Crikey has stolen everyone else’s ideas from our coverage over the past two years to bring you our very own Green Paper ahead of Penny Wong’s release tomorrow:

How to alter electricity prices:

Friday, 7 December 2007, Thomas Hunter writes: The National Emissions Trading Taskforce established by the states — which differs from the former PM’s Emissions Trading Taskgroup — has projected the additional weekly cost of electricity with an emissions trading scheme in operation. Their workings encompass three possible scenarios:

Scenario 1: Emissions capped at 2000 levels without substantial energy efficiency measures,which offers a 33% reduction in CO2 emissions at forecast 2030 levels.

Scenario 1a: The same as scenario 1 but with higher levels of energy efficiency.

Scenario 2: Emissions capped at approximately 1997 levels, offering a 43% reduction on forecast emissions for 2030.

How to cap prices:

Friday, 8 June 2007, Thomas Hunter writes: The Heat Is On, a report on the future of energy in Australia by the CSIRO’s Energy Futures Forum, which includes corporate players like Xstrata Coal, Origin Energy, BHP Billiton, Orica Australia, and Rio Tinto, adds further context to the price increases:

While retail electricity prices will increase by 2050 by between 7 and 20%, those increases will be below the change in real income per capita in Australia which is expected to rise by over 100% by 2050 as GDP increases. By 2050, the average share of full time wages spent on electricity is expected to decline from around 1.1% in 2006 to 0.5 and 0.7. This is inclusive of carbon prices imposed in the scenarios.

The ABS has some relevant numbers, too. In February 2007, Australian workers (including part timers) took home on average $857.60. An additional $2.20 per week represents only 0.26% of that figure. And as we see above, the Energy Futures Forum caps the additional expense of running our toasters and TVs under an emissions trading scheme at only 0.7% for full-time workers by 2050.

How to allocate permits:

Monday, 19 February, Michael Pascoe writes: The allocation of permits in any field is an area where governments routinely fail — whether its over-allocating water licences or maintaining the taxi licence racket. The European carbon trading system is already an example with permits given away to power companies and heavy industry, resulting in over-allocation and windfall profits for industry. The initial state government proposal is flawed by being limited to power generators. The AFR suggests the state treasuries could make more money by extending the scheme to include energy-intensive industries such as cement, steel making and aluminium. But state governments are notoriously prey to doing deals and favours — and it’s already happened in NSW by the government indemnifying Bluescope steel against any future carbon tax, as the SMH reported. It’s all part of the argument in favour of a revenue-neutral carbon tax with no exemptions.

How to price carbon:

Friday, 1 June 2007, Ric Brazzale, Executive Director, Business Council for Sustainable Energy writes: Emissions trading is all about the target. Whatever target you set, the market then determines the price. Some of the wording we have seen that talks about “measured”, “soft”, “modest” targets concerns us because the science is getting more dire and calling for tougher action. The problem you have with a soft or moderate target is, is it going to drive the right sort of investment?

$20 might be a good place to start, but bear in mind that’s considerably below the current international price of carbon which is around $AU35. If you have a soft target you are going to have a soft price, and if it’s a low target you are not going to get the abatement or the investment.

Below the $30 mark, you’ll get quite a bit of switching from coal to gas, and that will do you for a while, but that’s not enough to support new zero emissions technologies. You could introduce an emissions trading scheme that might not be so onerous at the start, but you also need renewable energy targets and energy efficiency targets. Nobody should see emissions trading as the silver bullet. It’s probably the most critical piece of the policy puzzle, but you still need development in renewable energy technology and energy efficiency measures to curtail energy consumption.

The longer you delay or the weaker the target up front, the higher you build the emissions later on. This is the test of the emissions targets: is it going to drive investment in new technologies that reduce gas emissions? If it’s not going to get you there, you are going to have to do something else.

Steve Hatfield Dodds, Senior Policy Economist, CSIRO Division of Land and Water, writes:

A modest carbon price of $10-$15 is enough to make the switch between coal and gas, and may be considered enough to encourage a lot of energy efficiency. It depends on detail of how it is framed, but $20 is high enough to be credible as an early signal.

In the international literature, it’s not until you get to around $AU60 per tonne that you really see the large scale transformation of the energy sector. The Australian Business Roundtable and modeling released recently by the Climate Institute indicates that if you are driving a binding emissions scheme alone you need to see a price in the order of $60 to achieve deep cuts in emissions.

A long term low price risks offering too much comfort to business, which locks in higher emissions technologies in the energy sector which later will make it more disruptive and costly to achieve low emissions targets should Australia find that important in the future.

The Climate Institute, from Making The Switch, says:

A wait and see scenario with a soft start to carbon pricing does not significantly reduce emissions in the short-term, leads to higher carbon prices and electricity prices over the medium to long-term, and does not promote the deployment of clean energy over the next decade.

Establishing a clear economic signal would allow the market to find the most cost-effective technologies, provide incentives for innovation and create a level-playing field for business and consumers. However, setting a low price or starting slowly will only delay the inevitable restructuring of the electricity sector and lead to higher costs at a later date.

