Of all the supposed flaws in the proposed CPRS, the one that seems to have gained the most traction is the concern that, as Jeremy Sear puts it “the more you sacrifice at home – the more some corporate polluter can emit instead.” GetUp is planning to run a full-page ad in The Oz tomorrow demanding the government fix this issue.
This issue has been discussed a number of times on LP. dk.au has emphasised the importance (and apologies if I’m oversimplifying here) of the sociological aspects of the issue, and the need for people to be involved in the decarbonization process – if they see their voluntary efforts being lost, support for the process will vanish. I don’t think it’s a big problem, myself. Despite all this, I don’t think anyone who cares about climate change thinks it’s the biggest problem with the proposed CPRS. The biggest problem, by far, is the twin evils of locking in monumentally inadequate carbon reduction targets and too-low projected carbon prices. The second-biggest problem is the ladeling out of free permits to Big Carbon.
All the voluntary participation in the world isn’t going to make more than a marginal difference to Australia’s carbon emissions. Tighter targets will make a big difference. So why spend all this lobbying effort to fix problems at the margins of the scheme, rather than tackling the big one head-on?
But but but .. if we don’t take voluntary action ourselves, however will we manage to bathe in the glow of moral self-righteousness? It doesn’t matter if we’re ineffective in stopping the globe getting hot, just so long as we can find cartoon villains (those philistine corporations) to blame for it.
You clearly have no understanding of the politics of the warm inner glow.
Fair point, Robert.
GetUp is liable to Get Up anyone’s nose. Suppose you Set Up an online lobbying and ad-making outfit. What will it then do? Why, organise online petitions and ads. While bragging of its success; as if no other efforts have led to the success in question. Simplisic and puerile, much of the time. I think it’s their smugness I find most off-putting.
Glad to get that off my chest. Now, what was the topic? OK: whatever carbon-reduction scheme we have, should encourage C-reducting small and medium industries, should encourage both individuals and large organisations who emit to act. On individuals/industries, it’s not “either-or” is it?
And C ain’t just C. CH4 : methane, is a much worse greenhouse gas than CO2. Not that you said methane was fine.
http://www.epa.gov/methane/
I think it’s a statement of no confidence in the Ruddsicles. We have seen him and his cave in on everything to do with Kyoto, so we’re down to asking him to recognise that some of us are willing to change. To date, he’s willing to make grand gestures and set up inquiries, but the substantive measures are missing, presumed nonexistent. Just like the apology, in fact. At least with greenhouse gases he’s willing to publish the data which is more than you can say for the “intervention” in the NT.
Robert, I’d say it goes further than just voluntary emissions though – it seems to me that given the way the CPRS is designed the ONLY way emissions will ever come in under the target set by the government is by groups buying and ripping up permits. So if some company decides to invest billions in building a new CSP plant capable of cutting Australia’s emissions from electricity generation in half, and potentially capable of allowing Australia to cut its emissions down to 15% of 2000 levels, it won’t happen unless the number of permits in circulation is explicitly reduced.
Exactly right Robert.
Actually a question – I assume each permit is for a certain # of tonnes. Is the intention that a round of permits issued annually, whereby the amount issued decreases year over year?
What happens in the case of industry having been found to have generated more CO2 than it has bought permits for over a given period? Presumably there is a fine in the case that specific companies can be found to be responsible, but is it compensated for by further reducing the number of permits available?
Wizofaus @4,
In setting a target for emissions reduction, the government is supposed (in theory) to be weighing up all of the costs and benefits of emissions reduction. The tighter the cap, the more it will cost to achieve it. So just because a company could hypothetically
doesn’t mean that it is the right thing to do. In setting its cap, the government is implicitly saying that reducing Australia’s emissions to 15% of 2000 levels has costs that exceed the benefits. Basically, it’s not in our interests to make such drastic cuts, so blocking that technology is not inconsistent with maximising total social welfare. The aim is to reduce emissions to a certain level at least cost, not to reduce emissions at any cost.
Robert, you’ve commented before on the issue of feed-in tariffs for household size PV systems being a waste compared to money thrown at large-scale renewables, and yet the environment lobby keeps gunning for them. Economically, you’re on the money of course. But I reckon you’re seeing the same kind of dynamic here – importance given to measures that support people who care about the issue but don’t give big emissions-cutting results.
Perhaps its sociological as you say, but I’d call it more political.
The biggest problem with the scheme, as you quite rightly say, is the paltry targets. But how do you envisage pollies getting a sense they’ll be voted out if they don’t set real targets?
Politically, I reckon the biggest problem is that, while people ‘care’ about climate change, not enough people care enough to change their vote. How do you fix this? Local climate change groups (peopled in the main by ‘self-righteous, warm inner-glowers’) give many voluntary hours to trying to change people’s minds on this stuff and the thing that really gets people interested is being able to do something about it. You can be as logical and persuasive as you want, but make PV & solar hot water cheaper and people will put in on their roof and they’ll start feeling like they’re part of the solution and will feel pissed off when they see that the government isn’t. Pissed off enough to do something about it.
These small-scale ‘marginal’ activities generate political capital – a good deal more so than blogging!
Wot Laura said!
If Get-Up were serious about Climate change they should be focussing on the targets and the free permits AND explainig to people how the scheme will operate. A CPRS is pretty simple to run in practice but complicated to explain – if Get-Up get their way, then they will achieve a system that is not only difficult to explain but also difficult to implement in practice.
As I have said before in previous threads: there will still be ways for people to voluntarily reduce emissions under the scheme (buying permits for example) or outside the scheme (planting trees and not claiming credits); all they need to do this is a little education about how the scheme operates and a lot less fluff like the stuff that Get-Up are proposing that will only confuse people and be counter productive to getting something implemented that would actually result in emissions reductions.
Here’s what, go out to your newsagent and buy the latest copy of New Scientist.
Read it, then photo-copy the relevant bits or scan them and send them to every-one you know and the Bolta and all the other denialist retards as well.
We ain’t gonna get an ETS ar anything but fluff, flannel,foolishness, fumbling and furious fuckwittery.
When you have sent the NS around sit down and write a letter of apology to your children and your grandchildren.
Huggy
wizofaus @ 6
They will probably be fined (quite high fines I’d imagine) as well as having to pay the relevant amount of credits. The penalty has to be a significant enough deterrent.
Aussie Oskar
Your undoubtably right about the politics but it is bad policy and difficult to implement (for example – how do you differentiate between people who go to solar for financial reasons and those who do it for the warm inner glow?) The reality is that people’s voluntary reductions at home WILL make it easier for the targets to be met. If they feel pissed of about this because they want their voluntary reductions to result in even more emissions, well the solution is to find another way to do this (and pay for it with what they save from their lower energy bills) or lobby the Government for better targets (and fund Get-up to do this – with the money they save through their lower energy bills!).
Sorry if I sound frustrated with this but this whole point is due to ignorance. Policy should never be based around an ignorant (but popular) public opinion.
Required: “In setting its cap, the government is implicitly saying that reducing Australia’s emissions to 15% of 2000 levels has costs that exceed the benefits”
Ok…what possible long term costs would there in replacing our coal fire power stations with CSP plants that are able to generate baseload electricity at a competitive price? The only reasons it can’t be done now is because a) nobody’s really proved that CSP is that scalable b) there are still storage issues and c) we probably don’t have the required manpower and skills base together at this point. If all these problems are solved in the next 5 years, it could allow us to shut down all our dirtiest coal power plants, and achieve far greater emissions than would be possible otherwise. I actually don’t a have problem with a goal of a *minimum* 5% reduction on 2000 levels by 2020, but there seems to be little scope for allowing for the possibility that technological breakthroughs in the next few years actually make a much bigger target more feasible.
OTOH, the potential long-term environmental costs of *only* reducing first-world emissions to 15% of 2000 levels by 2020 are enormous, and if Australia isn’t even bothering to aim close to that, there’s little reason to assume other developed nations are going to.
Yep, you’re right Dave. There is still a lot of ignorance around the CPRS – but its also pretty complicated and not for the faint-hearted. The GST slapped 10% on everything (except some birthday cakes) and everyone paid it pretty much every time they got out their wallet. They understood it pretty quickly.
No one will ever have carbon surcharge written at the bottom of their docket and it all happens somewhere else anyway so I reckon that ignorance will carry on – even once its implemented.
This whole argument is a bit of a proxy for the anger at the scheme’s 2 problem as Rob called it – poor targets and too much pointless compensation for rich polluters. People want to see bigger emissions cuts and they feel jibbed that the already-well-compensated will do better and better as the scheme goes on.
At this stage, the task is to gun for a better scheme. Once the scheme’s in place then we can all settle down and decide if ripping up permits is really the best we can do.
Well, you gotta do somerthing.
As I think I’ve said before, the science of all this is a bit beyond me. Maybe Get-up will help, maybe not. Dave55 has hit it right on the head about what they could be doing. And sure, they can be tiresome and mindlessly bourgeois sometimes, but we’re a better country with them than without them. Never forget the evil of the Government that brought them into existence. Labor won’t be there forever, and Labor has made some terrible errors of judgement – CPRS, keeping the Intervention going, being too soft on watering down Workchoices – at least, that’s the impression I get. So we need GetUp and organisations like them, just as we need blogs like LP.
Paul
Over at the Get-Up site they have a CPRS Fact Sheet . While I don’t agree with how they have phrased a lot of it, this should really be what Get-Up press (rather than their sensationalised ‘Petition’ which, quite frankly, is awful). The Fact Sheet Concludes with this:
I think I understand what they are pushing for (that is, people can purchase credits to retire them) but why does it need a separate market? Why can’t the CPRS simply have a mechanism for ‘voluntarily retiring credits? An organisation like Get-Up WWF GreenPeace etc could then buy permits on the market payed for by donations from altruistic people and retire them under this mechanism. The market would then be the same as the one in which the emitters operate and the retired credits would reduce supply for the remaining credits pushing up the price (and actually making the people who have solar panels and hot water better of relative to other!).
Also, would a person signing the petition understand that the separate market for retiring permits was what they were actually advocating when they sign it?
The thing that bothered me about all this – aside from the bigger fish to fry issue – is that get up only seemed to get their knickers in a twist about this once it became an opposition/Australian talking point.
This isn’t in an of itself a bad thing, but geez, if Get Up really gave two hoots about this stuff, they wouldn’t need it spoon fed to them from Bolt and Turnball – they should have been on top of this from the get go.
The subsequent bloviating looks reactionary which is really the opposite of what they’re trying to do, and it makes me feel like – merits of the issue aside – they’ve been effectively played.
I for one have had great difficulty in arriving at a stable, rational view regarding what should be done. The basic facts as they appear to me:
1) There is going to be escalating death and destruction for many years to come, and it will be impossible to deny the connection, especially once we start having years of record warmth again. (The whole notion that ‘global warming has stopped’ is basically due to 1998 having been very far above trend, but the trend is now catching up with that old record.)
2) Nonetheless, the most extreme scenarios will never happen, *because* the human race will be driven to action. Something like the Worldwatch Institute’s scenario, in which the world becomes carbon-neutral by 2050 and carbon-negative thereafter, and in which the temperature increase over the preindustrial reaches a maximum of about 2 degrees and declines thereafter, should be regarded as an *upper bound* on how bad things will get, even though those targets are far beyond what any major emitter is advocating at present. At some point the political discourse will switch decisively from 450 ppm and up, to 350 ppm and below.
3) Furthermore, it is inevitable that some cheap and fast form of “air capture” – extraction of carbon from the atmosphere – will be invented well before mid-century. This is basically a judgement regarding the power of advanced nanotechnology and the time to its development.
Position 2 implies a certain degree of optimism: the battle against climate change will inevitably be won, so it’s really a matter of minimizing the number of casualties and the stress to the body politic. But note, the battle will not win itself; it will be won because people are forced to act, and the changes involved will be radical.
Position 3 is the most subversive one, because it says a cheap comprehensive solution will arrive in, say, thirty years’ time. It seems to imply a near-100% focus on “adaptation”, i.e. trying to minimize the locked-in death and destruction, over the next few decades, because the incremental changes to CO2 levels which can be produced in that time by decarbonization of the economy and by existing methods of bio- and geo-sequestration will make very little difference to global temperatures in the *immediate* future (and hence very little difference to the magnitude of death and destruction experienced in the immediate future).
