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Federal

Apr 27, 2010

CPRS into the deep freeze

There used to be a bipartisan agreement on the need for an ETS. Now we're further away from one than ever before.

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The government today wheeled its dreadful CPRS into the political deep freeze, continuing its pre-election deck-clearing of anything that doesn’t suit the narrative it wants to sell voters between now and August.

Given it had no chance of passing the damn thing through the Senate, there’s perfectly good reason for the government to put it aside.  But its real goal is to neuter the opposition’s campaign on price rises engendered by the CPRS.  The coalition has been working for some time on a campaign to make sure small businesses understand they’ll be hit by significant price rises for electricity under the CPRS.  There’s little or no compensation for small businesses for the rises in the CPRS, because they’ll be expected to pass the rises on to consumers, who will be compensated.

Still, it took the government a while to get its lines right on the issue when the coalition ran a preview of the campaign in question time in February.

The fact that in putting it aside until 2013 means the government will save just under $950 million between now and then shows just how nonsensical the opposition’s “great big new tax”  line is.  Some tax that would have pumped nearly a billion dollars into the economy — and that was just for starters.

It bears remembering just where we started from in all this — Kevin Rudd and John Howard going to the 2007 election with a shared commitment to an emissions trading scheme.  After the Nelson interregnum, Howard was succeeded by a man more determined than virtually anyone else in Parliament to take action on climate change.  And yet somehow, the Prime Minister and Penny Wong managed to botch it.

And they really botched it, first by letting every rent seeker in the country come in for their chop, and then by thinking climate change was a great weapon with which to split the coalition, rather than a “great moral and economic challenge”.

It’s a singular achievement for which Rudd and Wong can take credit — with some thanks to Tony Abbott and Nick Minchin and the rest of the coalition climate crazies.

The Greens, perhaps with one eye on holding the balance of power from July 1,  have urged the government to again consider their interim carbon levy proposal, which would cap permit prices and slash handouts to polluters to 20% of revenue (rather than 27% of revenue, where it starts, before rising above one-third of revenue in later years).

However, that ignores the political reality that the government has gone cold on climate change because it failed to sell its CPRS properly and denialists, engaged in a systematic economic war on future generations, have leapt into the gap.

Sadly, this is the perfect time to be implementing an emissions trading scheme, with the economy again poised to enter an extended boom led by the resources sector.  Any negative impacts on polluters of the scheme — and the Grattan Institute has conclusively shown that impacts will be almost trivial — would be minor compared to the benefits of strong economic growth.  Australia’s emerging economic challenge is to manage high levels of growth.  The introduction of an effective ETS would provide an additional tool for policy makers dealing with too much demand and unbalanced growth.

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51 comments

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51 thoughts on “CPRS into the deep freeze

  1. mboz101

    Yet again our elected representatives prove themselves to be small-time, cynical, tawdry politicians concerned only with staying in power to suck on the taxpayer teat. Where is the courage and boldness that real leaders show in the face of such great moral challenges? There is none to be found amongst this mob.

  2. David Sanderson

    The ETS is a massive failure for Labor in general and Rudd in particular. Both design and attempted implementation were both dreadful. Out of the whole debacle only Turnbull comes out of it with any credit.

    Labor still thoroughly deserves re-election because of its other achievements (and because the alternative is so miserably inadequate) but the tolerance for Rudd playing games with really important reforms has evaporated.

  3. Kevin Cox

    The government can do something significant about climate change without increasing taxes, without increasing the price of fuel and without increasing the budget deficit.

    It can give those of us who want to do something about the problem interest free credit. We agree to only use this credit to invest in ways of reducing green house gases in the atmosphere. We agree to pay back any loans we take out from the earnings on our investments.

    This will work because the cost of renewables and energy saving investments is mainly interest costs and almost every investment we make will be profitable. The government, by suggesting it to the Reserve Bank, can issue as much credit as it likes and it can charge as much interest as it likes for the credit. There is no law or regulation that says this cannot be done if the board of the Reserve Bank agrees to it.

    The citizenry takes on the equity risk of the investments and repays the loans. The government has to do very little except allow us to get on with the job, earn some money and pay some taxes.

  4. Marcus Ogden

    “The Greens, perhaps with one eye on holding the balance of power from July 1…”
    Come again?

  5. Liz45

    If Labor was fair dinkum about climate change, and reducing greenhouse gas emissions, it would call a double dissolution and hope for a Senate that is supportive, or perhaps getting together with The Greens and devise a better piece of Legislation that doesn’t give so much money to the big polluters! Too simple?

