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Tag Archives: Emission Trading Scheme

The truth about the ‘carbon tax’

Firstly, let’s remember that from June 2007 to December 2012, before the introduction of carbon pricing, average electricity prices rose by 70 per cent, so the big hike we all endured had nothing to do with action on climate change. A 2012 report by the Productivity Commission found network services, or poles and wires, to be the single most costly component of electricity supply accounting for around 45 per cent of total electricity prices from 2007-2012.

Next, let’s get the terminology straight. We have a fixed price emissions trading scheme which was slated to move to a floating price in 2015 under Gillard, moved forward to 2014 under Rudd. This means that our current system has two months to run, after which time we were going to align with the EU market which is estimated to move to about $9 per tonne this year, a significant reduction from our current carbon price.

Abbott said “the average power bill will be $200 a year lower and the average gas bill will be $70 a year lower.” He went on to say the average family would be $550 a year better off with the rest of the saving supposed to come from a general reduction in prices of goods and services passed on by other businesses, many of whom claim they had not increased prices because of carbon pricing and would therefore be unable to reduce prices.

The Queensland Competition Authority’s report estimates that, if the carbon tax is repealed, the average electricity user can expect their bill to increase by 5.4 per cent, or about $76. This is less than if the carbon price remained, but prices will increase not decrease nevertheless.

Gas prices in the eastern market – Queensland, NSW, Victoria, South Australia, ACT and Tasmania – are projected to rise sharply in the coming years as exports and demand for domestic consumption increase.

Energy Australia said it is important for the government and community “to be aware there is no guarantee that final energy prices will move proportionately with the average carbon price reduction in wholesale energy market”.

AGL Energy says that it usually needs a lead time of months to make price changes, and that “non-carbon” factors will drive prices after July 1 this year.

A joint submission by power and gas companies cast doubt on Tony Abbott’s promised price cuts of 9 per cent for electricity and 7 per cent for gas from the abolition of the carbon tax warning “it is difficult to specify exactly how much electricity prices will fall once the carbon price is repealed”.

The submission argues the carbon price impacts vary by region, by supplier, by retailer and in many cases by individual contract. The carbon tax applies to the cost of electricity generation where fossil fuels are burned, which represents about 30 per cent of the electricity price. Network charges for transmission represent a “significant portion” of retail prices and these could rise on July 1, except in Victoria, and this will have an impact on electricity prices that may reduce any cuts associated with carbon tax repeal. In Western Australia and the Northern Territory the electricity price is determined directly by the government, so regulatory changes will take time to implement.

So when Abbott, Hockey and Corman tell us we will be $550 a year better off they are talking crap, plain and simple. They use a price that won’t apply after July 1 and ignore industry advice that prices will not go down. Even if we didn’t move to a floating price until 2015, any supposed savings would only be for one year.

Instead of collecting about $13 billion in revenue from polluters over the next four years we will be paying over $3 billion of taxpayers’ money to polluters. As Mr Abbott has chosen to keep the compensation package, this means over $16 billion difference to government coffers, or about $450 per household per year. Add to that the fact that every single expert has said Direct Action will not achieve our targets without a far greater expense if at all, and we will patently be much worse off financially and environmentally.

Frank Jotzo, Director of the Centre for Climate Economics and Policy at the ANU Crawford School of Public Policy, believes we should keep the fixed price on carbon.

“If it wasn’t for the poisonous politics of the “carbon tax”, the best option would be to stick with the gradually increasing fixed price, and keep it for longer. The effect on cost of living from the $23 carbon price has been minor, and most households are better off financially because of income tax cuts and welfare increases.

Impacts on industrial competitiveness have been negligible. Keeping the fixed price would cause no further impacts. The carbon price immediately reduced emissions from the power system, because it made some of the dirtiest electricity plants too expensive to operate. Lowering the price could undo many of the gains, bringing old clunkers online once again.”

The fact that companies are still announcing closures, even with the promised repeal of the carbon tax, shows how small a factor it plays.

Global investment in renewable energy dropped 11% in 2013, according to EY’s latest quarterly Renewable energy country attractiveness index (RECAI), with policy uncertainty in particular reducing investor appetite across many markets.

China closed the gap on the US at the top of the index, installing a record-breaking 12GW of solar capacity in 2013 and ramping up its consolidation effort to accelerate market recovery.

Germany remains in third place, but lost ground following the announcement of subsidy cuts and watered-down renewables targets by the new coalition government. Rapid solar market growth and a burgeoning offshore sector helped Japan to replace the UK in fourth place.

Ambitious targets and a series of large-scale project announcements have seen India jump to seventh place. Competitive bidding trendsetters Brazil and South Africa have also risen in the index thanks to a plethora of new projects awarded in 2013 auctions.