But it is hard to imagine people settling for such an approach (virtuous delay) once position 1 becomes commonplace – after a few more Atlantic hurricane seasons like 2005, after record droughts, floods and fires, and so on. Also, the destructive potentials of advanced nanotechnology may make it look like a cure worse than the disease. So long as you cannot propose a comprehensively safe way to deal with the danger of artificial life and artificial intelligence overwhelming their natural precursors, the luddite strategy of simply not going there is a rational one, though rather hard to enforce in practice.
Returning to the problem of climate change, if you accept the inevitability of *some* form of mitigating action in the short to medium term, and also that “low” targets (below 350 ppm) are the only ones that will be acceptable once people at large really understand the choices, perhaps the thing to do about the nano option is to keep it in view, to pursue your carbon-capture research so that it’s moving in that direction but will deliver some usable methods in the short term as well, and to also be clear that you’re aiming at the forms of nanotechnology which do not immediately have a dual use as WMDs.
Moving to the short term, my problem seems to be, what actions and what attitudes are worth promoting, given the “optimistic” outlook of positions 2 and 3, but also the inevitability of doing *something* now (position 1) and the fact that the only acceptable long-term targets are the low ones, which are usually taken to imply far more radical action than any government is actually advocating. The actual stance that I am led to adopt is one of rhetorical support for low targets but political support for only moderate action, as in the CPRS. But it’s rather a long tale to explain the reasoning behind it!
Robert, While I respect your sentiments about the 2020 target. reality does have this nasty habit of intruding. Today, there are reports that Heather Ridout, chief executive of the Australian Industry Group, is calling for the emissions trading scheme to be delayed for two years. This will give aid and comfort to those opposing any action. You can expect a continual trumpeting about the threat to jobs if an emissions trading scheme starts during the global economic crisis. The fear-mongers will have a greater chance of succeeding if those favouring action are prepared to sabotage any scheme that does not meet their high ideals. It seems to me that the choice is between a proposed emissions trading scheme that has lower than desirable targets and no emissions trading scheme and hence no Australian targets for many years. This seems to be the case whether the 2020 target is 5 per cent or 15 per cent – the higher figure being what Australia will commit to if the major emitting nations accepts this as a minimum and the lower figure being what Australia will do if the major emitting nations cannot agree on a target. In many ways this issue reminds me of the Republic referendum, where the pro-Republicans were divided and made themselves easy prey for the monarchists, particularly because there were pro-Republicans prepared to scuttle a Republic if it were not their model.
Robert, I don’t think they’re quibbling around the edges exactly. I think the real issue is to ask not whether this is a scheme that should be condemned for its inadequacy (clearly it should be) but rather should we as concerned citizens support it in its current for or not, and, by implication, should the Greens support it or not. My efforts to reduce my pollution should have an impact, and the current scheme doesn’t necessarily allow for this. Should this have an effect on whether the CPRS gets up in the Senate? What’s our call – support it as a bad start but better than nothing, or reject it as useless? I am uncertain at the moment as to which path to take, but I can accept a good scheme with an inadequate starting point, while I can’t accept a flawed scheme (even if the starting point was better).
Having said that, my main concern is less with 5%, and more with the handouts and low pricing (the second part of your first point, and your second point).
Alister: what’s the point of the exercise? To 1) allow your personal activities to contribute to reducing the amount of greenhouse gases emitted on a global scale, 2) or reduce emissions on a global scale as much as possible?
To me, 2) is the point of the exercise. 1) is a priority only as far as it contributes to 2). This is not an exercise in personal growth – it’s about saving our environment so our children, grandchildren, and distant descendants get to enjoy in the future as we do now. Any warm fuzzies you or I get along the way are incidental.
Robert – exactly right – and required, you are hinting at what is the real issue here. The fight over voluntary reductions is a proxy war over the weakness of the cap. As you say, the targets should be set so that the marginal social cost of abatement is equal to the marginal social benefit of abatement. What many environmentalists/GetUp/Australia Institute, etc are really upset about is that they believe that MSC=MSB would occur at a lower cap than has been set. In that context, voluntary actions would be way of getting closer to the optimal amount of emissions reductions. As others have pointed out, AIG and other business groups are already calling for a delay to the scheme. If say, the government caved on the voluntary issue, what do you think AIG and other business groups would say, given that the implication would be a higher carbon price than would otherwise be the case? They would of course lobby for further concessions. On top of that problem, there is the issue that the voluntary reductions by households are extremely hard to measure. For example, you might think that the insulation reductions should be on top of the existing cap, but with normal every day household decisions, how would one calculate what was a response to the change in relative prices and what was a voluntary change in behaviour? It quickly gets extremely complicated.
Another way you can see why the voluntary reductions are a side-issue is to think what would happen if the government set a cap of say a 40% reduction by 2020. Would anyone still care that voluntary reductions weren’t on top of that cap? In my view, the answer would be no, so lobbying should be directed at the real source of their concerns – the weakness of the targets.
Robert, I agree with you that 2) is the point of the exercise. What I’m unsure about is whether the current CPRS moves us towards 2) or not.
Assuming Cap-and-trade is a Carbon tax by any other name then surely the focus should now be on getting the ‘ Cap’ down much harder and tighter?
This will make the tax higher but that is a second-order issue and the price…we feel the price is worth it.
Surely, it’s a VERY small leap for a person who ‘wants to make a difference’ to switch from spending their dollars on efficient appliances, solar pv, carbon offsets etc, to simply buying credit certificates?
If this mechanism is not available to individuals then companies could surely be formed to bulk purchase. It seems a much more reliable way to achieve carbon offsets than a lot of the flakey ‘buy a tree’ schemes, which I would guess, from my own involvement with one particular NGO, are extremely poorly audited.
A further rather glum consideration for me is the lack of global focus.
While it is possible to convince ourselves that our actions will be interpreted in a certain hopefully positive way when it comes to why we think this I fear we are kidding ourselves.
When schemes are complicated the level of education needed across the population being asked to change needs to be at a certain level.
Many lesser developed countries are heavily locked into increasing their C emissions for many years to come or have such diffuse forms of governance that expecting any concrete repsonse to actually work is also unlikley. China comes to mind immediately .Their general level of education is also lower than where we might imagine while being counterbalanced by their often authoritatian central governments ie the population will be told how to act.
Reflecting on the first point I made it also seems to me to based on the assumption that what we do reflects somehow the “future”- as if others will want to aspire to achieve what we do.
Again from my experince in China this is actually the reverse of their reality – they see themselves as the future and we are bit players who should sell them commodities and neat technology.
It doesn’t mean we can’t set a great example but others may not concur that we have achieved something useful. At a local level it makes all the politicking madly frustrating and this issue should be approached as a national , bipartisan issue.
Ha! no hope that will happen.
“Surely, it’s a VERY small leap for a person who ‘wants to make a difference’ to switch from spending their dollars on efficient appliances, solar pv, carbon offsets etc, to simply buying credit certificates?”
Sure, but they’ll still be buying appliances, and contributing to demand for (presumably cheaper) inefficient ones, thus making it more difficult to achieve lasting energy reform.
Why not treat households like businesses? Give them free permits for emissions up to a certain per capita threshold (with caveats galore of course!), then slug them heavily for the excess?
I’ve just run across the discussion of the CPRS and Australian mitigation policy which took place on Monday in the Senate finance committee – see Hansard, starting on page 93. Many important themes are addressed and I recommend it to everyone in this discussion.
FDB – regarding efficient appliances, the mechanism already exits for the government to simply exclude the importation of inefficient appliances now, through the Australian Standards certification process, so it would seem sensible to simply extend that to all new appliances, essentially making efficiency mandatory. People who are buying a new fridge today will likely buy a more efficient product by default because of the Standards certification process.
I think my point still stands for solar PV, and carbon offsets, that the money spent on those would be put to better use purchasing credit certificates.
Mitchell: some interesting points in your earlier post, which I’d like to respond to at length in some point.
As far as I can see the rationale of buying credits is the govt has made too many of them and by buying them up I can reduce the oversupply the govt has created. Will the govt use the funds I spend on the credits to abate carbon?
It seems that if the govt set adequate targets I would not have to pay extortion to the govt to obtain adequate policy and the money I spend on credits could be better spent on reducing my personal footprint, which would also give me a greater sense of personal satisfaction and would I think contribute to more community support for change as people could be personally involved.
While purchasing credits may be more effective than changes to my personal footprint, this seems entirely due to policy failure by the government. The idea that anything I do personally may just give more comfort to those that have failed to do the right thing (big polluters) just rubs it in.
I agree with Robert that the most serious problem with the CPRS is the targets, rather than the fact that it invalidates individual actions. The fact that the government is unwilling to reduce emissions by more than 15% by 2020 undermines a good international climate agreement. Another problem is that bad targets are locked in by emission permits being treated as prooperty rights; caps are set exactly five years into the future; “gateways” of targhet ranges are set until 2020 (and will be set beyond).
At the same time, I think it is politically very useful to make use of the issue that individual actions are invalidated. There are heaps of well intentioned people out there who have spent thousands of dollars on solar panels, solar hot water, insulation and other things who are starting to realise that their investme nts m,ay save them electricity bills, but don’t provide public goods such as reduced greenhouse emissions.
This is very powerful. It can be used to force the government to both rethink the targets and rethink the inflexibility arrangements that lock bad targets in. In response to questioning on Lateline, Penny Wong hinted that targets could be adjusted more quickly, contradicting the White Paper. This arose consternation from Brian Toohey in the AFR, who didn’t like the loss of certainty for business. The problem is that certainty is shifted from the environment, and present and future generations to emissions intensive firms.
Unfortuinately, groups like GetUp see the solution to this problem to be a secondary market for the retirement of permits (h/t Dave55).
What is needed is the government not ruling out reducing its emissions by more than 15%. Treating permits as property rights rather than a compliance mechanism exacerbates this. This totally undermines international climate negotiations, and could be thought of as a cynical move by Australia to not face up to its high per-capita emissions.
There is a bunch of other stuff that should be changed. I think a price floor would be useful for example. But I think the key issue to focus on is the lack of willingness by the Rudd government to ruduce emissions by more than 15%.
Re 26 – Senator Abetz is a time waster on that committee but Milne and Xenophon at least try to get useful information from the witnesses.
Even senator Wong’s answeres about international agreements are tentative and guarded. The Kyoto protocol is also a limiting agreement rather than a final destination in terms of how we can assess potential solutions to the underlying problems of increasing C pollution .
All a bit disspiriting to read but thanks for the link .
The government is ramming through the CPRS and ignoring public feedback. Climate Change Action groups across Australia oppose it because it will not be effective in reducing emissions – so it fails its basic aim.
Market-based systems have just been demonstrated as failures globally. The European cap and trade emissions system has not reduced their emissions.
The CPRS shares exactly the same faults as other failed systems – free permits and exemptions for polluting industies (exactly the ones who should be reducing their emissions).
Wong trots out exactly the same line that Howard did – dirty polluting jobs come first – and even attacks community groups who want lower emissions on this.
The perversities about the high cap not reducing emissions and it also being a floor (rellocation) are peripheral. If they had a reducing cap that delivered 100% clean energy by 2020 there might be some hope, assuming “the market” actually works as planned.
Specific carbon rations with a very high tax rate for excess usage would be equitable, easy to understand and far more effective. If people and/or companies did not use their ration and choose to sell any excess these would be definite emission reductions over and above the total reductions under the full allocation.
It’s not that I disagree – at all – that the matter of how household emissions reductions are counted (or not) is a minor issue when compared to the rest of the CPRS.
However, I think Robert that your achilles heel when it comes to your analysis of the politics of all this is to consistently underestimate or outright discount the fundamental importance of individual empowerment. This isn’t just about people like me, who from an outsiders perspective can accurately be described as a middle class green who wants warm fuzzies for ‘doing the right thing’.
Poll after poll has found that the vast majority of Australians want action, and want to take action on climate change, and the scheme that is being suggested therefore disempowers the majority of the population in the most fundamental of ways, which in turn undermines national support for any action, and snowballs on.
Everyone always does the ‘gotcha’ with these poll results and says ‘yes but Australians individually don’t want to pay’ – well of course they don’t! Firstly, no-one like to pay for anything; but secondly and much more importantly, Australians rightly understand and accept that this problem is much, much bigger than just individuals, and government support for action at all levels is required. I think they are also innately aware that if the government doesn’t help them, it will also go hand in hand with helping polluters – ie it’s a sincerity test of the government.
From a macro political perspective, if Getup et al get a very strong response from the public to have individual household efforts properly counted in the scheme as reductions, it will not only show that Australians want to be able to act, but signal a strong desire I believe to see the government act properly on climate change.