  6. shepherdmarilyn

    When will you lot get one thing through your thick skulls about who the polluters are? It is us, we the public who are the big polluters.

    Power is not stored, it is only supplied on demand and we demand and demand and demand and then whine about the power bills.

    We whine about petrol prices and keep driving (not me I have never had a car), we whine about everything and we do nothing but expect the guv’mint to do it for us.

    Why don’t we stop whining and start doing our own work. Put on an extra jumper instead of heating, walk instead of driving.

    Make it a goal to cut our own bills by 25% and see what happens instead of this incessant, ignorant bleating.

    When people boycotted products using CFC’s in the late 80’s the companies pretty damn quick changed over.

  7. Chris

    “… and then by thinking climate change was a great weapon with which to split the coalition, rather than a ‘great moral and economic challenge’.”

    Can someone please explain to me how the government engineered the coalition split on this issue? The split was a consequence of the what happened, but the government’s objective was to get coalition’s support, as demonstrated by all the sweeteners that went into the final package to get the coalition on board.

  8. David Sanderson

    Chris, Rudd encouraged a split by running dead on the issue. If he had campaigned solidly for it then he would have helped create a groundswell of support that would have helped the pro-ETS Lib camp prevail and avoided the split down the middle that occurred.

    Many of the anti- ETS camp within the Libs are pure opportunists – Abbott is perhaps the most cynical of this lot. If they had seen a groundswell of support for the ETS they would have backed it. The legislation would have passed and either Turnbull or Hockey would now be the Liberal leader.

  9. Liz45

    @SHEPHERDMARILYN – POint taken! You’re right of course!

  10. Rush Limbugh

    who cares, Climate change is complete fucking bullshit anyway.

  11. David

    As in Marcus Ogden entry, ditto.

  12. OBlizzard

    Kevin,

    That’s a poor Idea for a whole bunch of reasons. If all we needed to do to tackle climate change was invest in renewable R&D then all we would need is initiatives like the renewable energy targets, easy peasy. Reality unfortunately is much more complicated. The biggest issue with that plan is there is no incentive for industry, by far the largest polluters, to invest in abatement. It all depends on those of us who “want to do something” about climate change. Corporations primarily seek profit, you cant realistically expect companies to voluntarily reduce their profit margin for the good of society, that’s why we have government after all.

    Relying on people who want to act on a moral level will not change the way our economy as a whole works, it will just look pretty around the edges. If you want real change you have to get the wider market involved and without a price signal said market will not move to a low carbon stance; its pretty much that simple. We can put solar panels on every roof in the country but without a carbon price we wouldn’t have a hope in hell of making the cuts science tells us are necessary if we want to avoid the consequences, especially if we intend on continued economic growth and increasing standards of living.

    The other major issue is the lack of environmental certainty in such a scheme; no targets and no concrete way of meeting them. Relying on environmental minded people to make changes at the neighbourhood level is not going to stop a brown coal power plant being built or stimulate investment in rail over road transport.

  13. John Bennetts

    @ SHEPHERDMARILYN and Liz45:

    “It is us, the public, who are the big polluters.”

    If only this was true, we might have seen some effort to reduce our effects on the atmosphere and our headlong rush to consume the remaining 50% or less of liquid and gas resources globally.

    The Politicians, acting as our representatives, have failed comprehensively to develop and to implement a policy in the contentious areas of climate and energy. The industrial leaders have filled this vacuum, as they are employed to do, with proposals to gain private benefit from these opportunities. Think: air and land transport; coal and gas fired power generation; ultra-high cost green power alternatives such as wind and solar PV; cement and concrete; clay brickmaking; asphalt roads.

    The “public” have no input into the process if the politicians have put the issue into the too hard basket.

    So, while agreeing that your sentiments are, in a narrow and hypothetical way, kind of correct, I tend to support Bernard’s point of view in the context of Australia, 2010 and management of climate and energy.

    Real change must come via the ballot box and we have again been denied the opportunity to do so, for party political reasons. A pox on all of their houses!

  14. David

    Rushlim..that would be similar to your writings.

  15. John Bennetts

    @Oblizzard:
    Sorry, but no amount of R&D and construction of windmills, geothermal, solar photovoltaic or any other so-called renewable will do the job. I won’t go into it here. For well-reasoned papers on this subject, check out the BraveNewClimate site or similar, but be prepared to read and to think for at least a week. This is deep stuff.

  16. OBlizzard

    shepherdmarilyn

    While I agree we all need to do our part without getting industry involved we wont be doing anything really effective. The only way to get industry on board in any real way is through regulation and the only way to ensure the appropriate legislation is implemented is for the average Joe to speak up in places like this. Political pressure is absolutely critical here so all of us need to keep the bleeting up, make it louder if possible.