Australia has dropped from sixth to eighth spot in the rankings, off the back of the expected repeal of the carbon tax and review of the Renewable Energy Target (RET) creating an uncertain investment environment, particularly in regard to large scale renewable energy, EY said.

Australia’s largest renewable energy company, Hydro Tasmania, has posted a record $238 million operating profit. The state-owned power generator says it made $70 million from the carbon tax, exporting record amount of clean power to mainland Australia. The company was able to pay a $116 million dividend to the State Government. This will be jeopardised if carbon pricing is removed.

Nathan Fabian, head of the Investor Group on Climate Change, told the Senate Committee looking into Direct Action:

“My members are looking at the United Kingdom, Ireland, the United States, France and some South American countries as having more stable investment environments for low-carbon opportunities. Direct action is not an investment grade policy.”

Tim Buckley, from the US-based Institute for Energy Economics and Financial Analysis, told the same hearing that Australia was missing out on hundreds of billions of dollars being invested every year in renewables, in energy efficiency and in development of these new technologies, and the hundreds of thousands of jobs being created in China, Germany and in America.

When the economists agree with the scientists it is surely time to start thinking well this is the way to go, or should we decide what’s best on the basis of talk-back radio hosts and polls printed in the Telegraph.

So to sum up, removing the carbon price will not lower your bills, nor will it save businesses. Direct Action will not lower emissions. Uncertainty about the renewable energy target is costing us investment in a growing industry of the future and the jobs that go with it. And we are now seen internationally as lightweights, easy prey to corporate greed and unwilling to share the global burden of action on climate change.

Oh and just a heads up on a potential new rort – You may now become a “Service Provider” with the government’s Green Army romp. You can submit a tender for as many projects as you like and you will be paid $192,500 per project, $22,500 for administration, and provided with a workforce that you pay between $10.14 and $16.45 per hour with no superannuation. How many employers will decide it’s far cheaper to be a “Service Provider”?

 

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Sir Abbott, duplicity is thy name

 

queen

Do you come here often?

Every day the duplicity of this government becomes more apparent. In order to assist their political puppet masters, the Coalition is prepared to condemn future generations to the enormous task and cost of coping with catastrophic climate change.

Joe Hockey, in another crass display of duplicitous behaviour, tells us that Labor left us with a debt of $667 billion. What he fails to mention is that this is projected debt for 2024. By that time, if we continue on this path of destruction, I would suggest our debt will be far higher as we cope with natural disasters of increasing intensity and the health and social costs from rising temperatures and pollution of our air and water.

Our tourism trade will suffer as the reef dies, the old growth forests are logged, marine creatures are slaughtered, and animals become extinct as their habitat is handed over to miners and developers. Our farmers will struggle with drought as the Murray-Darling dries up. Summer will be a time to fear as bushfires rage around the southern states and cyclones and floods devastate the North. Our exporters and airlines (if we have any) will face sanctions from countries that have emission reduction strategies in place.

The WHO’s Director-General, Dr Margaret Chan, joined the ever-growing chorus from influential leaders when she said:

Climate change will affect, in profoundly adverse ways, some of the most fundamental determinants of health… we need champions throughout the world who will work to put protecting human health at the centre of the climate change agenda.”

The group Doctors for the environment Australia focuses on the environmental causes of human illness and the means to address them. At their recent conference an impressive display of speakers urged doctors to become vocal and active in campaigning for urgent action on climate change.

Greg Hunt was heckled as he, in all seriousness, said that Australia would use its presidency of the G20 as a “catalyst” to help the “G4” – the US, China, the European Union and India – complete the groundwork for a new deal to lower emissions. He spoke about the value of trees in carbon reduction amidst taunts about logging the World Heritage forests in Tasmania. Do as we say, not as we do?

In October last year, Hydro Tasmania announced a record $238 million profit, $70 million of which came directly from the carbon tax. When asked if Tasmania would receive compensation for scrapping the tax, Greg Hunt said “We are not proposing compensation to businesses as a result of the carbon tax repeal.” But they are more than happy to give billions to polluters to update their factories.

Tasmanian opposition energy spokesman Mathew Groom said Hydro Tasmania’s record dividends had come at the cost of high power prices in Tasmania, and scrapping the carbon tax would lower power prices, but Lara Giddings said power prices were set to drop 5 per cent on January 1, independent of the carbon tax. So much for caring about Tasmania.

The Senate Committee investigating the Coalition’s Direct Action Plan have released their findings. To paraphrase…Direct Action is crap, won’t work, will cost a fortune, will require a huge bureaucracy to administer, is lacking in detail about implementation, is inadequate for now let alone the future, and is just downright madness. Recommendation – stick with our current system but up the ante.