I can’t articulate it better than that as I’m being nagged to go eat my breakfast, but in a nutshell, this is about harnessing people power to improve the CPRS, and those improvements can go far beyond this ‘fiddling’ if people demonstrate they have and want matched, their political will.
This is a little OT but I thought it useful background to the debate. Given that we have been criticising the Government’s 5% 2000 level reduction target, I thought I would take a look at what that reduction actually requires for a bit of background (and as it happens, a reality check).
Based on the Department of Climate Changes’ GHG Emission information System 1990 emission levels in Australia were the same as 2000 levels (552Mt) Accordingly, using a 2000 benchmark instead of 1990 levels does not affect the extent of actual emissions. Note however that actual emissions from industry rose significantly over this period but were offset by reductions in LUC (agriculture has remained pretty static at around 90Mt =/- 4Mt). In 1990, LUC accounted for 136Mt; by 2000, this had dropped to 57Mt and in 2006 (latest figures) down to 40Mt. Despite this drop, and the fact that agriculture has remained pretty static, actual emissions have (in 2006), increased to 576Mt or around 4% on 2000 levels. What this means is that industry (for lack of a better grouping) increased emissions over the period 1990 to 2006 by around 1040Mt/ annum. This increase in emissions from industry is 19% of 1990/2000 levels. What this means is that whatever reduction target is set based on 2000 net emission levels, industry will need to bear a higher burden of the emissions reductions because the scope for gains in agriculture and LUC are limited. Put another way, a 5% reduction for the economy as a whole will require a much larger % drop of industry sector emissions when compared to agriculture or LUC.
Lets assume for the sake of the argument that the starting point for emissions reductions is at 110% 2000 levels. A reduction of only 5% on 2000 levels requires an overall reduction of 15% 2010 levels or 82Mt. Continued reductions of 15% 2000 levels over the following 3 decades to 2050 would result in a total reduction on 2000 levels of 50%. With new technologies likely to come on line post 2020, gains of 15%/ decade should be easier in the future than in the coming decade. Looking at the figures in this way, the 5% 2000 target doesn’t look that bad; particularly seeing as the bulk of the reductions in that period will need to come from industry.
What will be interesting to see is whether or not the cap under the CPRS for emissions from the sectors covered by the scheme is 95% of their 2000 levels or some increased amount having regard to the reductions in LUC emissions post 2000. In other words, it will be entirely possible for the Government to allow industry as a whole to increase emissions over their 2000 levels provided it can offset these increases through reductions in the sectors not covered.
A few points of clarification for Robert:
I don’t see much hope for deliberative decision-making in providing constructive solutions to climate change, but still see the consensus building process as important for the first of the two ‘sociological’ criticisms I’ve made:
Firstly the ‘forms of life’ (cf. Lash) criticism correlates emissions intensity with the technological forms that allow us to maintain our social lives – gadgets, computers, cars, planes, amazon.com etc. These are all energy intensive and require rethinking to become ‘sustainable’ in any meaningful sense.
The second is the ‘trans-science‘ critique that says that areas like mitigation technologies like air capture, CCS, nuclear, renewables, biofuels, all require questions we ask of science (does it work, is it feasible, economic) but can never be fully answered by science. By definition there are ‘social’ questions at stake there.
Oh and by the way, GetUp has already campaigned on targets. They asked for 30% by 2020 and over 100 000 signed the petition. Which isn’t to say that they shouldn’t run a more targeted campaign again.
Dave55:
I don’t see how that follows, Dave55. As far as I’m aware, GetUp hasn’t proposed any elaborate mechanisms for crediting voluntary actions by local governments, businesses, community groups and others. I’ve seen plausible proposals that could be explained much more easily than the EITE Permits clauses, banking provisions, international linkage clauses and other impenetrable bureaucratese.
Anyway, GetUp’s slogan is ACTION for Australia. If you want explanation go to Wikipedia.
dk.au
Get-Up have proposed a secondary market for retiring permits – either this works on retiring permits from the primary scheme or through abatement credits. They have not provided any detail on how this could be done. If the former, there is no need for a secondary market because this can be done in the primary market so I have no idea how they envisage this operating. If the latter, this would need to run alongside the primary scheme but outside it and could result in double dipping where the abatement is an abatement of emissions from within the scheme. I would be possible to use an abatement scheme for emissions outside the primary scheme but this wouldn’t reward the behaviour that most people feel most strongly about, ie, solar panels etc. Get-Up have generally been pretty good in how they advocate different causes but I am critical of how they are doing this because:
a) they provide no detail on how it would even could operate;
b) it confuses the argument and is more likely to result in delays to a flawed buy workable scheme that will actually result in emissions reductions;
c) it relies on an assertion that altruism won’t be rewarded when in fact it will (through both private and public gains) albeit not in the way people may have expected.
As for the complexity – sure, there will be some, but it will be industry that needs to understand the full detail, not the general public in the same way that people know there is a GST and that it is factored into their consumer costs but they don’t need to know how a BAS operates, input tax credits etc. Besides, most of the CPRS operating structure is based around existing regulatory ideas so it is not a completely new system. I fail to see how an abatement based scheme would have any less regulatory burden on those participating in it and it may well drag more people into it (and impose on them an administrative burden) than would be covered by the CPRS. A carbon tax for example still has complex crediting and debit structures.
Robert, what you are missing is the political implications of this. Joe Punter has been bombarded with information over the past 3-4 years about what he can do to reduce his carbon footprint, and now he’s being told that all of that is pointless. He will no longer feel any personal connection to the problem, and most likely say “F*** it!” and crank up the A/C. This policy will almost certainly erode support for action on climate change, which is already being badly hurt by the GFC.
The financial engineers who gave us the GFC, will eat the CPRS for breakfast. Lets cut the crap, and tax carbon.
I agree fully with your assessment. We as a community empowered our government at the last election to act strongly on Global Warming, but our government has, so far, twisted that empowerment to mean everything else but GWA. And they have confirmed that missinterpretation with these very inadequate targets. Most people have indicated that they are prepared to cooperate with their government in the implementation of a Global Warming Solution. For most people that is as much as there is flexibility in their situations to cope with. It is a privileged group who have the means to divert significant resources to large scale individual energy restructuring, and of those who have made the effort if their efforts were examined on a total energy basis would be seen to be less than half of full energy independence. So I believe that for the bulk of Australians the use of our tax money is the principle means that we have to address Global Warming.
That is not to say that if an appropriate technology were to become available that individual action could not make a significant difference. And the very best option that I have seen to date, apart from solar water heating, is the CSIRO development programme for printed solar panels with a possible 10% efficiency. Individual empowerment is extremely important, but it is the government that must take the lead as we have, as a nation in the last election, asked them to so do. So far they are betraying that trust by using the Kyoto signing as a veil to mask an unsettling indifference.
Rooftop solar:
These are the facts:
The East coast of OZ will shortly have about (round figures) 50GW of generation capacity.SO what happens when we elect to replace 5% of our generation capacity with Roof Top PV (RTPV)?
GW 50.00 East Coast generation capacity
MW 50,000.00 East Coast generation capacity
kW 50,000,000.00
Fraction RPV 0.05 5.00%
kW/RPV 2,500,000.00 5% East Coast generation capacity
Rooftops 8,000,000.00 About
RPV/Rooftop 0.31
Assume 50% Rooftops 0.63
Assume 33% Rooftops 0.94 Say 1 kW
Rooftops with 1 kW RPV 2,666,667
Estimated tonnage trees removed for solar access 1,333,333.33
C02 sequestered by trees 29,304,000.00
CO2 Returned (leaves,roots) 14,652,000.00 Say 14 Millions tonnes retuned to atmosphere
1 kW RTP Avoids 1,000.00 kg per kW installed per annum
Total CO2 avoided per annum 2,666,667 Say 3 million tonnes
Carbon neutral time 4.67 Years
Factor in; Embodied energy and installation CO2 5.00 Years (some PV technologies need 3 years+ to return the embodied energy)
For data on tree CO2 sequestration see
http://www.plant-trees.org/resources/Calculating%20CO2%20Sequestration%20by%20Trees.pdf
For Avoided CO2 by PV systems see:
http://web.mit.edu/agrea/docs/MIT-LFEE_2004-003a_ES.pdf
The estimated tree removal is very conservative. Anyone ever heard of the “leafy suburbs”? An estimate I once did for Sydney suburbs showed that at least 60% of houses would require tree removal on the North side of the house. I have assumed that the trunks are placed into storage (Any-one have rot free storage space for 14 million tonnes of tree trunks) and the roots and leaves just rot in landfill or better are just burned.
Ok we are 5 years in and the embodied energy has been taken care of
we are CO2 neutral; at last. There is a problem, Melbourne Sydney, Brisbane and Hobart all lie roughly at the same longitude. This means that Solar noon (peak solar output) occurs in all cities at roughly the same time.
This means that the peaking stations and a percentage of the base load generators have the total load reduced by a large percentage – depending on the total system load factor at the time. if the thermal efficiency of the peaking and base load drops by even a few percent then the whole solar exercise will be a waste of time and money.
Money better spent.
Introduce low cost energy storage into this mix and the entire picture changes
RTPV becomes competitive, the peak power problem goes away and the overall network efficiency will rise by about 10%.
Huggy
Well put, Robert. Thank you.
There are two separate points here: 1) the administrative substance of the proposals ie. whether they’re workable (2) whether it makes sense politically for GetUp to mobilize a public campaign like this. I’ll leave aside this for the moment, but I think it’s an important question (cf. carbonsink @ 39)
That depends whether the abatement is occuring in covered or uncovered sectors. I agree that the institutional forms by which this recognition will take place is very important, but the question can be expressed as follows:
‘will additional action by community groups and other organisations etc. be recognised by the Federal Government’s scheme and/or marked against our international obligations under Kyoto?’
That’s not a hugely difficult problem to express. If you want to get technical, you could ask:
‘should there be a body to ensure that additional action beyond the horrendously ineffectual range of 5-15% will be recognised through the retirement of AAUs or CPRS permits.’
Double counting problems aside (which are potentially deal breaking), I don’t at all accept that the ‘complexity’ argument you make is a strong one because anyone interested in having their abatement recognised will do so through some kind of organisational structure with relevant experts (NGOs, community orgs, business consultants etc.).
One way of determining additionality of schemes like community tree planting projects, solar panels on surf clubs and other small scale initiatives is to have an expert panel that assesses additionality, certainty, permanence etc. and creates credits through a secondary market (as GetUp have suggested) which then, through an appropriate mechanism, results in the retirement of credits.
c) it relies on an assertion that altruism won’t be rewarded when in fact it will (through both private and public gains) albeit not in the way people may have expected.
@carbonsink and anyone else who thinks a tax will solve the problems:
http://www.eastasiaforum.org/2009/02/25/emissions-confusion-trading-vs-taxes/
dk: With regards to your point about GetUp’s previous campaign on targets, that’s great. But the only hope for amendments that make the scheme better at this point are Senate negotiations with the cross benches. So the question arises – “what should the cross-bench Senators ask for to improve the scheme?” I maintain that by far the biggest flaw is the weak targets. Ergo, that’s the one that the cross-bench Senators should be holding out for improvements on, and that’s the one that GetUp should be pressuring Labor hardest on.
Thanks Robert. I agree that stronger targets are important, but without adjustments to the banking and borrowing provisions and international linkage provisions too that’s hardly likely to make any material different to investments considering how much allocation is free of charge.
I’ve got a post attacking the Montgomery-esque assumptions of the likes of Labor Outsider that the marginal costs will be accounted for by firms regardless. That has not been the experience of the EU ETS – Allocation method matters! In short, investment decision-making will only be altered significantly with:
1) Stronger targets
Combined with
2) Restrictions on international credits
3) 100% Auctioning, or at least caps on the EITE provisions.
4) Tighter banking and borrowing provisions (not much of a big deal, but I reckon the fragility of the politics necessitates this – cf. NZ’s experience)
Also, Structural Adjustment packages to affected communities instead of cash payments to Coal Fired generators.
Well DK.AU @ 44, obviously you think that Jotzo makes a sensible arguement. Frankly, it is just so much of the same failure of understanding that we have been drowning in throughout this whole time wasting ridiculous debate. And you have to get to the last paragraph to see how little understanding this guy has
“So it is all back to basics: who foots the bill, where does the money go, and how much change is induced”
What???? you haven’t even thought out what to do with the receipts of your nonsense complicated scheme that has our businessmen scratching their heads wondering how it relates to them?