    Bernard

    If Rudd is walking away from this CPRS then he’d be seriously shaking my faith in him and his government. If by the end of the first year of his second term the CPRS or something like it is not at the very least being seriously pushed by labor I will not vote for them again. I understand its an election year and all but after that, if there is no real effort to do something I’m going elsewhere and taking everyone I can with me. Really bad policy work from start to finish, I actually think more would have been done to address climate change if John Howard had won the last election.

  17. Rush Limbugh

    Oblizzaard….this is the first time your confidence has been shaken…he made 603 election promises…304 requiring acts of parliament…

    he has achieved 7 of the major ones…

    at this rate of one every two every years he will need to be elected 78 times to achieve all of these.

    Beware of a Government that promises everything.

    Your only now dissapointed…wow.

  18. Kevin Cox

    Oblizzard

    Who said anything about morals? When I say “those of us who want to do something” I mean for our own profit as well as reducing greenhouse gas levels. Who said anything about neighbour small scale systems? I am talking about major projects.

    To see more go to http://www.youtube.com/watch?v=EaY5X6bSK7o and http://www.youtube.com/watch?v=epJt8OxoQPI

  19. Liz45

    SHEPHERDMARILYN – I’ve been thinking over your comments and my response, and I believe that I’m not the same as “the big polluters”? It’s at least 30 yrs as a member of Friends of the Earth, that with others, tried to educate people re the need for renewable energy sources and the damage being done to the planet. We were ridiculed and referred to as ‘greenies’ and ‘communists’ and ‘radicals’ etc. We pointed out how the oil and rubber industries via the car industries had ruined public transport in the US, while encouraging the purchase of cars, oil etc. All the while, those responsible for the nuclear industry(GEC, Westinghouse, Philips) were spewing out more gadgets that would create the need for more energy etc. The building industry in Australia was being rewarded for increasing the number of power points throughout a house etc. There were many different avenues that were promoting the ‘free for all use’ of and increasing the demand for electricity – to no avail, sadly!

    It is possible to have renewable energy of a few varieties, solar, wind, geothermal etc to supply base load power for this country’s present and future energy needs. The main thing lacking is political will and investment of dollars. The federal govt gives $10 billion in handouts to the fossil fuel industry each yr – none of that is aimed at me. Too many companies like BlueScope Steel and BHP Billiton obtain their energy and water needs at a much cheaper rate than I do, even though they make hefty profits each 6 months! Added to these hand outs are other lerks and perks available only to people in business, while the ‘little person’ like me helps supplement their costs. So, no, I’m not like the big polluters at all! They employ many people to lobby the govts in order to maintain their priviledged position/s, while I and others like me are at the bottom of the pile!

    Coupled with this is the obscene increases in both their profits and CEO incomes over the past few yrs, while groceries alone have increased 40% in the last 10 yrs, but wages and pensions certainly have not! We’re doing it tough, they’re living in clover!

  20. shepherdmarilyn

    I didn’t say you were like the big polluter Liz, we are all the polluters. Without us using so much energy they would have nothing much to sell.

  21. JamesK

    Yes Bernard…[Edited for excessive insults – Mod]

  22. JamesK

    Why? Doesn’t Bernard think most Australians are d-mbf-cks?

  23. Eponymous

    At least if we’d voted for Howard, he would have got some sort of scheme through.

  24. Socratease

    How long can Rudd keep faith with those that elected him? At some point, regardless of who’s leading the opposition, this guy has to be seen by his former faithful as The Emperor Sans Clothes.

    Speaking of the opposition, interesting to note Abbott’s new “low key” criticism of the government. Seems he’s taken some advice about reining in the stream of sarcastic remarks in public directed to Rudd and is now concentrating on calmly pointing out Rudd’s stream of policy failures. Don’t know how long Abbott can keep up that act before his attack dog nature breaks through again.

  25. BRUCE PIKE

    lets just get our prime minister into a workcover court over the pink batts fiasco just release comrade garretts letters must be a disappointment to the lefties of crikey and poor 6yr old gracie anyway at least rudd wont go to any labour pollies funerals eg senator buttons
    much rather go see cate’s baby

    how much longer can labor faithful keep him there

  26. David Sanderson

    Bruce, illiterate and incoherent. They don’t have to go together but it is a pretty unattractive look when they do.

  27. Frank Campbell

    Well, no need to hang about : Keane rewrites history while you wait.