Clean energy and low-carbon investors are abandoning Australia as the Federal government, and its conservative colleagues at state level, turn their interests and policies away from renewables and long-term carbon abatement incentives. Nathan Fabian, the head of the Investor Group on Climate Change, told the Senate committee that “Direct action is not an investment grade policy,” noting that investors viewed it more like a short-term grants scheme. Banks, he said, were likely to take a similar view, echoing the frustrations of many players in the clean energy industry who have been unable to obtain finance because of policy uncertainty.

Fabian also said the proposed review of the RET “appears to be another very clear signal that Australia will not be a market for low-carbon investing for the next few years. My members are looking at the United Kingdom, Ireland, the United States, France and some South American countries as having more stable investment environments for low-carbon opportunities ” So much for being open for business.

Tim Buckley, a former Citigroup chief analyst in Australia, clean energy funds manager, and now with the US-based Institute for Energy Economics and Financial Analysis, told the same hearing that the Australian clean energy industry is regressing because of the lack of clarity on policy.

“We are worse than stalling; we are actually investing in assets that I think will become stranded as a result,” Buckley said. “Internationally, companies and economies are building industry capacity to transition for the long term. We should be building capacity as well and we are not doing so.”

He said Australia was currently missing out on hundreds of billions of dollars that were being invested every year in renewables, in energy efficiency and in development of these new technologies, and the hundreds of thousands of jobs being created in China, in Germany and in America. So much for jobs, jobs, jobs.

Numerous other parties have dismissed the proposed emissions reduction fund as “unfinancable” – mostly because it offers a maximum 5-year investment horizon. That reflects the view of most people – and possibly even the government – that Direct Action is not a long-term policy position, just part of a short-term political manoeuvre that has helped deliver power to the conservative parties.

Economists are convinced that carbon pricing will yield the greatest environmental bang-for-buck at the lowest economic cost. Justin Wolfers, an Australian professor at the University of Michigan, says:

“Abbott’s plan doesn’t effectively harness market forces; it relies instead on the government handing out cheques. One problem is that we’ll end up subsidising a lot of abatement that would have occurred anyway. Another is that the plan imposes extra costs because it uses scarce tax dollars . . . All told, Direct Action involves more economic disruption for less of an environmental payoff.”

Quoting from the Federal Parliament website:

“The Senate is a house of review and a powerful check on the government of the day. The proportional representation system of voting used to elect senators makes it easier for independents and the candidates of the smaller parties to be elected. In recent decades this has meant that the government party usually does not have a majority of votes in the Senate and the non–government senators are able to use their combined voting power to reject or amend government legislation. The Senate’s large and active committee system also enables senators to inquire into policy issues in depth and to scrutinise the way laws and policies are administered by ministers and public servants.”

I would ask all Senators to remember their role. You have heard the expert advice. You have received submissions from stakeholders and concerned parties. You have whole departments to help you understand what you are being told. On the basis of what you have learned, you have recommended that we do not proceed with the Emissions Reduction Fund, that we have an Emissions Trading Scheme, and that we increase out targets.

The lie about the carbon tax hurting business and families just has to stop. Families were well compensated for the small increase in power bills due to the carbon price. Trade exposed businesses were also compensated. Renewable energy and sustainable practice received funding, and research and development was leading to whole new industries. And if you were really all that concerned you could make power GST free.

Mr Abbott, your absolute intransigence on this matter, your insistence on “we said we’ll do it so we will”, regardless of all expert advice to the contrary, makes you unfit to lead our country. You show no intitiative, you are unable to react to changing circumstances, you are unwilling to take advice, and you are prepared to sacrifice all for the short term gain of the wealthy. And as for you Greg Hunt and Malcolm Turnbull, you are despicable – you know the truth but are unwilling to speak it.

People of Western Australia, I urge you to consider how important it is to have a genuine house of review in the Senate. Our fate lies in your hands.

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Heaven help us before Hell becomes the inevitable destination

In May 2007, the Prime Ministerial Task Group on Emissions Trading presented John Howard with a report that had “been informed by the views of a wide range of stakeholders.” They considered 216 submissions from interested parties and held discussions with 180 groups and individuals both in Australia and overseas. Dr Peter Shergold, Chair of the Task Force, said the broad-ranging expertise of government, industry, and environmental organisations had been of significant benefit to their deliberations.

In an introductory letter to Howard, Dr Shergold said:

“We hope that this report can contribute to the development of policy which will further strengthen Australia’s considerable record of achievement in addressing climate change at the domestic and international levels. Our conclusions have been framed to position Australia to take a lead in reducing greenhouse gas emissions while maintaining economic growth and safeguarding our competitive advantage.”

The report was extensive and came to the following conclusion:

“The members of the Task Group have come to a shared conclusion: the adoption of a longer-term emissions constraint and the introduction of an Australian emissions trading scheme offers the least-cost way of reducing the output of greenhouse gases domestically and would make a substantive contribution to a comprehensive solution internationally.