The very first thing that was required here was to determine what the new energy system should entail, then an estimate of its cost, then an estimate of a realistic implemention plan, then a measure of the economy’s capacity to meet that plan, then a determination of the carbon price adjustment to realise the plan, adjustment with reality, then push the go button.
Instead we have had an approach based on how little can we get away with, and how can people make a profit from it.
With advice like Jotzo’s no wonder Garnaut cam out with the rubbish he did!
If we had a couple of spare centuries to work this out I would be able to say “go for it guys, do what ever you like”.
But we don’t, we have a decade at best.
BilB, I reckon a decade is optimistic.
The whole problem, as I see it, is that the government’s approach has been framed in terms of The Market which, as we have seen recently, works really well …
If I understand you correctly, I agree with you – we should be defining where we need to be (with very aggressive targets), then working out the quickest way to get there.
Exactly DI.
What we are stuck with at the moment is a bunch of boffins playing with economic mechanisms for their own intellectual pleasure. Even our own JQ the other day blogged that the World Economic Crisis had caused a decrease it the European carbon credit cost. Eh? Well it is a fluctuation, you see, caused by a change in economic activity. So what you are saying is that a near total collapse of the worlds banking system is what it takes to cause a fluctuation in the cost of carbon credits in Europe? Yes, it is exciting isn’t it. We have seen a mechanism that we created actually working, there it is, there is the fluctuation. Well what does it take to cause the carbon credit price to increase? Oh, we don’t know that. Well is this ETS thing actually causing a decrease in the use of carbon? Now, that is too difficult to measure, but we have now seen a fluctuation, so we know that something is going on.
Spare me!
It really is amazing how little some of the posters here understand about markets. BilB – the EU have two targets – their Kyoto Targets and the targets for Phase 3 of the ETS. The carbon market is forward looking in that expectations of future demand and supply of permits matter for the current price. The unexpected fall in activity means that the price required to meet the fixed targets is lower than it would otherwise be. I have no idea what you are talking about when you say that we don’t know what would be required to make permit prices rise. Of course we do – an unexpected increase in the demand for permits or an unexpected reduction in the supply of permits. As caps are progressively reduced over time, the real permits price will rise over time as well. But that doesn’t mean that there won’t be short-term volatility in permits prices – that is the market doing its job as a shock-absorber. The first phase of the EU ETS did not reduce emissions – but then it wasn’t meant to – it was a learning phase. Phase 2 will result in some but limited absolute reductions – again because it was designed that way. Phase 3 aims for 20% below 2005 levels and 30% if an effective international agreement is in place. So how will that not lead to actual emissions reductions?
Economic mechanisms are used because if well designed they can deliver a given reduction in emissions more flexibly and at lower cost (and deal better with uncertainty) than command and control mechanisms. A carbon tax is still a market mechanism and delivers no certainty about emission reductions – all that a policymaker can do is set the price that she thinks will deliver the targeted reduction in emissions. The same policymaker that sets the weak cap will also be setting the size of the tax – so it is not a real solution to the problems discussed above. Just as voluntary reductions do nothing save reduce the cost of achieving a given cap, under a carbon tax, if governments observed households taking large voluntary actions to reduce their emissions, they would probably just reduce the real rate of growth of the carbon tax. You have to internalise the political equilbrium that generated the policy that we have!!!
The argument of some people here seems to be that the recent financial crisis invalidates the role of markets in allocating resources in any sector of the economy. That is just plain dumb. There were specific market failures in parts of the western banking sector that weren’t properly addressed through the right regulatory measures. If emissions are measured properly, and the right cap is in place, and the secondary carbon permit derivatives market is appropriately regulated, and only offsets that represent genuine emission reductions can count toward meeting the cap, there is no reason why an ETS will not deliver genuine emission reductions efficiently.
BilB – the first place you go wrong is by saying that you have to start with what is needed and then work out the cost of delivering it. But what is needed is itself conditional on the cost. What is needed depends on current and future costs and benefits of abatement, with appropriate discount rates applied to the future. You don’t just say we need to stabilise concentrations at 300ppm by some fixed date and then work out what needs to be done to get there, because whether the 300ppm target is the right one depends on a host of social and economic factors. It is the essence of cost-benefit analysis. The science does not tell us what needs to be done – the science tells us what the environmental implications of BAU will be, and likely implications of various stabilisation targets. Democratic processes have to take that information and decide what option will be most likely to equalise the marginal costs and benefits of abatement.
I suspect that what is really at issue here is that you either dispute the use of cost-benefit analysis in setting targets, or think that the situtation is so dire that almost any cost is worth bearing to avoid climate change.
I agree with all of you that there are flaws in the CPRS. But the primary flaw is the weakneess of the target – and even that reflects a short-term political equilibrium. I don’t particularly like the permit allocation mechanism, because it will raise the cost of meeting the targets and is not equitable – but the scheme will still be effective in reducing emissions below their baseline levels by 2020.
It is good to agitate for improvements, but if people such as yourself work to scuttle the imperfect scheme that we have, you will only succeed in setting your whole cause back any further. Sure, you will still be able to bask in your moral purity, but it won’t be much help to anyone.
L.O. – you claim “Economic mechanisms are used because if well designed they can deliver a given reduction in emissions more flexibly and at lower cost (and deal better with uncertainty) than command and control mechanisms.”
But why assume economic mechanisms will be well designed, but not command and control mechanisms?
FWIW, I agree that in the general case, a market mechanism is desirable and generally preferable, but I’m genuinely struggling to see how it can possibly work fast enough without some substantial command and control measures too.
There is a very good reason Wiz – market mechanisms deal much better with uncertainty than command and control mechanisms. A big thing missing from all of these discussions that we have on this forum is how little policymakers know about different firms abatement costs either now, or in the future, and how little we know about how the relative price of different low emission technologies will evolve over the coming decades. Take the MRET for example. When that was first introduced, the modelling that was done on the impact on the supply of various renewable sources did not predict that it would be wind that would increase its market share the most. Command and control mechanisms significantly increase the risk of locking in less efficient technologies. They also make it more difficult for emission reductions to take place where they can be done most cheaply – thus increasing the aggregate cost of delivering a given emission reduction. It does not matter for the environment where emission reductions take place – just that they do. There is an enormous amount of heterogeneity in marginal abatement costs across firms – so it just makes sense to have a mechanim that allows those reductions to take place where they can occur most cheaply. The other great advantage of carbon trading is that it sends a long-term price signal that firms and households can act on when making investment and consumption decisions today. Command and control mechanisms do not do that.
I have to say, I haven’t seen any serious analysis that suggests that pricing carbon shouldn’t be one element of the policy suite to counteract climate change.
That doesn’t mean it should be the only policy though. There are other market failures that have to be dealt with as well. That is why there is a role for complementary policies like public support for low-emission technology R&D, labelling standards, in some cases technology standards, investing in smarter electricity grids, etc. But they are all complements to pricing the carbon externality, not subsitutes.
As for the pace of change, a market mechanism can deliver any target you like within any space of time – that is why the issue with the CPRS mostly boils down to the inadequacy of the target. But that has nothing to do with it being a market mechanism – weak CAC policies would leave us in the same place (though they would be more costly).
DK – we should clarify a few things about allocation.
If one had a strict cap and trade, with no banking, borrowing, offsets or international imports, whether permits were auctioned or allocated for free would have no impact on whether the cap was met or not. If the cap is strict it has to be met – regardless of whether you make firms pay for them or not. Not making them pay is the wrong thing to do IMHO but not because the cap won’t be met. As I have said time and time again, overallocation, combined with no banking was the critical problem with Phase 1 of the EU ETS.
Banking is a no brainer in my opinion – indeed if banking had been allowed in phase 1 of the EU ETS the carbon price would not have collapsed. It allows the cap to be met more flexibly. On the other hand, there are good reasons to be vary wary of allowing borrowing – which is why the EU ETS does not allow it and why it will be very limited in the CPRS. As for allowing imports/offsets – there are a lot of complicated issues surrounding the verification of genuine emission reductions through offsets that need to be resolved before I would feel comfortable with allowing too many of them. But allowing international trading simply reflects the idea that it will be cheaper for some countries to reduce their emissions than others – so allowing international trading can deliver a given level of global reductions more cheaply. However, it is obviously the case that linking should only be with other countries with schemes where emissions reductions are properly verified. For that reasons, I’m quite sceptical of the CDM and JI components of the Kyoto Protocol – I have concerns that some of the supposed emission reductions are imaginary.
LO,
I am fully aware as to how the market mechanisms are intended to work. But after all or that wordiness you get to the hub of the issue
“I suspect that what is really at issue here is that you either dispute the use of cost-benefit analysis in setting targets, or think that the situtation is so dire that almost any cost is worth bearing to avoid climate change”
You see you make the assumption here that
“You don’t just say we need to stabilise concentrations at 300ppm by some fixed date and then work out what needs to be done to get there, because whether the 300ppm target is the right one depends on a host of social and economic factors”
somehow relates in the argument to this
“The very first thing that was required here was to determine what the new energy system should entail”
It does not. Herein is the fundamental difference.
“stabilise concentrations at 300ppm”
is just so much twaddle. Progressive reading of the situation indicates that there is no final understanding or agreement on what will happen at what CO2 level or even the future time frame for rate of change. Looking back to rate of change gives no certainty of what the future rate of change will be, simply because there are too many elephants in the room. And some of the bigger of these elephants are northern polar region methane release and sea floor methyl hydrate release. The only thing that there is near absolute agreement on is that we have to do something dramatic about our CO2 release and we have to do it fast.
So
“depends on a host of social and economic factors”
is all very well for a bunch of economists coping with a problem within the limits of their understanding, but it completely ignores the very real situation of the environmental battle field.
The engineering world knows full well that in order to solve the problem every coal consuming CO2 belching power station has to be replaced with a solar option of some form. So we are in Dunkirk territory here, not Iraq2 territory. What does that mean? Dunkirk required every available floating device regardless of size, power, speed, or carrying capacity to save the day, and it worked. Iraq2 was the carefully laid out and properly prepared battle plan, and it has been a horrendous disaster. Winning the battle at hand requires taking every available alternative energy technology (that won’t ultimately kill us) now and implementing them now. Waiting for some grand technology that might work in 20 years is failure.
So
“The very first thing that was required here was to determine what the new energy system should entail”
does not fantasize over potential final CO2 levels or a time frame, it simply says that we know what the problem is and where to start to fix it. Fast.
The economists fail to see that they are being used by governments around the world who fear change. Divide, delay, conquor. And it will be some future government that has to take the wrap, it won’t be on the incumbent’s watch. That is what is going on here and our economists are the dupes making it happen.
This pure assumption
“Economic mechanisms are used because if well designed they can deliver a given reduction in emissions more flexibly and at lower cost (and deal better with uncertainty) than command and control mechanisms.”
requires a huge leap of faith coming from a profession that allowed the current economic collapse, that professions prime field of expertise, and is stretching credulity with statements declaring certainty of outcome in a crisis that is potentially 100 times more potent. And a statement such as
“The science does not tell us what needs to be done”
just serves to confirm this doubt. There will be no scientist, who is not a denialist, who is any doubt that the science tells us to stop emitting CO2 completely and immediately. Anything less adds further risk.
So when you start saying “well we can only advise, if the policy makers set weak targets then there is the danger” shoots the entire economic management approach in the foot, and Rudd fully lived down to our expectations.
As long as government is fixated on “setting caps”, the game is lost. We have recently seen a 5 fold fluctuation in oil prices which yielded only a minor variation in consumption patterns. Its only major effect was to trigger property foreclosures as people continued to use petrol at the expense of their mortgage payments, which then snowballed into a world investment banking collapse. This chain of events has clearly demonstrated how poorly economic mechanisms perform at solving real problems. Simple problem, low cost housing. Add a dash of government policy, blend with markets and economic mechanisms, garnish with greed and bad luck, and voila, economic collapse.
The only real solution is to start the process of coal to solar conversion immediately. Then put in place a funding method, regardless of how it works. Anything less is failure to prevent severe climate change, and subsequent economic failure.
“…a market mechanism can deliver any target you like within any space of time…”
You can’t seriously believe this can you?