    ” (Wong and Rudd) really botched it, first by letting every rent seeker in the country come in for their chop, and then by thinking climate change was a great weapon with which to split the coalition, rather than a “great moral and economic challenge””.

    -It’s all Rudd ‘n Wong’s fault, with some help from the “Coalition climate crazies”.

    As if the rot wasn’t well advanced long before 201The high-water mark of climate millenarianism was 2006. Crikey is stuffed full of polls, including that one. So why ignore it, Mr Balloon? The ALP and Turnbull were guilty of nothing more than detachment from political reality. They were transparently sincere. The spivs and rentseekers would have cashed in on any scheme (as the windspivs are now ripping off rural Australia). The insulation and Green Loans scandals show the government and bureaucracy live in fantasyland- the average citizen knows the building industry is comically corrupt, but Garrett and Rudd have never been in a roofspace in their lives.

    The last thing Rudd wanted was to “split the coalition” over “climate change”: he desperately needed Turnbull to shepherd the recalcitrants into the corral. The rogue bull led them out at the last second. That’s what actually happened, Bernard. Copenhagen and Climategate were just accelerators.

    As I’ve said for many months on Crikey, ALP/Turnbull devotion to the millenarian cult has put the nasty Right within striking distance of power. (Note that when O’Brien interviewed O’Bama last week, “climate change” wasn’t even on the agenda, as pointed out by S. Black in these pages….)

    And where does the political and economic defeat of climate millenarianism leave noisy Crikey, still sitting on the kitchen floor banging saucepans? Your nappy needs changing. Or are you going to inflict on your readers more tantrums from Calvin Hamilton and the rest of the climate priesthood?

    Or will you do a Rudd and forget the whole embarrassing business? Will you now write about the myriad real environmental degradations that you’ve ignored for so long?

  28. zimmerman

    I believe with the aid of Crikey’s party of choice “The Greens”, Mr Rudd would have had oodles of senate numbers to pass the much needed ETS.
    The reason there is no action on Climate Change in Australia is pretty much down to Clive Hamilton.
    Oh the humanity!

  29. LizzieA01

    Well said Bernard. I despair of positive action on this important issue, and am very bitter that my vote was wasted at the last election – because I certainly wasn’t voting against workchoices. If the Greens can come up with a credible economic policy that is wider than their party brief then they will be in with a chance to get my vote in both the house of Reps and the Senate. I cannot vote for a party who’s leader thinks that climate change is “bullshit”, or for a party who’s leader believes that tackling climate change is too hard / not politically expedient to do.

  30. CHRISTOPHER DUNNE

    Ross Garnaut was right: climate change is going to be a real bugger of a thing to tackle, and not because the science isn’t loud and clear enough, it is, but because humans have invested everything in behaving like it isn’t.

    So seventy percent of Australians think we should reduce emissions but somehow don’t want to pay for it? There really is a disconnect from reality here, and if we are as citizens are so conflicted then surely our politics is going to reflect this.

    Well, it does, doesn’t it?

    Just as I’m personally conflicted by this decision of the government’s to shelve the ETS. On the one hand it’s not the plan I’d ideally like to see implemented and am glad to see it go down, yet on the other I feel like this retreat will only help feed the kind of ignorance so easily seen, even in some of the comments here…denialists and head-in-the sand types will rejoice. It was far from perfect, but it could have been the start of what is going to be a long hard road to wean ourselves off the notion that burning sh!t is a cost free activity.

    The ETS may go away (for a while), but climate change will not.

    So a cynical bit of pragmatic politics on Rudd’s part might turn out to be a ‘smart’ move electorally, but for many of those who put him there it’s going to be a bitter pill to swallow.

    Turnbull came and saw and almost conquered what proved to be a rabble of ill-informed and ignorant self-interest, and must now be very happy with himself for electing to leave it.

    But where does that leave the seventy percent who think we should reduce emissions? Back in Garnaut’s conundrum I’m afraid.

  31. David Sanderson

    Because, RV, he fought hard and consistently to get the best possible scheme that his party would support. In democratic politics that is what standing on principle means – getting the best possible outcome for the objectives you seek. It doesn’t mean accepting only your ideal scheme or nothing at all.

    In contrast, Rudd did not fight hard or consistently for the best possible outcome – as a Labor supporter I find that very disappointing.

  32. jenauthor

    Rudd’s problem is he does not want a DD yet … and the senatorial blocking of legislation is NOT the govts. doing.

    Rudd is being realistic — you can’t force legislation through a brick wall, lets face it, — and nothing can happen until after the election when hopefully idiots like Fielding are ousted (with a DD).

