My preferred position is that we have a rational program to get rid of all coal-fired power by 2020 at the latest, unless they can implement CCS.

Cute, because everyone knows that CC&S will not be commercially feasible by 2020 (and not for any carbon price this side of about $85 per tonne, which isn’t on the agenda), and certainly nobody in, say, 2012 will be able to rely on that so forward funding from financiers would make Gunn’s efforts look simple. You might as well legislate them out of existence and have done with it — a position more radical than that I put.

So that is not going to happen. I’d be happy enough if all plants of at least 30 years of age by 2020 would be replaced with some other capacity — say gas-fired Brayton Cycle etc …

If the government had just a bit more spine, they could cut a deal to acquire the existing assets cheap, and provide cheap finance for retooling along these lines in a phased program starting with the worst polluters. In a context in which there were a serious carbon price, you could cut a very cost-effective deal which the polluters could live with.

How that might best be accomplished I don’t know, but I’m pessimistic in the extreme about this ETS delivering anything that comes close.

I can see the logic of that, Fran, but the Govt is presumably going to take the cheapest and least disruptive course.

Well the least disruptive at least. It’s a capitalist government. Its first duty is to look after …. errr … capitalists so as to preserve its standing amongst the privileged more generally. The course they are taking is not at all the cheapest, because as I noted, stranded assets are cheaper to acquire than non-stranded ones.

It seems to me another possible compromise with the coal burners might operate as follows. Assume that 40 years is a reasonable time to recover the sunk cost of a power plant asset. You divide this 40 years into 480 months and you offer compensation for the stranded asset based on 480-(number of months since asset deployed).

Thus a burner that was for example 32 years and six months old would get compensation of 90*0.2083% * initial cost of asset. In short, the first plants to go would be the oldest. As it goes Hazelwood is more than 40 years old and indeed most of Australia’s plant is more than 25 years old.

The problem we have is that we need the coal burners to keep burning coal full bore until the capacity has been replaced, and are relying on the market players to do it for us. They are interested in making money, anywhere in the world, rather than serving our public interest. The market doesn’t ensure that the two purposes coincide.

The thing is that they cannot just make money anywhere in the world because the entire world as you’d know is also dealing with the problem of what to do about not only emissions, but raising finance, currency volatility and much else. Isolating one factor in one place or paying attention to the special pleading of TRUenergy or that English comany that owns Hazlewood, for example, is ill-advised.

They knew, or should have known, through apt duie diligence, what they were getting into when they purchased. They have to bear the consequences, surely. And if as you imply, there is a market failure here, then let the state come in and make whatever arrangements are necessary. That’s what states are for.

No, we shouldn;t, and we don’t have to because taxation isn’t ‘acquisition of property’ for the purpose of Section 51(xxxi) and imposing restrictions on how property can be used is not the same as acquiring a proprietary interest in a property.

I imagine this problem arises from the creation of emission permits as property, instead of (for example) a statutory license to pollute subject to certain conditions; and the mechanism by which emissions are reduced, ie by compulsory acquisition of the permits, instead of restrictions on how the permits may be used.

I am, of course, neither a lawyer nor across the detail of how the CPRS is proposed to be implemented, so take this with whatever quantity of salt you believe is prudent to disguise the taste of my amateur speculations.

d

The problem we have is that we need the coal burners to keep burning coal full bore until the capacity has been replaced, and are relying on the market players to do it for us. They are interested in making money, anywhere in the world, rather than serving our public interest. The market doesn’t ensure that the two purposes coincide.

I actually want us to bear the cost. Not coz I care for the owners or coz I understand sovereign risk – but because we got it wrong. Not just the present day owners left holding the baby. If stupidity needs to be punished let us all carry the can.

In this case though, the coal burners have been on notice since at least 1993 when Peabody started arguing for 1000ppmv to spur agriculture. In 2007 when the ALP was elected proimising Garnaut, the warning bell tolled even louder. And as has been pointed out … different jurisdictions.

Moreover, “a price on carbon” is not peculiar to this jurisdiction, nor is regulation of pollution other than CO2.

In short, this doesn’t fit the description of arbitrary and confiscatory intervention. Note that even in cases where a better case for this can be made out — Totale in Venezuela for example, they have accommodated the regime.