And anyway you didn’t answer my question – why assume that a market-based mechanism will be well desigend but a CAC one won’t be? It’s entirely plausible that there are enough peculiarities about CO2 emissions (e.g. the fact that electricity generation is responsible for such a high percentage) that getting CAC mechanisms right is actually more straightforward than getting market-based mechanisms right. Further, a number of books and papers of varying quality and levels of expertise have been written arguing how we could in principle very rapidly reduce emissions, but all of them require immediate government action, such as actively shutting down coal power stations etc. I don’t believe anyone has demonstrated how a market-based mechanism on its own could generate very rapid emissions reductions – and yet the best science we have tells us that anything less than very rapid reductions will generate enormous future costs.
Obviously LO, I see this
“It is good to agitate for improvements, but if people such as yourself work to scuttle the imperfect scheme that we have, you will only succeed in setting your whole cause back any further.”
very differently.
I can’t for the life of me understand why there are so many people who are convinced because the targets are appalling we should not be talking about any other flaws with the CPRS.
The CPRS is an enormous and complex mechanism – the fact that some people have put more thought into their communications strategies than into reading the Green and White papers seems to lead them to want to focus exclusively on the targets.
I for one think the targets are appalling – but, i hate to say it, i think the government knows that and the public knows that. I even think the government might have predicted that people would have been unhappy with the the targets. And i think the government had all of its spin ready to deal with criticism of the targets.
What they weren’t ready for, however, was widespread understanding of the ‘design features’ of the CPRS, including that the more effort households put onto abatement the less effort the industrial sector puts in. Is that the kind of ‘economic transformation’ people are hoping for?
Here are a list of reasons that ensuring that voluntary action will make the CPRS better (as opposed to great – which cant happen unless the targets are good)
1) Individuals will only continue to invest in behaviour change (such as leaving their air con off when they are watching the cricket) if they believe it will make a differnce. to those who say the price signal will achieve this you are simply wrong – look at the empirical data on the elasticity of demand for electricity. people spend more on coffee.
2) Voluntary action does not just mean individual action. I can understand why the government has sought to trivialise this issue but i cannot understand why those with in an interest in reducing emissions would. A CPRS where the result of the government spending $4 billion on insulation is a lower target, not lower permit prices, is an unambiguously better CPRS. same for the ACT target of a 30% reduction by 2020 – should the benefits of such a goal acrrue to the atmosphere or the permit price?
3) So what if I am wrong and the net effect in the long run is small? modifying the CPRS to make room for individual and collective voluntary action is a zero risk strategy.
4) I would suggest that the debate about voluntary abatement has provided more, not less, opportunities for those who want to get the message about targets out. Given that the two are not mutually exclusive that would seem to me to be a good thing. I for one have never suggested that fixing voluntary action was a substitute for fixing the targets
5) The concern about the (lack of) impact about voluntary action is as much a concern about equity as it is about the size of the abatement task. To that end the issue has brought two quite differnt groups back into the cliamte change debate- middle class families who feel cheated and deep green ‘do it all yourself because governments are hopeless’ types who had given up in the CPRS as they thought (wrongly) they could make a differnce by going it alone.
One final point. Incorporating voluntary action into the CPRS is easier than some people seem to think. While a secondary market in energy effiicency credits is one way (a way i proposed myself last year) there are more direct ways of doing it as well. For example, we could create a ‘cap and slice’ scheme where the target for any year is ‘sliced’ by the estimate of the voluntary action in the previous year. Under such a scheme you would only need to worry about estimating voluntary action at the household level in aggregate, probabaly against the baseline data already included in the CPRS modelling
To conclude, to those who say that fixing voluntary action is a ‘distraction’ from the target debate i would agree if i thought for a minute that the policy process was as linear as Penny Wong framed it up to be. The fact is, however, that it is not only possible, but i believe far more effective, to have a multifaceted critique of what is clearly a multifaceted policy problem.
Simply including voluntary action will not fix the CPRS or the planet, but it will help. In my assesment, talking about it has achieved more than simply repeating the mantra that the targets are too low (with ever incrfeasing vigour) seemed to be doing
Keep up the blather about market based mechanisms folks. Then you can have a debate how many angels can dance on the head of a pin. Equally relevant to the real issues of global warming.
Huggy.
Yes, market based mechanism are the problem, not the solution. Here in Melbourne we have had our hottest day ever, our worst bushfires ever, and the driest Jan-Feb ever with about 4mm of rain.
We are on a trajectory to run out of water. The climate with respect to rainfall has certainly changed. We don’t get any rain now.
And the best our political leaders can come up with is the CPRS and a greenhouse gas belching desalination plant which won’t be ready for 3 years and will cost a fortune to build (3b) and run.
This is the end of the world as we know it, with no political will to do anything about it.
Actually, HuggyBunny, the mediaeval debates about angels and heads of pins were somewhat more sensible than discussions about market mechanisms. What they were actually talking about was the nature of infinity (both countable and uncountable), which ties directly into set theory. Discussions about The Market (TM), on the other hand, …
David Irving, I thought it was a 17th century put down of medieval scholasticism but then what would I know
There was an interesting discussion of market and tax mechanisms for GW abatement on the ABC.
I think the message was that neither would be effective; but in the manner of academics there was much arse covering.
I am coming to the view that this is the most existential crisis ever to face humankind. So what do we do? We totally avoid facing up to it and totally avoid actually doing anything at all by invoking the fucking “market”. Like there is this great God who will come down and save us and the God is Market, Yea a vengeful God who is in the process of scourging the money lenders by giving the widows mite and the pittance of the poor to the rich. This is the God that they think will rescue them?? Oh fucking yeah.
Huggy
Wiz – what do you think would happen if the CPRS target was for a 50% reduction in emissions by 2020, with no borrowing and strict limits on offsets and permit imports? The permit price at the start of the scheme would be extremely high because permits would be very scarce. If policymakers really wanted to, they could effectively tax emission intensive industries out of existence in Australia.
As I tried to explain, command and control mechanisms are much harder to design efficiently than market based mechanims because the information requirements are much greater. My starting point is that there will be flaws in all policies that have to go through the democratic mixing bowl, but from my experience in public policy, flawed CAC policies are likely to be even more costly. Personally, besides the target, I don’t think the CPRS in Australia is that inefficient. There are some issues to resolve, but I think it will deliver a given level of emissions reductions much more cheaply than any other policy currently on offer, with much less risk of major costly mistakes. I’ve looked closely at the suite of policies that the EU has put together on the CAC side of the leger and for the most part they will simply increase the overall cost of GHG abatement without delivering significantly greater emission reductions.
The idea that discussing the most efficient way to deliver a given reduction in emissions is akin to medieval scholasticism just serves to show how far BilB, DI and Huggy are divorced from the real financial and political constraints that policymakers face.
Anyway, there is little point getting into this issue deeply again – there is an enormous philosophical gulf here in the way that we think climate change should be approached – and we won’t bridge that gulf in this discussion.
DI just gave a nice illustration of that gulf when he alluded to water shortages, which in my view are partly attributable to the lack of market mechanisms in that sector.
“The engineering world knows full well that in order to solve the problem every coal consuming CO2 belching power station has to be replaced with a solar option of some form.”
I mean that is just plain rubbish. Do you think nuclear engineers agree with that statement? What about those involved in CCS technology?
And BilB you highlighted how little you understand about economics with your comment about oil prices. The evidence is very clear that the short run price elasticity of demand is much lower than the long-run price elasticity of demand. The spike in oil prices was relatively short lasting – it is hardly surprising that substitution (which did occur) was limited because the existing capital stock is geared toward using it. Indeed, it serves to illustrate the importance of long-term increases in the relative price of emission intensive energy sources – it is that that signals to firms and households that investment and consumption habits need to change. As I have said before, the reasons for the GFC are very complicated – the spike in oil prices was as much a result of global macroeconomic imbalances as it was a cause of the global recession. And to suggest that a recession demonstrates that markets in a general sense are so fundamentally flawed that they can’t be allowed to allocate resources just beggars belief. By all means push for appropriate regulation in sectors where there are clear market failures, but you seem to be implying that we would be better off without them altogether.
You don’t really believe that do you? The mixed economy has served us well, and certainly better than any other alternative. We know what happened when communist countries thought that bureaucrats could allocate resources better than markets.
Perhaps we could take this thread in a more constructive direction?
Lets take as given that we think about how public policy should approach climate change differently. But surely, one thing we can agree on is that in a society where there are a plurality of views, that we have to find a way to reach compromises on policy issues such as this?
So, in the spirit of compromise, tell me what things you would be prepared to negotiate and which things are non-negotiable, so that we can find a political way forward….
A bit OT but this is my take on solar pv:
I recently looked into getting a 1KW system put onto our roof because the government will give a rebate of up to $8,000 for a minimum 1KW system. Despite the huge rebate the system would still cost $7500 ie $15500 all up. This 1KW system will produce max 5KW hours per day ( more likely 4 ) of power. This is shockingly bad value as it is about 50cents per day or maybe $160 per year. ie a 1% return. Wholesale the value of the electricity would be only 25c per day or less.
The panels themselves are ‘only’ about $9000 so the installation, framing, inverter and various other fees are about $6500. As you can see even if the panels were free, solar PV would still be very bad economics. Part of the problem is that the solar industry seems to have captured at least part of the rebate in higher fees ( not surprising ), but even disregarding that I think it will be a long time before solar PV is economic. The only reason why I looked into it is our local government is also offering to buy the power ( gross not net ) for 50c per kwh for at least 20 years, so it makes a bit more sense. But its almost a criminal waste of taxpayer money if you ask me – and I have been really keen on solar power for at least 30 years.
HB @ 61 – it absolutely was a C17th putdown of the schoolmen, but the mathematicians and philosophers of the time were starting to have their own problems with infinity (Newton and Liebnitz to name just two) and it’s quite likely they missed the point anyway. (The language the scholastic philosophers used is a bit opaque to the modern mind, so it’s hardly surprising.)
Back on track: Labor Outsider, you seem to be implying that CCS will work. Any honest engineer (they’re optimists, generally) will tell you that implementation is at least 15 years away, and success is by no means certain. This belief of yours colours my assessment of the rest of what you say, I’m afraid.
DI – obviously a short-term shift to CCS isn’t possible – but then BilB said that all engineers thought that we needed to switch almost entirely to solar!!! We are even further away from being able to do that at an acceptable cost than CCS! Besides, the bulk of emission reductions will occur after 2020 – which means it is important to consider all the technologies that will be commercially viable at that horizon. And in case you think I think we should put all our eggs in the CCS basket – I certainly do not – I was merely disputing the notion that “all engineers” think that all our energy supply should shift to solar – it is demonstrably false.
Mr HopeNChange: I know.
But people have had so much propaganda about the wonders of solar panels the hard facts of the matter get lost in the feelgood vibe.
Mr NohopeNchange @64
The solar rebate is the biggest scam of all time, the subsidy goes straight to the bottom line of the solar companies.It serves no purpose but to artificially inflate the price.
The technology for inverters has been in stasis for over 10 years because there is no incentive at all to do better – same old shit for over 10 years. If this sounds like some sort of “market” plea it is not. It is the Market believers who think that subsiding a ” market” will create an optimised product. In their wettest dreams it will.
I blame those wankers from the “Greens”.
Huggy
L.O. – it would probably collapse the economy and/or generate a black-market in CO2 intensive production methods, and get the government voted out if they didn’t renege it. Next question?
And while I agree that *in principle* a market mechanism should be generally straightforward to design, what we actually have on the table is an example of the sort of things goverments actually design, which is hardly a promising start.
Sadly Robert the solar hot water quote was almost as bad. $7400 for a high tech Hills 30 tube solar hot water system that would save me about $250 per year. Of course there was a subsidy of $3000 that brought the price down quite a bit, but a big part of the cost was $2100 installation. To get the rebate I would of course have to chuck out my perfectly good off peak tank and get it replaced by a smaller off peak tank.
I reckon it would take 1/2 day to install. Funny, I recently got a quote for air con and the instal price was $650 – also for half a day. That included a separate cable to the meter which wasn’t required for the solar water as I already have off peak.
Your taxes at work. No doubt more madness to come. I really reckon the inmates have finally taken over the asylum.
Huggy
Really? I would have though that subsidies were a good demonstration of market failure and one of the reasons successive Australian Governments have pushed for removal of trade barriers and subsidies and demonstrated how these can deliver productivity gains by doing it ourselves.
LO
I agree with your comments entirely. Trying to come up with a new way to reduce emissions now will only delay the action which is what a lot of the people arguing here actually want. Not sure where I read it but someone pointed out last week the comparisons between climate change policy and the republican debate. As with the republican debate, we run a very serious risk of derailing action to reduce emissions by arguing over the best way to acheive them!