    The fact that all the experts in the world cannot a) agree; and b) come up with a provable policy answer to climate change, means that this is/was never gong to be an easy fix.

    Politics on this has been laughable:

    The greens have sat on their hands and refused compromise until they knew passage was impossible.

    We all know about Steve Fielding and his ‘galah’ ideas.

    The bulk of the Libs have simply taken a political stand to guarantee their support base, and apart from the few brave lib senators, they have put the party first and the country (and the future) second. After the lynching of Turnbull, I expect many were too scared to voice their opposition (pun intended) to the party line.

    The govt tried its damnedest to please all and sundry in an attempt to get this passed to the point that it compromised too much.

    All this means is that the legislation was dead in the water, and the only sensible thing to do is set it aside until the DD is the right time. To say the govt. is backing away from a key policy is completely wrong. At no time time did Rudd say they were abandoning the policy (unlike the current opposition leader who suggests then abandons policy ideas on a daily basis).

  33. OBlizzard

    Kevin,

    I’m at work so I cant look at you-tube, sorry. You’ll have to explain it to me.

    In any case larger scale does not solve the issues of environmental integrity and economy wide abatement, which are fundamental to any realistic climate change policy. If you don’t address these issues then you aren’t addressing the problem and the best way to do so is a carbon price, its just that simple.

    Also if these projects are commercially viable then why cant you find the capital out in the market? Why do you need government? Even before seeing what exactly you are talking about the fact that you need taxpayer funded capital tells me these projects wont stand on their own two feet out there in the real world.

  34. OBlizzard

    Rush,

    This one is critical for me, its why I voted for him and its what made me sure I wouldn’t even contemplate voting for the coalition. I didn’t really care about the other fluff, this one is the single most important promise he made.

    I know the Coalition backfilled and blocked the bill in the senate, but they sold a cap and trade scheme so badly that people actually started to believe the “great big new tax” BS being thrown around by Abbott and Co. If public opinion had not waned over an ETS senate obstruction to it would have been less tenable. Instead as soon as the polls started to lag a little Rudd ran for the hills. Boo-urns!

    This scheme is half assed, but god dam it a half assed scheme that does SOMETHING is miles better than doing NOTHING, especially if it leads to something better down the track.

    John:

    I never said anything about renewables. The point is that in the short to mid term the lions share of abatement opportunities come from cleaner and more efficient industry (and to a lesser extent households). This ranges from reducing energy consumption in Aluminium smelters to cleaner smoke stacks to green driving training programs. We could cut current emissions by 15%+ just by using available technology which improves energy efficiency and direct emissions from industry. The problem is these technologies are usually more expensive than their dirty counterparts and thus must be made “artificially” more competitive. Again the most efficient way to do this is through a market determined carbon price.

    If you are talking mid to long term then absolutely we need to address the electricity generation infrastructure in this country. In my opinion I think sustainable nuclear has to be considered as part of the mix, particularly if thorium fuelled reactors become commercially viable. I’m not convinced nuclear power is as competitive as CCS, considering the cost of nuclear infrastructure and the high level of subsidisation nuclear energy receives around the world. Brave New Climate does put forward some interesting arguments in favour of sustainable nuclear over renewable energy, particularly the difference between renewables and nuclear in net capacity factor, I hadn’t though of that one before.

  35. CHRISTOPHER DUNNE

    OBLIZZARD, just a little point: the smelting of alumina cannot be made more efficient…it’s inherent in the process (well two, actually, extracting it from bauxite and then producing aluminium from it).

    This metal is solid electricity and that’s just basic to the chemistry and physics.

    What you can do is use cleaner energy, which is why a lot of smelting is being done near large hydro-electric systems.

  36. Eponymous

    Also disagree on the extent of industrial savings available. 15% through efficiency measuures seems very optimistic.

  37. John Bennetts

    @ Oblizzard (various posts):

    Kevin Cross’s two videos are essentially slight of hand stuff. They go on for 15 minutes explaining how zero interest loans produce productive assets owned by the consumers, but ignore the probability that at least one of the underpinning assumptions is wrong: Capital cost / output / reliability / running cost / availability / market price / physical limits / resource limits. The whole house of cards still looks vaguely plausible until risks are assessed, at which point it becomes apparent that creation of money for interest free Nirvana is doomed from the start.

    Put as simply as I can, no amount of effort and money can produce sufficient renewable energy, either overnight or in (say) 20 years, to reliably power our planet or even our country. There simply isn’t enough space, sunlight, lithium, manpower, etc.

