Prime Minister Malcolm Turnbull faces a fresh outbreak of party disunity over climate policy, with backbench MPs questioning the government's timing, scope and tactics after a formal review of the Direct Action plan was finally announced.
Environment and Energy Minister Josh Frydenberg on Monday launched the long-awaited review - which controversially promises to look at whether to introduce an emissions intensity scheme for electricity generators, which is a type of carbon price - though he emphasised a focus on household electricity prices and energy security.
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Carbon review divides government
Cory Bernardi gives voice to government divisions over a proposed carbon intensity trading scheme in the electricity sector. Courtesy ABC News 24
Energy and business leaders immediately issued a plea to the Coalition and Labor: end a decade of destructive politics and come up with a shared national plan to cut emissions over coming decades, including some sort of carbon price.
Most were open to that being an emissions intensity scheme, which would set a baseline for how much carbon dioxide a power station could emit for every unit of power generated, penalising those that breached their limit and rewarding cleaner models that emitted less.
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And as debate about the climate review began, it emerged Tony Abbott's signature "green army" policy, which used young unemployed people on landcare projects, is to be axed, prompting a furious rebuke from the former prime minister.
Fairfax Media spoke to 10 Coalition MPs on Monday about the prospect of an emissions intensity scheme for the electricity sector and all of them were scathing at the prospect of what is, in effect, a carbon price being re-introduced in Australia, regardless of the relative cost.
An emissions intensity scheme puts a hard limit on how much a plant can emit for every unit of electricity it generates. Initially, there could be no cost to generators that stayed within their limit, but those that emitted more than allowed would need to buy carbon permits - representing emissions cuts elsewhere - to offset the breach.
Liberal Senator Cory Bernardi, freshly returned from three months at the United Nations in New York, said transitioning to an emissions intensity scheme was "one of the dumbest things I've ever heard. It is not in the Australian national interest for the government to chase policies that ingratiate it with the Greens.
"To get back on the right economic track, we need the cheapest electricity in the world."
West Australian MP Andrew Hastie said his overriding concern was the cost of living for families and asked: "Why would we unilaterally, economically disarm [by adopting a price on carbon]?"
South Australian MP Tony Pasin said that given the current economic climate, "the government should be doing all it can to put downward pressure on the cost of electricity generation to reduce the power bills of hard-working Australians".
NSW MP Craig Kelly said it was fair enough for Mr Frydenberg to leave "everything on the table" as the review was undertaken but then added: "I do not see how any form of carbon trading scheme would put us at a national competitive advantage".
Another MP, who asked not be named, said he was "scratching his head" why the government had released the review - and opened up a new political fight - just three days after securing year-ending wins in Parliament.
"There is very real concern among colleagues that this goes down a track we were promised we would not go down."
As conservative MPs marked a line in the sand over carbon trading and Labor and the Greens criticised the government's review, Australian Energy Council chief Matthew Warren, representing the bulk of generators, said the most important thing for the industry was a policy that would withstand changes in government.
"We'd go for almost anything that has a substantial chance of succeeding and garners bipartisan support, because we can build on it," he said.
Mr Warren said a decade of uncertainty on climate and energy policy had driven away investment, leaving a system "now materially degrading before our eyes".
He said the energy industry wanted some form of carbon price linked to a clear emissions target that extended beyond 2030 - something the review will consider - to trigger investments in new power stations that would last decades.
Australian Industry Group chief Innes Willox said the country could only play its part in tackling climate change at lowest cost if investors believed policies would survive.
"Bipartisanship on climate and energy is the only way forward. The alternative is costly failure," he said.
The Climate Institute said the country had a clear choice: between a review that set Australia on a pathway to zero emissions, or continued the policy chaos of the past 10 years.
Deputy chief executive Erwin Jackson said the goal must be a policy framework that was capable of decarbonising the electricity system well before 2050. It must include some form of carbon price, but that alone would not be enough as experience had taught that any scheme would be a political compromise.
The Climate Institute supports a phased retirement of Australia's remaining 24 coal plants to set a clear timeframe of when new plants would be needed. Mr Jackson said it would reduce the need to subsidise renewable energy and help ensure energy security.
Frank Jotzo, from the ANU Crawford School of Public Policy, said an emissions intensity scheme would be a second-best option after an economy-wide carbon price, but support for it in public debate reflected that Australia was "cobbling things together" after year of political disagreement.
He cautioned that allowing the use of international carbon credits to help meet Australia's climate targets would not be enough to drive the change needed in the power sector, given the credit price was often low, and did not reflect other steps being taken in Europe and China to cut emissions.
He noted the terms of reference did not include a re-examination of the 2030 emissions target, of a 26-to-28 per cent cut below 2005 levels, but said there would be a global stocktake under the Paris deal under which Australia would be expected to strengthen its goal.
"That would indicate that will be considered later," he said.
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