Much of the debate now occurring over carbon taxes v ETS and the different types of ETS (baseline & Credit v Cap and Trade, Abatement schemes v emissions schemes etc) was well and truly canvassed in the late 90s and early 2000′s. Cap and Trade Schemes aren’t without their problems but they are vastly superior to the alternatives and are being applied in other countries. We can learn from the mistakes of the EU schemes and we know WHY that scheme suffered problems in it’s early stages (LO covered that well above). The CPRS, while it has problems, shouldn’t suffer the same problems as the early EU scheme. Had we taken action earlier, we could have ironed out the problems in implementation before it became (more) essential to take action. Unfortunately our previous Government ignored that advice so we are where we are. The CPRS, as LO has pointed out, isn’t THAT bad. The free allocation of permits, while less desirable from a theoretical perspective than full auctioning and subsequent revenue recycling protections, is at least based on sector averages rather than individual performance – so better performers in the sector will be rewarded compared to the poorer performers. However given that some in industry (or all of it if you listen to the Libs and Nats) are still (apparently) concerned that they will suffer under the scheme, there isn’t likely to be much of a move on that front from Government. Therefore, if we want action in 2010, it would appear to me that our best chance for improving the CPRS is to lobby hard for better targets rather than waste our efforts arguing over scheme designs and (IMO) stupid attempts to change the scheme to make some people feel good about themselves. I mean seriously, how many Mt of CO2-e are we talking about being saved by altruistic behaviour? Less than 5 would be my guess so why exactly should we completely modify a scheme that doesn’t cover all sectors at any rate to worry about making some people feel good about an emission reductions of less than 1% of total emissions. Sounds like bloody awful policy to me.
Perhaps Wiz – but what effect do you think that trying to engineer the same reduction in emissions using CAC mechanisms would have? Obviously I don’t support a reduction of that magnitude, but IMHO trying to achieve it using CAC mechanisms would be even more damaging to the economy – and even less likely to sustain a political coalition to support it. And remember, the costs of making a large part of the capital stock obsolete and replacing it with low or zero emission stock have to be borne somewhere in the economy…governments, firms and households all have binding budget constraints that have to be taken into account. Anyway, while I don’t think the CPRS is perfect, I think we disagree on how fundamental the flaws are. If the cap conditional on an international agreement was tighter, I would be quite happy with it. And if such an agreement were in place, the whole debate about free permits to EITE industries would disappear because carbon leakage would no longer be an issue. The safety valve would also quickly become a non-issue as well because it would disappear after 2015. I’m quite happy with the banking provisions, and I’m happy for Australia to import permits iff there is proper verification that genuine emission reductions took place elsewhere.
Lovelock was on the radio again today. Every time I hear him speak on CC/GW – I wish I hadn’t.
LO,
There are only 2 ways for emissions targets to be met. Stop using fossil fuels….and/or……start using alternatives.
There is no other method at all.
The entire discussion here is about how to achieve this.
If the world stops using fossil fuels our civilisation will grind to a halt (in most countries)…..but stop using fossil fuels we must.
So to prevent a grinding halt, there have to be alternatives.
Most importantly there have to be alternatives for people to transfer their energy use…to.
This means that alternatives have to be available ……….BEFORE…….pressure can be applied to discourage the use of fossil fuels.
So the differences in opinion are about timing and method.
The carbon tax people want to apply a low tax to fund the rapid and direct building of alternatives.
The market instrument people want to make fossil fuels less attractive in the hope that the market will make alternatives magically appear.
Is this how you see the field? Or have I got this horribly wrong?
One thing that there has been absolutely no comment on from the market people is what will electricity prices be once the CPRS is in full swing and what will petrol prices be (if necessary as a percentage)?
I thought petrol was exempted from CPRS?
On the CC bright side maybe there will be more of this in the future.
Lake Eyre Yacht Club gets back up and running
Absolute water frontage still to be had for a song, too, I hear.
L.O. I largely agree with you about the deficiencies of the scheme – but I’m also concerned that it’s already so politically comprimised, when the goverment is in the perfect position to put in place something less popular, given its current level of support, and the fact that it’s rather too open to abuse. For instance, while I agree that being able to purchase permits from overseas makes economic sense, it concerns me that it then becomes very difficult to measure how well the scheme is actually helping Australia contribute to any global reduction in emissions.
I also feel there need to be greater direct incentives for households and individuals to take proactive steps to reduce their emissions, rather just depend entirely on the price of emissions to drive spending patterns.
FWIW, yes I believe there are some reasons to think that trying to achieve very rapid emissions reductions by 2020 (say, 40% of 2000 levels, as per Greens policy) via substantial use of CAC would be more successful than relying almost entirely on an ETS – provided, of course, the CAC measures taken were sensible. I’d put it you that arguably most existing enviromental regulations are of the CAC type, and have generally been successful with limited side affects – by your arguments it would have been better to have markets in lead, SO2 and CFC emissions rather than rely on fairly straightforward bans (and, yes, a market in SO2 emissions was tried in the U.S. – and I believe was found to be less successful at reducing them than bans in Europe, thought unfortunately I can’t find a reference for this currently). Yes, CO2 reduction is an order of magnitude more difficult and pervasive throughout the economy, but we largely know what needs to be done: replace all emissions intensive industrial processes (especially power generation) with low emission equivalents, and at the same invest in CO2 sinks. The initial solutions need not even be sustainable long-term (e.g. switching all brown coal to natural gas), providing they canl last until more permenant solutions are available.
wbb, if that is the case then there is no incentive to not use my vehicles in the same way as I have always done. I am curious to hear what electricity might rise to and on what time frame.
LO
“I mean that is just plain rubbish. Do you think nuclear engineers agree with that statement? What about those involved in CCS technology?”
I am sure that they would say a lot, but they do not have up and running technology that Australia will accept for Nuclear, and for CCS those extreme optimists think that 1% leakage per year is somehow acceptable. The probability of this technology contributing to GWA is about equal to their leakage factor. But most importantly, the issue is time frame. You have not indicated in any way what the alternative implimentation programme will be. You simply IMPLY that this will some how happen. That is not at all believable. The only reason why there is ethanol (regardless of whether you believe it makes a difference or not) in our fuel is because it is legislated at 2% in 2 states. Without that, the ethanol industry would have been doubtful when the oil price headed back towards $30 per barrel. Alternative electricity supplies are just as vulnerable. And the investors know this, why do you think that they are lobbying full strength for coal, regardless of the colour.
Come on, stop talking in endless circles. Demonstrate what you believe will the ultimate energy infrastucture make up in 10, 20, and 30 years time. There has to be an achieveable physical infrastructure outcome from your CPRS. What do you believe that will be?
Dave55 – well put – we are definitely on the same page on the policy front. The Republic referendum is a good comparison to what is going on with the CPRS – but at least with the constitution we had a system to fall back on that worked well – if the CPRS is scuttled, IMHO the consequences will be far graver than when the Republic was knocked back. Sometimes advocates have to be more strategic. There is immense value in demonstrating in the first few years of the scheme that it works and that economically the sky will not fall in. Once that has been demonstrated, it will be far harder for some business interest groups to run a scare campaign on the issue. Sometimes it is better to think incrementally than in absolutes. IMHO the Greens would be better offering a deal to the ALP – pass it if the unconditional cut is 10% and the conditional cut is 25% – and also try and do a deal to reduce the generosity of compensation to non trade exposed industries so that much more revenue from auctioning can be funneled to low-emission R&D.
BilB – that is sort of where I see things, but with some qualifiers.
The level of the carbon tax that would be necessary to fund the rapid building of alternatives to fossil fuels would be extremely high – certainly much higher than would be considered by the current government. And it is worth pointing out that from a revenue raising perspective a carbon tax and a CPRS with 100% auctioning are almost identical. As I have said before, I don’t understand why people seem to think that a carbon tax will solve the problems of the CPRS. Just as there are free permits under the CPRS, under a carbon tax, trade exposed businesses would lobby for exclusion for the scheme or reductions in other taxes – the same would go for the fossil-fuel generation sector. Households would be compensated through other transfers. The proportion of the revenue left over for investment in alternatives would be far too small to rapidly transform the current emission intensive capital stock into something less emission intensive.
Where I agree that there are key differences is on timing. I’m almost certainly more sanguine that we have time for price signals, combined with greater investment in low-emission R&D to bring forth cost effective low-emission technologies within the next two decades. Markets don’t make things appear by magic – it is simply the logic of significant changes in relative prices and the way that they alter investment incentives.
I guess you simply don’t think we have the time to wait for cost effective low-emission alternative technologies to be developed through the application of market forces.
As for the price impact, that has been well covered in the white paper and the RBA also had a box in its most recent Statement of Monetary Policy – from memory, a $25/t carbon price will raise the retail price of electricity by 15-20 % (though I might have those figures wrong) and lead to an overall increase in the CPI of around 1%. There will be no impact on petrol prices because the government – stupidly in my view – decided to offset the effect through lower fuel excise.
Another very important point is to not focus too much on just the short-run permit price and relative price of different fuel sources. Because the cap will be progressively tightened over time, real permit prices (that is deflated by the CPI) will rise over time (with considerable short-run volatility). The expected rise over time is what will be critical for people making energy investments. For example, a coal fired power plant has an economic life of somwhere over 40 years. So, when considering whether to invest in a new plant, an investor has to take into account not just the current permit price, but his expectation about future permit prices because it is future prices that will have the most impact on the profitibility of the project. For example, an investor would have to be pretty stupid to invest in any new brown coal fired power plants, because the increase in relative price of that fuel source is almost guaranteed to ensure that such plants will be last in the NEM merit order. It would likely be a risky and loss-making investment.
And just finally, while it is true that there need to be some subsitution possibilities in order to discourage fossil fuel use – that doesn’t mean that all the potential alternatives have to be developed before a price signal has value. In the short term the price signal will encourage the greater use of gas and those renewable technologies that are currently available. But in the longer term we simply cannot know which alternative technolgies will be most appropriate to serve our energy needs. What a market mechanism does, combined with adequate funding across a range or R&D areas, is significantly increase the incentives to develop new technologies, but without having to determine in advance what those technologies should be.
I think market forces can be harnassed to do tremendous good in this area, but for those that are skeptical of markets, I can see why alternative policies might be desirable. All I would say is that even if you don’t price carbon directly, command and control mechanims still have an implicit cost that has to be taken into account when considering their worth. Unfortunately, many of them are extremely expensive – for example, the EU’s 10% biofuel target cost somewhere around 250 euro per tonne of CO2 abated – it is just an extremely cost ineffective way of reducing GHG emissions.
LO – you’re right there – biofuels definitely demonstrate an example of poor CAC-type policy being pursued: but here’s the thing – *nobody* that seemed to know anything about biofuels thought it was a good idea. There really was no good reason for any goverment to pursue it.
As for your suggestion “IMHO the Greens would be better offering a deal to the ALP – pass it if the unconditional cut is 10% and the conditional cut is 25%” – I would be very surprised if that’s not exactly what they try to do (though my suspicion there is that a government more concerned about appeasing industry or the short-term impacts on the economy will go in to negotiations secretly hoping there is no international agreement, because a 25% cut is just all too hard).
Oh one other thing – is there any discussion of estimated population increase in the next 15 years, and to what extent its worth attempting to limit via government policy? We could start by scrapping the baby bonus…
Wiz – the evidence I have seen suggest that the SO2 trading scheme in the US was extremely successful and that the implicit cost of the European ban was extremely high (the costs of the ban outweighed the benefits) – but I too don’t have a reference so I will look into it. As I said in my last post, for every CAC mechanism that is okay, I can point to another that is horrendously expensive to deliver – so I will take a carbon tax or ETS as the centre piece of my policy suite any day.
BilB – on the technology front, I think a combination of nuclear, CCS and various renewable options will be able to deliver the necessary reductions in emissions. On the renewable energy front I don’t even dare to imagine what could be possible over a 30 year time frame with the right price incentives. Between the 30 years from 1970 to 2000 computers and associated technologies transformed the way we do business and lead our lives in ways that few imagined – I expect similar transformations in energy over the next few decades. Governments will be able to help the process with the right price signals, assistance with R&D, and investing in smarter energy grids.