    Regarding energy efficiency and power generation, I agree that short term and long term options are relevant, but the driver should be consistent. There is no point in paying 60 cents per kWh for solar generation when the market is closer to 4 cents, as is happening every day in Australia. Add to this the fact that photovoltaics are totally unpredictable, except that they are worth diddly-squat at night time. This results in our treasure (money) being diverted to an ineficient and unreliable outcome, PV.

    For efficient outcomes, all power proposals must be exposed to the same marketplace. A unit of energy saved is worth a unit of energy used. Thus, if the real cost of using carbon was factored into its price at well-head or mine, then the money raised could be available for cleanups. I am unable to say just what price is appropriate for carbon, but contemplate the cost of removing 1 tonne of carbon (say 2.5 tonnes of CO2) from either the air or the ocean, using currently available means. Once the playing field for energy sources has been levelled, the apparent cost of energy is be the true cost of power. Demand management will not be a “feel good” issue any more – it will be driven by the dollar saved.

    Bring the lifetime costs and externalities into the marketplace and the energy options will do the rest. The same goes for nuclear, whether via the current processes via thorium cycle reactors.

    The debate should be about the magnitude of the carbon tax (etc) to level the playing field, not how far the tilt should be to make viable the wind, solar PV or solar thermal or any other industry.

    In a perfect world, those countries which dump carbon into the atmosphere and ocean should be required to pay into an international fund the cost to clean up their mess. Currently, that runs lobally at several million tonnes carbon per day – a tidy sum by anybody’s calculation. As the world’s largest per capita polluting nation, why should Australians not have to pay our way? The carbon tax would provide precisely for this.

  38. OBlizzard

    Chris,

    Point taken, it was just meant as an example. Every (insert industrial process here) has abatement opportunities in one form or another (they could even include offsets), the only difference is the marginal abatement cost. The point is you need a carbon price to stimulate these shifts toward abatement.

    Eponymous:

    I was involved in a trial on driving habits and their effect on fuel costs. After implementing a “green” driver training program we saw 10% ~ 12% (optimum) reduction in fuel costs simply through efficient behaviour; this is without any capital expenditure on hybrid light commercial vehicles or any technological device beyond GPS (which we already had). 12%!!!! Imagine that combined with new vehicle technology already on the market.

    The Dutch achieved a 20% improvement in energy efficiency in industry from 1989 to 2000 primarily through widespread adoption of best practice energy policy. Obviously Dutch industry is very different to Australia’s but it shows you just what can be achieved. There are massive opportunities for abatement that come simply through efficiency gains. Obviously that wont cut it in the mid term if we intend to make the cuts we need by 2050 but its the obvious place to start.

  39. Eponymous

    OBlizzard,

    No dispute with the driver training. Money for jam and a terrific program. But, it’s different with fuels compared to electricity.

    In a past life I did the energy reporting for Sydney Water and ran their energy efficiency projects, which were part of the Fed Gov Energy Efficiency Opportunities program.

    At SW, most of the efficiency gains were banging against the physical constraints of having to pump water. Because all the major pumps were large, their efficiency is very close to the theoretical maximum. Thus, I suspect that across most industries the large energy heavy processes are close to their limit. I’ll see if I can chase down some EEO numbers. I know they’ve already knocked 1% off the Aussie total, but I doubt another 15 is there to be had. Hopefully one of their reports will indicate the potential savings that have been identified.

    On the EU example, I’ve heard a slightly different story. An EU energy envoy came to town last year and spoke about their 20/20/20 policy; 20% renewables/20% under 1990 CO2 and 20% Energy Efficiency. They were very doubtful about the EE target, but hoped to get most of it through transport/fuels related industries.

    The exception was Russia and Germany who counted a lot of WW2 machinery in their baseline for energy use. It was in their best interest to change this stuff, and found most of it was cost effective. That’s just a story really…

    Off to find some EEO numbers.

  40. Eponymous

    Most recent EEO report covers 60%ish of Australian energy use, and mostly the VERY big users. If ALL the identified opportunities are put in place, it will reduce Aussie energy use by almost 3%.

    That’s principally big electricity users and big fuel users like Linfox and Qantas. So, maybe 15% isn’t outrageous? Would have to include passenger vehicles; there’s some low hanging fruit there. A lot of single passenger Commodores and Falcons where I’m from…

  41. CHRISTOPHER DUNNE

    No argument from me Oblizzard; yes, we need a carbon price and that can only come from government.

    I agree with most of Bernard’s article too, especially about the rank hypocrisy of the media that have chased the loony toons around the globe for denialist soundbites (pursing ‘balance’ or just baloney) and now all jump up in sync to howl at the government for putting it all in the too hard basket.

