Australia’s Carbon Emitters Need the Stick, Not the Carrot

Australia’s biggest emitters were more motivated to address their carbon emissions under the pressure of the carbon tax rather than with the incentives of the Direct Action plan, according to new research.

Dr Jayanthi Kumarasiri from Swinburne University interviewed 18 executives from nine companies who are responsible for their businesses’ carbon missions, before and after Australia’s carbon tax was repealed.

“During the carbon tax period the financial pressure really drove them to take action, so all nine big emitters had seen that the carbon tax was a major financial threat to them,” Kumarasiri told Pro Bono Australia News.

“And not only the financial threat directly coming from carbon tax, they also saw the increase in electricity and gas price as a result of the carbon tax as a real threat to them.

“Apart from that financial aspect… the high emitters saw this was a reputational threat as well. They said because the carbon tax identified them as the high emitters… that put them in the spotlight as the bad emitters of Australia.

“And at the same time the top management paid great attention to emission issues.”

The carbon tax was replaced by the Direct Action plan which provides funding to companies to incentivise emission reduction activities. Kumarasiri said this wasn’t working as well as the tax.

“They said, compared to the carbon tax, the Direct Action plan didn’t drive the same motive or urgency for them to take action,” she said.

“They saw that the momentum had dropped because of the repeal of carbon tax, especially they said the top management were not that interested, because there’s no direct financial burden to them.

“Some of the companies put on hold the project directly relating to emission management. They said overnight things changed.

“Some of the weaknesses they see in Direct Action plan, compared with carbon tax, there’s no real direct financial burden to them. There’s no real motive for them [to say] ‘yes we need to take action immediately, urgently to reduce carbon emissions’.

“At the same time they see the Direct Action Plan is quite complex [with] no clear guidance relating to how the direct action plan works. So that kind of [shows] the weaknesses of the Direct Action Plan.”

She also said the Direct Action plan presented less of a reputational threat than the carbon tax.

“Under carbon tax they were identifiable entities, so that brings them under the spotlight. At the same time media put on real pressure to say they are the liable companies, they are the high emitters,” she said.

“That kind of thing they didn’t see from Direct Action plan, that could be the reason they didn’t talk about much reputational threat.”

Kumarasiri said she was surprised by the results given the growing emphasis on corporate citizenship and sustainability.

“In a way, personally it surprised me because they are the large economic entities in Australia, so they have a direct social responsibility to do the right thing,” she said.

“Of course some companies take action, but definitely I saw from these commercial institutions they try to reduce costs.

“Mainly what I’ve seen is they see the carbon issue from a cost point of view, ‘what we can see or do to reduce our emission costs’… not ‘we want to be environmentally friendly or socially responsible’.”

She said strong government policy was needed to tackle climate change.

“If you want high emitters to take strong and urgent action… effective policy needs to have pricing, without pricing it would be quite difficult… to expect these companies to reduce emissions.”