Unless carbon prices are high, clean energy sources will not see early deployment in Australia. The introduction of a market-based mechanism to ensure all new electricity load is met by near zero emission technology will reduce both short-term and long-term costs of reducing emissions.

Don’t extempt the big polluters:

Friday, 28 March 2008, Clive Hamilton writes: Exempting the coal-fired electricity generators from the emissions trading system would be like imposing a tax on cigarettes then exempting smokers from paying it. As the biggest source of carbon emissions in the country, the coal-fired electricity generators are the principal target of the scheme.

The first objective of the new system is to drive up the price of coal-based electricity compared to the alternatives, mainly natural gas and various forms of renewable energy.

These same companies now demanding a windfall have in the past attacked proposals to introduce emissions trading to Australia by pointing to the problems in the European Emissions Trading System. As everyone knows, the problems there were caused precisely by the decision of European governments to hand free emission permits to big polluters, which led to price volatility and a huge wealth transfer to the very companies that should have been penalised by the system.

Be careful of throwing the ETS too wide:

Friday, 4 July 2008, Guy Pearse writes: Garnaut continues to avoid saying which industries should receive compensation for the impact of an ETS on the basis of their trade exposure and emissions intensity. He won’t get specific about who should get it, how much they should get, or how long what is effectively an emission subsidy should last. Yet, strangely in the absence of that detail, he is apparently still able to suggest what proportion of ETS revenue go towards such compensation.

Almost every industry imaginable is now identifying themselves as a TEEI deserving special treatment, and there is a very real risk that householders and cleaner sectors will end up subsidising the emissions of Australia’s worst polluting sectors for decades to come. Worse, by signaling that these industries will be given the right to pollute freely pending a level playing field in carbon trading internationally, Australia risks attracting even more dirty industry to its shores. That would further cement our position as the greenhouse ghetto of the developed world, and it would make the task of cutting our emissions as a nation even harder.  

Focus on renewable investment:

Friday, 4 July 2008John Connor, Climate Institute, writes: Meeting emission reduction targets and building the clean-energy alternatives will generate trillions of dollars of investment opportunities. Australia needs policies to ensure all new electricity load generation comes from clean energy and that support, not hinder, investment in clean energy and low carbon technologies.

Create a system that lasts:

Friday, 4 July 2008, David Pearce, Director and Principal Policy Analyst at the Centre for International Economics, writes: … our political system needs to deal with the full immensity of the time scales that are involved for climate change policy. Even if the entire world acts immediately, climate change will not be affected for a number of decades. There will be pain in the many years before there is any gain because the inertia in the climate system means we are already committed to a large amount of climate change. The policy we implement now must be robust for many, many years to come, and it must remain robust despite the fact that the benefits are diffuse and far in the future. This makes climate policy quite unlike any other economic reform we have seen.

Forget coal:

Friday, 4 July 2008, Greens Senator Christine Milne writes: However, Garnaut clearly has a blind spot on coal. He has been taken in by “fool’s coal” and believes that geosequestration will be the saviour of the Hunter and Latrobe Valleys. If he truly understood the urgency of climate change, Professor Garnaut would not be punting on a technology which is at least a decade from proving itself, if it ever can, and can never be one of the truly zero emissions energy sources we need in order to achieve fast and deep cuts in emissions in coming years. But, like the politicians, he seems incapable of envisioning Australia beyond coal.

Garnaut, and the Government, must be very careful with the structural adjustment packages they come up with. If they are used to prop up coal jobs, they will surely kill the valleys in the end. If, however, structural adjustment is used to support a green collar revolution, through the restoration of a domestic manufacturing sector and a huge expansion in retraining and re-skilling the workforce, those who are foreshadowing doom and gloom for the Hunter and Latrobe will be proven wrong. Opportunities abound provided the structural adjustment is for the new economy and not trying to shore up coal.

Forget Geosequestration:

Friday, 4 July 2008, Greens Senator Christine Milne writes: There are three main reasons why we say we must not assume that geosequestration will save us: it is not and will never be zero emissions, it is too slow, and it is too risky. The fatal flaw of coal with geosequestration is that it will always emit some CO2, not less than 10% of current coal. The deeper the emissions cuts you need to achieve, the less carbon capture will play a role. In a world where we only needed to reduce emissions marginally over a long time, geosequestration might be an option. But that isn’t our world. The science is clear that we are already entering dangerous climate change, and that minimising the risk of catastrophic, runaway change means heading for net zero emissions as soon as feasible. This means zero emissions from the energy and waste sectors, and carbon sequestration in the forests and soils offsetting some stubborn agricultural and industrial emissions. In our real world, we need zero emissions energy sources, and coal with geosequestration doesn’t fit the bill.

But Carbon Capture does have a role to play…

Monday, 7 July 2008, Dr Peter Cook writes: CCS is certainly not the total answer to greenhouse concerns, but it is an essential part of the answer along with energy efficiency, greater use of renewables and lower carbon fuels. Each year China puts in more new coal fired power stations than we have in the whole of Australia now — and those power stations will be emitting CO2 for the next 40 or 50 years. So we just have to get cleaner and smarter in using fossil fuels — which is where CCS comes in!

Peter Fray

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