As for why renewables are vulnerable, that is because without a mechanism that forces firms and households to internalise the social cost of carbon emissions, those technologies are simply not cost competitive! However, a carbon price starting at $40/t and rising through time would be adequate to make wind technology cost competitive now, and will significantly increase incentives to improve solar technologies so that they can deliver energy in the medium-term at around the current price of wind. In the shorter term, proper carbon pricing will drive coal out of the market and allow gas (which is less emission intensive) to act as as transition technology. In the medium term coal will only be part of the energy mix if CCS is demonstrated to be commercially viable and safety concerns associated with leakage can be overcome.
Wiz, I’ve been critical of government policy in a number of areas, but save perhaps Martin Ferguson, I don’t think anyone in the shadow cabinet will be hoping that the international talks fail. Indeed, successful talks would solve many of the most intractable problems with the CPRS, such as having to overcome potential carbon leakage.
I’m not a demographer, but I thought that Australia’s population was projected to increase by around 25% over the next 15 years? I know that Australia’s population grew by 1.7% over the 12 months to June 30 2008 – but overseas immigration was adding significantly to overall growth and numbers are likely to be cut over the next few years as the recession/downturn reduces skill shortages and the demand for labour. As for whether it is worth trying to reduce the rate of population growth, I like to think, perhaps optimistically, that we can eventually break the link between population and economic growth and climate change and other types of environmental destruction. But that topic would need a whole other thread!
Ross Gittens’ article in the SMH Today puts forward a very similar argument to LO’s and mine abov, namely that the debate is more likely to end in nothing than any better outcome. There is a real sense of frustration in the article that I haven’t seen from Gittens’ in what I have read previously; I must say that I share this frustration. IMO he gets the politics of it pretty right as well.
Great thread.
LO:
I’ve got a lot of sympathy for that kind of stragetic thinking. It has echos of the development of the CDM. I’d be very interested in whether you see the CDM as a salvagable mechanism or too damaging to local polities in developing countries by stifling the incentives to implement effective domestic policies.
LO @ 81 – Would be very interested if you could come up with some references on EU SO2 CAC vs Title IV of the CAAA. I haven’t seen any conclusive comparative studies, only against a counterfactual baseline.
Oh here’s something to add to your cost calculations for Nuclear.
Well I for one would be very disappointed if the Greens won’t support the ETS at all, as opposed to attempting to negotiate a better target. Even if they only get 10%, that’s a lot better than than the at least 10% *greater* than 2000 emissions that we’d have otherwise.
I suspect the Green will also try to negotiate e.g. changes in land use policy that will help increase carbon sinks, but that sit outside the ETS (in other words, they will have the ability to bring net CO2 emissions in below the ETS target).
LO,
There only three types of energy readily available to our civilisation. These are: the energy that is left over from the formation of the planet (uranium, geo thermal, hydrogen nuclear compaction); the suns energy that has been captured by organisms and stored over hundreds of millions of years (oil coal calcium carbonate); and the energy that flows to the earth from the sun daily (solar radiation). In investment terms these are Heritage, Inheritance and Cashflow. So were the energy moguls investment advisers their advice would in order be: nuclear..sell off your family historical arts and artifacts in order to pay the bills and don’t bother working (not so bad for nuclear fusion); fossil fuel..draw down on your house in order to pay your bills and try to time it so that you do not run out before you die saving avoiding having to work; Solar..work and live on your cash flow.
The environmental argument is: Nuclear..release significant amounts of CO2 producing nuclear fuel, produce clean electricity, then commit to long term infrastructure dismantling and housing left overs (not the case for fusion); Fossil Fuels..produce unsafe amounts of CO2 and continue until the fuel runs out, or for CCS use up the fuel at an accelerated rate and hope that the stored CO2 never leaks out; Solar..produce long term infrastructure to convert solar radiation as required releasing no CO2 at all.
The investment argument, for this I will take your figure for electricity price increase at 20% on retail. In the simplest form a 20% tax on electricity retail sales would yield $7 billion per year (Australia’s peak 60 gig for ten hours at $.16 per unit). This is a realistic budget to replace all of Australia’s electricity infrastructure with CSP over a 20 year period. How CSP trough solar cost $2 billion per gigawatt including grid connection. So that means 2.5 gig of new plant every year from the primary revenue pool, compounding every 5 years as more installations become commercial and pay an investment return. It is absolutely no harder than that. CSP trough solar has an indefinite economic life as the system has a 1% annual replacement rate and so the plant is constantly being renewed and it’s efficiency steadily increases as result. In this simplistic scenario there is no loss national product as internal coal consumption declines. This is because employment for Solar energy production is similar or slightly higher than it is for coal production. So as Solar energy plants come on line the uptake of Solar employment matches the decline in Coal employment. It is just different work. In order to make this viable the only other legislation required is the compulsory purchase of the Solar generated power, a trend that is underway now in an increasing number of countries. As this is a progressive transfer from coal powered electricity pricing to Solar powered electricity pricing the effect on the delivered retail pricing of the electricity will be negligible. And in the case where the investment in the initail hardware is written off as it was provided by the public (as was the case with NSW coal powered infrastructure) then electricity prices may even decline.
It is totally foolish, even bizare, for the Coal energy industry to cling on to attempt to extend the life of their situation, because they are the management that would be best placed to bring in the new alternative solar and geothermal energy infrastructure replacement. An investment that is fully externally funded. Business doesn’t get any easier than that. And from the public and business point of view absolutely minimal disruption. The only industry sector that would be severely disadvantaged by this scenario is the aluminium smelting industry, and there are many offset mechanisms available to minimise the impact on this industry.
I think LO that the CPRS protagonists have bamboozeled themselves with the complexity of their idea. They have made something that should be simple and immediate, as the scientists have called for, complex and delayed, as entrenched industry players have called for.
I’ve just checked my business electricity bill and a $0.032 (3.2 cent) per unit increase will cost me $13.00 per week extra. And in that I run 3 CNC machines reasonably continuously. So if that is my business GW compliance cost then it doesn’t even register on the cost scale.
So LO where you say
“The level of the carbon tax that would be necessary to fund the rapid building of alternatives to fossil fuels would be extremely high…..”
is a false claim based on no real information at all.
And
“As for why renewables are vulnerable, that is because without a mechanism that forces firms and households to internalise the social cost of carbon emissions”
is nonsense if the electricity that comes through the wires is entirely from alternative generation then there is no need for machanisms.
And further
“those technologies are simply not cost competitive”
is substantially false, even today, but certainly completely false where the full cost of fossil fuels is taken into account.
But, I have just demonstrated how a simple 3.2 cents per unit levy on electricity will give a guaranteed 60 gigawatts of base load electricity by 2030, and a probable 120 gigawatts by 2040. This being 100% operational CO2 emission free (for the non hybride) indefinite life infrastructure electricity (service vehicles electrically powered) based on todays technology available immediately. So there is the challenge, demonstrate how a CPRS will deliver the same at such a low cost.
If you cannot then your argument is entirely empty.
By the way I thought to look up CCS leakage. In the process I discovered why the federal government subsidised a tower solar experiment over trough solar. This had puzzled me as tower solar is the most expensive. It turns out that there is a CCS technology that uses solar radiation to break down power station supplied CO2 into CO, then use that to build hydrocarbons for fuel which eventually become atmospheric CO2. A double bite at the carbon cherry by the coal industry. So the tower solar is really coal technology investment, not solar energy investment. It is all just so sleazy.
On negotiations.
the unlimited international offsetting worries me for a number of reasons:
1. While the CDM carbon price stays low, the AU price will trend down to around $20/tonne and result in little change in companies long-term investments, and thereby delay the restructuring of the AU economy that the CPRS is supposed to promote.
2. As you pointed out somewhere above CDMs and a range of offset products are notoriously difficult to show that they are additional. So with some modelling predicting that up to 50% of ‘reductions’ in Australia will be via offsets, its very worrying.
I wonder whether the feds were hoping on a relatively low international price which would make meeting the targets relatively easy.
What we should hope for is:
- that the EU economy recovers, pushing the price up
- the US gets a cap and trade going so, again pushing the price up
- that the UN improve the CDM additionality issues in post-Kyoto phase.
So, if I were greens I would negotiate for a cap on number of international permits.
Then I would ask for a higher ‘unconditional cap’, and then a higher “international agreement” cap.
An interesting point to note is that if we went for say a 40% CPRS cap by 2020 and the international price stayed low, we’d buy mostly offsets and perhaps have little environmental impact. Whereas a less difficult cap with more international limits would actually see domestic reductions. (and perhaps a real environmental benefit.)
Which also raises another point i’ve been grappling with. If we just rip up permits that we buy, and the international price stays low, aren’t we then just effectively buying more CDMs with little to no environmental gain?
In which case are we better off looking for non-Kyoto offsets that are of a higher quality?
On another topic raised in this post – regarding price elasticity of electricity/energy.
Australia has had historically low energy prices, which has meant little incentives for firms and households to build/invest in energy technologies. (cf. Japan and EU)
While the short-tern impact might not be great (its cost of a coffee etc) on the long term and if we assume interval pricing is introduced with smart meters in a deregulated price market – you’ll see people switiching off their AC rather quickly.
Contrary to what has been suggested above with regards voluntary action, I think cost will be THE motivating factor for getting the vast majority of the people to switch off their AC. the quicker we can get retail prices reflecting wholesale peak prices the better.
Also, on the targets see this article on what ‘the developed world’ is converging on for 2020: 15%
http://www.msnbc.msn.com/id/29405770/
“And then there are all those useless economists, endlessly arguing the toss between pollution taxes and emissions trading schemes – whichever way you jump they’ll hanker after the other way – while the opportunity to act slips away.”
Ross Gittens from SMH link given above.
Exactly. Intellectual pride at being able to pick holes in reality being more important than outcome for the despised pragmatist. Analagous to those greens whose moral pride is more valuable than seeing an outcome for the despised majority.
BilB @ 86\I think you have pretty well nailed it.
Refreshing change to see some-one actually discussing the nuts and bolts ind=stead of that endless Pomo market stuff.
Congratulations:
BTW we could bring geothermal on line within 10 years, I would guess about 2 GW pa. The real problem is the incumbent generators, you want to meet some hopeless old farts who are stuck in a 19th century time warp, meet the coal fired generation people.
Huggy
BilB – you have demonstrated no such thing – all you have done is make a whole hot of extraordinarily optimistic assumptions about the cost of replacing Australia’s existing energy infrastructure with alternatives. The cost of generating electricity through solar is more than double what it costs to generate electricity via wind, which, itself is only cost competitive with a carbon price of around $45/t. Even if the 20% tax were sufficient to pay for the transformation in generation capacity (which I strongly doubt) the ongoing much higher cost of generating that electricity would mean that retail electricity prices would increase by far more than the 20% that I was talking about. All of that has an economic cost, especially over the time frame that you are talking about, that is far higher than any electable politician will consider. Put your suggestion through any of the economic models currently used for this type of thing and you would see that your policy would be dead on arrival as soon as the results were released. What you cannot seem to understand that as far as the economy is concerned, forced conversion of our electricity generation to solar is itself a tax above and beyond your official 20% retail electricity tax.
Think of it this way – what is the MRET? It forces retail energy companies to purchase a certain proportion of their energy from renewable sources – although it is not directly a tax, implicitly it is because it raises the retail price of electricity above what it would otherwise be. And the MRET is only a 20% target!! What do you think the implies carbon price would be to result in 100% renewable energy over the next 20 years? It would be astronomically high and you are off your rocker if you don’t understand that. And you haven’t even taken into account yet that only 30% of Australia’s GHG emissions come from the stationary energy sector.
Until you actually sit down with some sort of economic model and try to understand how the policies you are talking about will flow through an economy, your contributions to the policy debate will be extremely limited.
Dave 55 – how do you differentiate between people who go to solar for financial reasons and those who do it for the warm inner glow?
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Is that important? Why?
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Policy should never be based around an ignorant (but popular) public opinion.
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Cough cough. I’m sorry son but I’ll ave to show you the door. And we thought you had such promise at the LAP.
The biggest problem, by far, is the twin evils of locking in monumentally inadequate carbon reduction targets and too-low projected carbon prices. The second-biggest problem is the ladeling out of free permits to Big Carbon.
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Yeah. A carbon tax would probably be written in such a way to allow Big Carbon a back door out as well. I wonder if the shit has to really hit the fan before people really face the problem.
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Hint: When Antarctica is privatized and land blocks are selling there for top dollar really stat to worry.
I really want to reinforce this for everyone contributing to this forum, becaue BilB’s conceptual error is extremely fundamental.