The Task Group believes the key to success is to begin at once, but to proceed with care on the basis of considered and informed decisions.”

One aspect of the Coalition’s Direct Action Plan is an Emission Reduction Fund where polluters are subsidised for specific reduction projects. This possibility was examined in the report with the following observations:

  • Project-specific approaches can involve high administrative overheads for both government and project proponents.
  • Financing subsidies and specific project-based interventions also impose costs on society from their use of taxation. If these approaches were to be used extensively to achieve large-scale abatement, the economy would suffer losses in economic and administrative efficiency. In contrast, market-based approaches to emissions abatement involve the explicit pricing of emissions, allowing the market to determine the cheapest source of emissions reduction.
  • Market-based approaches have the potential to deliver least-cost abatement by providing incentives for firms to reduce emissions where this is cheapest, while allowing the continuation of emissions where they are most costly to reduce.
  • Market-based approaches also provide a strong ongoing incentive for investment in technology research, development and deployment, and in business efforts to improve energy efficiency.
  • An emissions price provides incentives for the discovery and deployment of least-cost abatement opportunities. The damage caused by a unit of emissions is the same no matter where it comes from, so a uniform carbon price across the economy can harness abatement opportunities where they are cheapest.
  • Emissions pricing provides ongoing incentives to all firms and individuals to abate. Market participants have an incentive to abate whenever a unit of abatement is cheaper than the emissions price, which leads to the efficient exploitation of all abatement opportunities.
  • The process of ‘creative destruction’, with opportunities for the emergence of new industries as new technologies and production techniques supplant existing methods, is one of the key ways in which market-based approaches bring broader benefits to society.

One of the task force’s key messages was

A desirable model for reducing emissions at least cost incorporates emissions trading with a price cap in the initial phase of a scheme – this combines the best features of a carbon tax with emissions trading.”

In other words, John Howard’s own advisers preferred the system we currently have in place. Many reports and submissions were given to the government confirming this.

“Harness the power of the market – the greatest benefit of emissions trading is the ability of the market to find the lowest cost solution. It follows from this that scheme[s] should have a minimum of rules that limit the type or level of abatement. The underlying principle should be to treat all opportunities equally based on their mitigation impact.”

Australian Plantation Products and Paper Industry Council submission to the Task Group

“Where the use of environmental goods and services is not valued properly, users of the resources have little incentive to recognise the costs of the environmental degradation they impose … Instead, the focus inappropriately shifts only to the financial growth foregone from addressing [and preventing] the environmental damage.”

Australian Government Intergenerational Report (2007, p. 71)

In July 2008 the Wilkins Review, done by the Department of Finance and Deregulation, looked at failures of direct action style schemes which had been implemented in Australia, such as the failed Greenhouse Gas Abatement Scheme, and warned “project based abatement is difficult to achieve through a grants program – further demonstrating why the ETS is a superior approach to achieving large scale abatement.”

In the seven years since the report was published the overwhelming majority of scientific research has confirmed that climate is changing and AGW is playing a significant role in that change. In fact, the only debate seems to be on the time frame and severity of the catastrophe and even that is rapidly vanishing. Consensus is, and has been for a long time, that immediate action must be taken on a global scale.

Another major strategy of the Coalition’s DAP is soil carbon sequestration. Their policy document states that

“The single largest opportunity for CO2 emissions reduction in Australia is through bio-sequestration in general and, in particular, the replenishment of our soil carbons. It is also the lowest cost CO2 emissions reduction available in Australia on a large scale.”

However the CSIRO, in a submission to the Senate inquiry into DAP said that

“Soil carbon in agricultural zones is likely to provide low levels of greenhouse gas abatement. Saturation of carbon sinks (the maturation of forests and the restoration of soil carbon levels) means that per annum abatement from the land sector will decline in the decades after project establishment.”

Perhaps this explains Tony’s desire to log our old growth forests?

Economist Professor Ross Garnaut told the inquiry that abolishing carbon pricing could cost the federal budget at least $4 billion a year within five years, if the Abbott government wants to reduce emissions in line with Australia’s international commitments.

In his submission Professor Garnaut said direct action was vague and failed public interest analysis tests and that the government’s Green Paper on the Emissions Reduction Fund aimed at replacing the Rudd-Gillard climate policies ”is a shooting of the breeze”, merely raising a few questions that it failed to answer.

”It is an unusual document, lacking any semblance of the framework of public interest analysis that is characteristic of Australian policy-related papers of modern times”

The government’s continued appointment of climate change sceptics to advisory roles shows its intention to ignore all scientific, economic and industry advice to pursue its big business agenda. They are prepared to sacrifice our future for the very short term advantage that exploiting our resources may give us. They seem determined to set the train to destruction into motion and disable the brakes.

Heaven help us before Hell becomes the inevitable destination.

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