    It would be funny except that its not, at least not to those of us who’ve got some idea of where we are headed with ‘business as usual’ and the kind of claptrap the coalition are now sprouting.

  42. Kevin Cox

    OBlizzard

    Two ways to encourage investment in renewable energy are to increase the price of fossil energy or to decrease the price of investing in renewable energy systems.

    Both approaches will work.

    Decreasing the investment costs of renewable energy through the use of interest free loans repayable over the life of the investment will make renewable energy very profitable at today’s prices.

    Where will the money come from? Well the money comes where it always comes from, and that is the issuing of credit. In our monetary system when a bank makes a loan it increases the money supply through a book ledger entry. It does not loan money sitting in the bank. There are rules about how much it can create and how much it must have on deposit but fundamentally a bank can create Australian dollars when it gives credit.

    Today we issue the money only if the borrower has an existing asset that can be sold if the person does not repay the loan. This is called monetizing assets and when you monetize an asset you pay interest on the money because the person with the asset has given you part ownership of the asset and so is entitled to some rent on the asset. So all our money except cash and notes is interest bearing.

    We do not have to create money by monetising assets. In particular the Reserve Bank can give interest free loans and as it does when it creates cash or prints notes. The issue is will the money be paid back if it is not backed by a monetised assets? If it is cash or notes then it can’t go away and so it will be “repaid”. It will also be repaid if the borrower enters into an agreement that they will repay the loan from the profits made on the investment.

    There are simple ways to ensure this.

    Note giving some interest free loans does not mean we stop giving most loans with interest. We only do it in places where the market is not delivering the outcomes we want such as investments in renewable energy and other ways of reducing the level of greenhouse gases in the atmosphere.

    The general approach is called contingent loans and HECS is an example. Read the work of Bruce Chapman to see a description of contingent loans. What I am discussing is an example of contingent loans.

    The approach is dismissed by conventional economists because they think it is administratively expensive and that it introduces “moral hazard”. A well designed contingent loan system can be administratively much less expensive than a conventional loan system and the moral hazard can be eliminated.

    The carbon price approach to encouraging investment is indirect and very complicated to implement. It is time we tried the much simpler system of interest free loans.

  43. John Bennetts

    I feel that these interest free loans imply picking a government backed winner – in this case, one or several forms of so-called renewable energy.

    There are problems of allocative efficiency involved here. We already have the government subsidising returns on solar photovoltaic power by mandating that 60 cents is returned to generating households for each unit (kWh) of power generated, where this same amount of power can be purchased 24/7/365 from existing base load stations at about 10% of the price, or from the grid at about one quarter of that price.

    5 million Aussie homes are thus subsidising the few who have rooftop PV panels.

    This is the type of inefficient outcome that government support, via interest free loans, subsidies, tax holidays and other measures bring with them. The government is not the market place and is not in a position to monitor and control every investment decision, even if it wanted to.

    The government CAN make the marketplace fair. By making sure that the total costs associated from cradle to grave and due to carbon recaapture and storage from air and water are included in the price of carbon-intensive fuels, coal, oil and gas.

    The only way that I see this working is via a carbon price, with rebates available for actual capture and storage.

    Interest free loans will only prolong our agony through watching one pet renewable technology after another fail to produce the desired result on time, while it is rorted by multinational profiteers and local spivs.

    That’s it from me on this thread.

  44. Kevin Cox

    John Bennetts

    Your assumption is wrong. The government does not try to pick any winners. The investments are picked by the citizens of the country to give them the best return on investment. It will stop subsidizing inefficient methods of generating renewable energy as investors will go for the ones that give the most return on their money.

    Everyone will be entitled to get loans. I suggest that the loans be allocated on the basis of the inverse consumption of mains electricity and that will encourage people to consume less energy.

  45. John Bennetts

    KC’s last comment makes even less sense than his earlier posts.

    I am impressed by his commitment to a fabricated reality which is without rational foundation. At the least, I take it that each citizen chooses an investment and the terms under which his/her non-money will be “invested”.

    21 million separate decisions, just for Australia. No economies of scale, no coordination, nothing. Talk about a waste of time and effort!

    Kevin is obviously well read, somewhat skilled in PowerPoint, knows his jargon, but what a hollow proposition!

    BK wrote of a CPRS in the deep freeze, a political catch-22. Look where we have ended up.

    Good night. I’m out of here.

  46. Kevin Cox

    John Bennetts

    To solve this problem 21 million people need to work together to a common purpose. We do this by changing the millions of individual decisions to move in a particular direction not by telling everyone what decision to make. The proposal suggested will influence individual decisions in the following way.

