Competitive grant schemes can be effectively used to reduce Australia’s greenhouse gas emissions but they are not sufficient to produce large scale abatement at a low cost.
Competitive grant schemes are best used in conjunction with other policies including a broad based carbon price.
The carbon price is able to achieve large scale abatement at a low cost and the revenue collected from a carbon price could be used to fund the ERF. The ERF could be effectively used to fund abatement in areas not covered by the carbon price or in areas where a carbon price is not able to tap into low cost abatement or where transaction costs are low.
The political class in Australia needs to overcome its tendency for picking individual climate change policies and embrace a broader approach.