accountability measures. But the reality is there is barely anything in it.

It includes no mechanism to cut greenhouse gas emissions and no funding to drive change. Anyone flicking through its 16 pages could be forgiven for wondering what the fuss is about.

No, the real shift last week was in the US, where a deal has been struck between the Democratic leadership and the party’s perennial climate roadblock and coal superfan, Senator Joe Manchin III of West Virginia.

Just two weeks ago, Manchin – a millionaire thanks to a family coal business and the leading US Senate recipient of oil and gas money – was being called “the man who single-handedly doomed humanity”, a villain and a range of unprintable things after promising to use what is effectively his casting vote to again block serious climate legislation.

It was widely assumed that was it, but Manchin shocked nearly everyone on Wednesday by announcing he would back US$369bn (A$527bn) in spending on climate and energy.

If it passes Congress, it is likely to be genuinely transformational. The bill allocates huge amounts for tax credits on renewable energy and battery production, rebates on household electric vehicles and green appliances, support for environmental justice projects in communities that are disproportionately affected by the climate emergency and funding to address highly potent methane emissions.

The authors say it could lift the country from a 30% to a 40% cut in emissions by 2030 compared with 2005 levels and put Joe Biden’s 50% reduction target within reach.

Not everything in the bill, optimistically called the Inflation Reduction Act, is climate positive. It also includes significant concessions to fossil fuels, which were deemed necessary to get Manchin across the line. There will be new leases for oil drilling in the Gulf of Mexico and Alaska – a step that would break a Biden election commitment – and faster approval processes for gas pipelines.

At another time, these sort of measures might have prompted a stronger negative reaction. Some critics have argued that while fossil fuel elements in the deal are dwarfed by the support for renewable energy, they could drive an expanding demand for gas that locks it in well into the future. But pro-climate action Democrats and activists have mostly applauded the bill as a breakthrough. Their position can be summarised as a combination of “the positives are immense” and “this is far more than the nothing we expected a week ago”.

Expectations in Australia are, of course, in a different place. With the Coalition continuing to absent itself from an adult conversation about climate policy, the centre of debate lies somewhere between the Labor assessment last year of what was politically achievable after years of electoral losses and the science-based positions of the Greens and independents.

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The position of the climate change minister, Chris Bowen – basically that Labor will stick to its modest election commitments but won’t stand in the way of deeper cuts – is not an unreasonable starting point given where we have been, but it has been undermined by Anthony Albanese’s extravagant suggestion that expanding the Australian coal export industry could be good for the climate because local coal is “cleaner” than that from overseas. It’s an old coal industry line that, as Graham Readfearn has explained, doesn’t stack up.

The prime minister’s other rhetorical device has been to misrepresent a push from the Greens for a moratorium on developing new coalmines and gas fields as an attempt to rapidly shut down existing fossil fuel developments, claiming it would have a “devastating impact on the economy”. It is blatant politics, but unlikely to matter by 2025, when voters will be able to judge the Albanese government on what it has actually achieved.

The key questions will go something like this. Has it implemented the climate policies it promised in a way that sets the country up for the future? Has it persuaded Australians that its emissions reductions are real and not greenwash? Has it been honest with the communities that will be most affected by inevitable change and produced a plan to support them?

Has it nullified dishonest claims by the Coalition and others that try to blame Labor for increases in power bills caused by international factors? And has it used the power of incumbency to set an ambitious emissions reduction target for 2035 that sets a new trajectory and renders debate over the 2030 goal redundant?

We will get a pretty good idea of how much of this is looking over the next 12 months.

In terms of new climate spending, the government is offering nothing on the scale of what is planned in the US, but it has introduced legislation for tax breaks for electric cars and says $20bn will be dedicated to building electricity transmission links needed to get the country to 82% renewable energy by 2030.

But the big questions will be over how Labor deals with industrial pollution and future coal and gas proposals.

Bowen has promised a discussion paper later this month on options for the government to use the safeguard mechanism – a Coalition policy that has been around for years without achieving anything – to cut out-of-control emissions from major industry. Labor has enjoyed support from the business community for its climate targets, but the negotiations over the safeguard – which will decide how rapidly 215 big emitting facilities and mines have to make cuts – are where things could get challenging. The minister won’t have much time to thrash out the detail. He has promised the revamped safeguard will be running by July next year.

Labor has made clear it has no intention of banning new fossil fuel mines outright, regardless of what the world’s climate scientists, the UN secretary-general and the International Energy Agency says. But a well-designed safeguard mechanism could at least make developing new coal and gas fields much more difficult.

Total industrial emissions will have to start to decrease. Obviously enough, allowing new fossil fuel projects will make this harder, and put greater pressure on existing polluting businesses to make deeper cuts. But the government has also said trade-exposed big emitters will be protected. Something will have to give. One option would be place much stricter emissions requirements on new fossil fuel proposals than on those already operating.

While the government is considering this it will also need to decide what it does about carbon credits. Many big polluters under the safeguard mechanism want to use them, which would mean they were effectively paying someone else to act while they continue to emit. But the integrity of the national carbon credit system is under a cloud, having been described as a fraud and “largely a sham” by one of its architects.

A review is under way, led by the former chief scientist Prof Ian Chubb. His answers at the end of the year – including on whether there should be limits on how many credits can be used – will go a long way towards deciding if Labor can bring about the meaningful change needed.

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