    We Reward people (give them more credit) the less mains electricity they consume.
    The credit that people receive MUST be invested in ways to reduce greenhouse gas concentrations in the atmosphere.

    This approach can amplify the effect of putting a price on carbon. The money for the Rewards can come from the carbon tax. We collect the tax but give it back to the population in inverse proportion to the amount of green house gases for which they are responsible. However the Rewards must be invested in ways to reduce the level of greenhouse gases in the atmosphere.

  47. Eponymous

    John, I disagree with your assertion. Making money available is not picking winners.

    Picking winners is when the Government gives money directly to one technology or another. In a sense, the insulation rebate scheme picked winners; it encouraged in ceiling insulation at the expense of all other efficiency measures. This might have been the right thing to do, but it was still picking winners.

    In Kevin’s example there are no winners mentioned, just money available. He rightly points out that investors would be free to do with it as they please. They will still choose the lowest price abatement available to them; those that don’t will be uncompetitive. I don’t see how this is picking winners. Further, I don’t see how this is different to the outcomes of the LRET (MRET).

    This is the great problem of Abbott’s proposal. Giving money directly to people to plant trees is picking winners, and leaves a huge option open for rorting the system.

  48. Kevin Cox

    Eponymous

    Thank you. Much better explanation than my attempt.

    The critical point is to allow people to make choices – not be required to put in insulation, plant trees, put in solar panels etc..

    One of the problems with most policy ideas is that they tell us what to do. Economists are right when they say it is all about incentives. Unfortunately they mainly advise price incentives which unfortunately are one off effects. The other way is to think in terms of investment incentives.

    So policy makers out there.

    Think of ways to incentivise people to invest in ways to save energy and generate renewable energy. My suggestion is give people money if they consume little energy and require them to invest those savings in ways to generate renewable energy.

    This will work and it will have a compounding positive feedback effect.

  49. Liz45

    I’ve just read most of the comments here, and there’s one major component to the Rudd govt’s deferral of this issue that hasn’t been aired, and that’s the power of the mainstream media; the amount of air time and written space supporting the conservatives – in everything. How many journalists have really dug their heels in and made Abbott defend his stance – on a heap of issues? None I suggest!His daily opportunistic ‘policy changes’ would be laughable if so not serious! And how many people castigating Rudd have demanded that the msmedia commence doing this? I suggest the same number – none! What did they expect Rudd to do? Declare martial Law and bring in the troops? Take over the Senate and change the Laws, if that were even possible? Of course not!

    Who’s been responsible for the decrease in public support re contributing to the tough decisions ahead in order to reduce greenhouse gas emissions? The same media who spuke bullshit and nonsense and want a coalition government to win the next election! The same media that supported the horrendous WorstChoices rules, that impacted the most on the young, women and kids, and workers in the building and mining industries!

    I think it’s far more prudent to perhaps seek a double dissolution on the proposed changes to Health care in this country, and then hopefully introduce the Legislation blocked by the Senate re Climate change. Put the unjust proposition to the Electorate, that people on a pension or low income shouldn’t have to subsidise the rich peoples’ membership to private health insurance! It’s not just or fair!The other political reality, is that while I support The Greens on their proposals, they would never have passed the Senate either, and there would probably never be community support for the same reasons as I mentioned above – the bloody media! Irresponsible journalists, who support their bosses line on everything, who in turn are only interested in persuing their own profits! They don’t give a s**t about any of us!

    When the TV stations cover all political issues with impartiality instead of sensationalism, and always push their own agenda, people may receive an adequate education re these matters. Sadly, as the reality shows, those like me who watch the ABC and SBS are not the majority. How many read articles from around the world on issues, as opposed to those whiling away their time on Twitter, Facebook or YouTube?

    Having said this, I’m very disappointed in the Labor govt in so many important/vital areas; aboriginal issues, asylum seekers, workers rights and incomes, women’s rights, and justice before the Law for all – but the alternative is worse! After Julia Gillard’s attitude to education and teachers, I don’t have much faith in her as a possible leader of the ALP either! Most disappointing!

  50. Liz45

    PS. Abbott’s brain reminds me of one of those ‘florist sponges’ you find in floral arrangements. Each morning, the single marble in his brain finds a ‘hole’ to rest itself in, and that’s where it stays for the day! He usually makes an outlandish policy announcement or comment at the beginning of the day, and we’re subjected to more comments as the day unfolds! Very little questioning by the media! He gets away with it all day – almost every day! Frequently, he contradicts the assertion he made days, weeks or months earlier, but the media still give him uncontested air time! Pathetic!

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