The Price of Carbon
Australia has set a target of a 5% reduction in emissions by 2020. Even that paltry target looks challenging when you look at the politics of climate change in Australia, but you never know. With the government’s Emission Trading Scheme again set to go before the senate next month, and the possibility of a double dissolution election before the end of the year, things could change quickly.
If Australia is to reach a 5% target, a price will need to be set on carbon of around $35 per tonne. Many have argued that a price on carbon will see Australian businesses loose a competitive advantage that will see job losses and industry moving off-shore. That fear is unfounded according a new study recently released by the Grattan Institute, a non-aligned policy think tank associated with the University of Melbourne.
Those interested in the economic impact of a carbon price should look up “Restructuring the Australian Economy to Emit Less Carbon-A Grattan Report”. The report argues that the billions of dollars of compensation set to go to high polluting industries under the governments proposed Carbon Pollution Reduction Scheme (CPRS) is unnecessary, and money that would be better spent elsewhere.
Why is the government offering polluting industry billions of dollars in compensation for the Emission Trading Scheme?
Australia’s highly carbon intensive and polluting industries are hugely profitable. They already have a competitive advantage internationally because of their proximity to raw materials. With a $35 per tonne price on carbon, these industries will remain competitive and continue to turn over huge profits. They will remain competitive even if the rest of the world fails to set a price on carbon.
Under an ETS, jobs in heavy industry in Australia will continue to grow. Jobs will not be lost overseas. We are much better off in the long run with an economy that is internationally competitive when there is an international carbon price. Therefore Australia must set a price on carbon, but we should not compensate the heavy polluters, who will continue to run profitable businesses. The billions of dollars going to the fossil fuel industry would be better spent developing sustainable energy.
Additional note:Things certainly move fast in the world of climate politics. Since writting this column a couple of days ago, the Rudd Government has dropped the ball on the ETS. A senate vote on the ETS has been put into cryogenic suspension until at least 2013. This is not necessarily a bad thing as the ETS had such weak targets and gave so much money to the polluters that it may be best to leave it on the scrap heap. Now would be a good time to start reconsidering the options, particularly with an election on the way.
I have just read the Doctors For the Environment Australia (DEA) policy in relation to coal fired power stations. Here’s what they say.
DEA believes it has a responsibility to promote a rapid transition to renewable energy because coal is a national and international health issue. Coal is the main driver of climate change and a significant cause of cardio-respiratory diseases in Australia.
The coal industry in this country continues to expand at the behest of state and federal governments. This must be addressed urgently.
The DEA’s policy is to provide education on the health impacts of coal-induced pollution and its major role in climate change. Further the DEA intends to oppose any expansion of the coal industry and support its gradual replacement by job-creating industries in renewable energy that will establish a new economic frontier for Australia.
Why is coal a health hazard?
. Greenhouse gases are emitted from combustion and mining.
. Air is polluted from combustion, mining and transportation.
. Water is diverted from drinking, agricultural and ecological uses.
. Water is polluted from mining, coal washing and combustion.
. Land is degraded from mining, pollution from combustion and the disposal of solid wastes.
. Coal mining is still one of the most dangerous occupations, even in industrialised countries.
. Coal mining and coal-fired electricity foster centralised energy production and use, thus supporting a system
that is vulnerable to disruption from natural causes, electrical instabilities and sabotage.
. The industry is losing jobs rapidly and, in particular, local jobs in regional centres and rural areas.
All these hazards and costs are passed on to the community and are not included in the market price of coal.
The health impacts of greenhouse emissions have been central to DEA work over past years. They ascribe to the view that “climate change is the biggest global health threat if the 21st Century” The Lancet 2009.
The medical consequences of the use of coal have been assessed in the USA by Physicians for Social Responsibility
(PSR). In summary, coal pollutants affect all major body organ systems and contribute to four of the five leading causes
of mortality in the U.S.: heart disease, cancer, stroke, and chronic lower respiratory diseases.
Each step of the coal lifecycle mining, transportation, washing, combustion, and disposing of post-combustion wastes impacts human health. Coal combustion in particular contributes to diseases affecting large portions of the U.S. population, including asthma, lung cancer, heart disease, and stroke. It interferes with lung development and increases the risk of heart attacks. www.psr.org/resources/coals-assault-on-human-health.html
In Australia there is an extraordinary lack of research and health data compared to Europe and the USA. Far greater consideration must be given to this issue.
Tough for large scale renewables
Times are tough for large-scale renewables in Australia. There are many factors that are hindering their current rollout. Firstly, in this economic climate, financial institutions are unwilling to lend without long-term power purchase agreements (PPAs), as there is no guarantee of a stable power price for renewables over the long term. This is a direct result of the government not enacting a suitable mechanism. Without the strong mechanism there is uncertainty. Financial institutions will not lend in an uncertain market and without financial backing these large projects are unlikely to be built.
As if that isn’t bad enough, the consequence of all the public pressure for solar panels on roofes has been that we now have Renewable Energy Certificates (RECs) worth next to nothing, which means that large-scale renewable projects, both wind and solar are at a standstill. This is because the government linked the RECs scheme with domestic solar and because the rooftop solar scheme was rolled out rapidly, without the time restraints that large-scale renewables face (with development approvals and PPA processes), it swallowed up all the allocated RECs and diminished their value.
The push for domestic projects conveniently played into the hands of the government and the fossil fuel industry (as domestic renewables don’t pose a threat to them). It achieved the warm fuzzy feeling the government was after, but did little other than stifle the progress of large-scale projects that have a much greater potential to reduce our CO2 emissions. What is clear is that the rollout of roof-top solar has come at the cost of large-scale renewables. One should not be sacrificed for the other.
The government is now talking about a proposal to change the RECs format by separating industrial renewables from domestic. This is desirable, but is yet another “proposal”. We’ve wasted too much time on a continuous string of proposals, each of which seem to take years to implement. Large-scale renewables companies believe that if this change is not implemented in the next few months some of them will be forced to go overseas, because there is no market for them here. Countless projects have been approved, but are at a standstill waiting for a stable, ambitious mechanism. The uncertainty of the market has meant a stalling of this vital industry. It all stems back to a strong mechanism that will bring stability to the market. ?
It is extremely frustrating that after years of the same argument, it still remains the central problem, yet is so simple to implement and doesn’t cost the government. Creating a mechanism is purely a matter of legislation. NOT HARD and without the financial price tag of their recent bungled insulation scheme.