For simplicity let us say that there are only two energy sources – coal and solar. And in the free market, it costs $50/Mwh to generate electricity from coal and $100/Mwh to generate electricity from solar. As a starting point, lets assume that there is no government intervention in the electricity market, so that initially, the market share of coal is 100% (setting aside the small number of people that would have and would install solar without any form of government subsidy). Let us now assume that a policymaker comes along and says that over the course of the next 20 years, the government will levy a 20% tax on electricity generated via coal to fund the replacement of the coal capital stock with a solar capital stock, so that by the end of the 20 years, the energy capital stock is entirely solar. No new investment in coal is to be allowed and existing coal plants are to be gradually decomissioned as the new solar capacity comes on line.
So, the question is – is the real tax here 20%?
And the answer is – of course not!
The 20% tax is what was needed to fund the building of new solar plant – but it costs twice as much to generate electricity via solar than coal, so electricity prices will more than double (while it remains, the 20% electricity tax will also add to the price).
So, in actual fact you have just come up with a policy that is an implicit carbon tax that, as I said in my earlier posts, is much much higher than is any actual policymakers are currently contemplating.
The error I think is that you are just unable to think through the economics of the policies that you are proposing.
Now, perhaps the externality from carbon emissions is high enough to justify the transformation that you are talking about – but please stop trying to argue that there will be a small cost attached to it.
BTW does anyone have figures on retail electricity prices across OECD nations? In particular, what’s the ratio between the cheapest retail prices among OECD cuntries and the most expensive?
Just trying to get a handle on how damaging, say, doubling retail electricity prices is likely to be.
BilB
just a minor quibble, on your “then commit to long term infrastructure dismantling and housing left overs (not the case for fusion)”
My recollection of figures produced several decades ago is that the huge neutron flux emitted by a fusion generator would require heavy external shielding; the reactor components may also suffer internal deterioration due to neutron impacts. Consequences: frequent replacement of damaged reactor components, large disposal problem for both these components and the irradiated shielding. Much shorter half-lives than Uranium “daughter nuclei” however.
Fusion might be better than fission, but it wouldn’t be “clean and green”.
the variation in prices across the OECD is enormous Wiz – just within Europe, retail electricity prices for industry in Italy (the most expensive) are more than double the retail prices in France.
The 2007 OECD economic survey of the EU has a nice graph that demonstrates that.
Australia’s retail electricity prices are amongst the lowest in the world, and far lower than the European average, primarliy because of our access to abundant and cheap fossil fuels.
L0 the fuel costs for solar? ” The 20% tax is what was needed to fund the building of new solar plant – but it costs twice as much to generate electricity via solar than coal, so electricity prices will more than double (while it remains, the 20% electricity tax will also add to the price)”.
Of all the generation costs, solar; be it thermal or PV, has the lowest running costs and fuel costs of all – including nuclear. The fuel is free and the maintenance costs low. PV modules carry a 20 year guarantee – try to get that for the fuel rods in a nuke.
No the generation cost for solar is very small it is the capital cost that kills it.
We could certainly build very large scale solar thermal plants with either phase change or latent heat storage that would produce electricity that costs less than nuclear – without the toxic waste.
Like I say it’s the incumbents who are the problem.
Huggy
huggy – i should have been more precise – what i was implying was the price of solar once the capital costs are embedded into that price. There are no free lunches unfortunately and there is a pretty good reason why very few people install solar panels to generate most of their household energy without an enormous subsidy. The implied cost per tonne of GHG abated for increasing the use of solar through feed-in-tariffs are more than double the present cost of wind generation. And I’d be wary of being too optimistic on the cost of solar thermal until that technology has been demonstrated at scale in Australia. The modelling I have seen suggests that deep emission cuts can be made most cheaply by drawing on a suite of energy technologies, with solar and other renewables just one important component.
Adrien
Adrien – I think not but it seems to be of some importance to the people who feel put out by taking action based on an assumption about something they didn’t really make any effort to understand. If it isn’t important, then why the hell are we contemplating changing the CPRS to accommodate this.
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Sorry – I got a little bit exuberant there
Still, given that we are arguing what is the best policy to implement from a theoretical POV, we (ie us debating it here) shouldn’t just accept that we need to give in to dumb ideas to get some action on climate change. The argument that ‘altruistic behaviour won’t be rewarded’ is only gaining traction because the people feeling hard done by really didn’t understand exactly what it was they thought they were achieving, nor what they are actually achieving by doing this. The fact that it is also wrong is getting bugger all airplay because it is hard to explain why without a full(ish) understanding of how a cap and trade scheme works. In the long run, installing solar panels, planting trees etc will help achieve our targets (what ever they may be) against a base case of that not happening. Further the argument that altruistic behaviour only results in a lower emission permit price isn’t itself bad; unless the cost of reducing emissions is kept low, we are never going to get business onside and we wont receive any reductions. If altruistic behaviour helps achieve a low cost scheme that reduces emissions, it is better than none at all. Introducing significant changes to the way we reduce emissions now will only delay the actual emission reductions without any real guarantee that the actual ‘improvements’ will be better for the planet.
It seems to me that the debate is being hijacked by various interests ranging from the anti market brigades to the climate deniers, each with their own barrow to push; the victim will be the planet. The CPRS (despite its flaws) is better than just about any other scheme proposed around the world. While I would prefer that there were no free permits, the method they are doing this is actually pretty clever and more equitable than most grandfathering proposals I have seen. Further, the grandfathering won’t actually prevent the target being achieved. The biggest problem with the CPRS is actually the targets but this isn’t a problem unique to the CPRS, indeed, the same target would apply if there was a carbon tax and has been highlighted above, the revenue for a carbon tax would almost certainly be passed back to the EITEI in a similar magnitude to that achieed under the CPRS. Unless those of us who have examined the various options in some detail go to the effort of explaining why the increasingly populist opposition to the CPRS is flawed, we will end up with a very bad scheme that could set back real emission reductions in Australia for a long time. Some of us have been going through these arguments for over a decade and I suspect our frustration with what seems like groundhog day for climate change policy is limiting our exuberance in doing this explaining.
LO
Thanks for responding to BilB’s post, you saved me the effort and did it much better than I could have.
One additional point to add is that BilB has failed to point out that a tax on electricity across the board would need to apply only to carbon based electricity generators. If it was imposed on the electricity generated from solar and the other renewables it would be counter productive and price them out of the market. This would then mean that every year the tax base decreases by 20% so the tax would never generate the actual revenue that BilB has asserted it needs to to fund the renewables.
BilB’s proposal also relies on an assumption that we know now what the best source of energy is for our future needs. I can’t agree with that. The reality is that there simply hasn’t been enough research into renewables to really achieve the efficiency levels necessary to make them cost effective. Until there is sufficient cost drivers (and not just R&D subsidies) for innovation in the energy sector, any decision now to go with solar or tidal or geothermal or wind is simply premature.
Some significant cost drivers will be (according to an SMS I recvd only this afternoon) in evidence across the state of Victoria tomorrow, Dave55.
Open your window.
LO,
For starters, I have tested the information with the key designer of the European CSP programme, Dr Franz Trieb. And I invite you to do the same, his contact information is easily found in google. The 2 billion dollars per gigawatt (you would have noticed that I put it in as 2.8 billion) is a fairly safe estimate considering the changing global financial situation. Your assertion about the cost of solar generation is incorrect. The cost of CSP electricity is reducing steadily, and there are no figures that are fully relevent to Australia as all of the information available is based on small US and European facilities. The economies of scale proposed here for Australia promise a much lower operational cost. All of the published CSP generation cost estimates take into account the full investment cost which is one of the most significant cost elements. These figures are routinely held up for comparison against Australia’s capital written down generation facilities using subsidised coal. When the comparison is performed on a balanced platform Solar is comparible with the full coal and gas energy mix. And you are perfectly correct in saying that this must indeed be tested, fairly, in an economic model. Furthermore, the solar component in the total energy mix of this model, starts out at a very low level and linearly increases. All of the CSP electricity generation cost projections that I have seen show solar power cost reaching parity with coal and gas around 2015. So the impact of the Solar component on the total electricty price will be low. The electricity that we use now comes from a variety of electricity generation facilities at wildly varying prices. It is the final average figure that we see on our bills.
One of the beautiful parts of this model, Dave55, is that it is entirely linked to CO2 producing energy use. And no, the levy is only applied to carbon based energy sources. Even though the levy remains the same throughout the programme, maintaing a stable energy price, the levy is increasing relative to the carbon cost as the carbon content declines, just as LO has said would happen under a CPRS.
All of that aside, LO, you appear to not recognise that there is no other option but to convert to a substantially solar solution, and preferably very quickly. This puts you out on a limb because the Australian public, along with much of the scientific community, are very much in favour of exactly this. No, Dave55, I do not say that this is the only technology available, or necessarily what the total replacement energy infrastructure would include. CSP trough solar is a 30 year old mature technology (as is wind power) that is ready for mass implementation now. There could be at any time in the 30 year installation programme new technologies that mature and skew the mix in a different way. That will not obsolete up and running alternative facilities, it will simply add to them. Just as we use coal, hydro, gas, and wind now. Each technology has its own advantage and becomes individually optimal at various times.
Even though it would be good to fully test this proposal in the treasury’s computer model, there is a very simple way of demonstrating the minimal impact. This proposal will add around $220 to the average annual domestic power bill of $1120. Now the average car doing 20,000 kilometres per year consumes $2000 of petrol with petrol at $1.0 per litre. Many households have 2 cars. Petrol routinely fluctuates through 30 cents per litre costing an extra $300 to $500 per vehicle per year. This does not bring ruination to the economy. So the 3.2 cents per kilowatt hour levy ($150 per year per household) is a very modest cost for Global Warming Energy restructuring.
According to the global carbon exchange
http://www.globalcarbonexchange.com/latest-industry-news/australias-co2-emissions-profile.html
stationary energy is near 50% of CO2 (this does include CO2 released in the processing of oil). Road transport and cars contribute 12%. over the 30 years of this programme it is hoped that a significant percentage of passenger vehicles will become plug in electric which will be possible when 100 gig of alternative power is available. With 90% of coal and gas generation substituted along with 60% passenger vehicles replaced with electrical power trains this sector will reduce Australia’s CO2 emissions by near 50%. The next larger emissions are methane and CO2 from farming, together 35%. Handling these emmissions require very different policies. Considering the very extremes encountered in Australian farming I am not convinced that an ETS would work uniformally in this sector.
Ambi,
Yes, I do believe that elements of the fusion reactor become radioactive. It is not worth considering, though, until fusion power becomes a reality.
L.O. – ok so why consider, say, a doubling of retail electricity prices (as might occur if we pushed forward with rapid conversion to renewables) to be especially damaging? Sure it will make it tough for poorer households, but they can be compensated through transfer mechanisms.
It’s not as though doubling retail electricity prices would cause the average electricity bill to double either: households would inevitably cut back on their usage. Further, if it’s allowed to happen over, say, a 10 year period, the rise in incomes over that period would significantly reduce the impact of that doubling.
BilB
It’s not just domestic electiricty prices that increase but all electricty and that extra cost of production is passed through into consumer prices. You and I might be able to wear a 20% increase in prices but a lot of people can’t and some of the tax revenue you are proposing will need to be used to compensate low income earners, pernsioners etc – you cannot use all of the revenue to buy or invest in renewables.
Additionally, where is the incentive to acheive the efficiency gains you predict will occur. At the moment the efficiency gains come at significant costs/ % increase.
I fail to see why you proposal, is any better than what will be acheived under a CPRS coupled with the MRET scheme. I recognise that your proposal will put the generators into the public sphere as opposed to slowly transitioning to a private (but clean) electricity network but other than on ideological grounds, if there is sufficient comptetion in the supplier market, it should be robust enough to provide the continuity of supply necessary (provided the supply network remain in public ownership). The reality is that getting enough people accross the line on this proposal when an ETS is already well advanced in terms of costing and design will only delay the action we all know is necessary.
wbb
I could have phrased that better …
I’m not denying that we need action but until there is a cost placed on the carbon, all the hot days in the world won’t force industry to change. What I’m saying is that the CPRS (with improved targets), coupled with the MRET scheme, will drive investment in these technologies much better than a command and control structure.
Throwing out the CPRS to try and achieve something better will only delay action and there is likely to be less support for any alternative model. We need to act now, so get behind the CPRS (but argue for stronger targets) so we actually get some action rather than simply a lot of talk about what we would like to achieve.
Dave55,
The idea is better simply because it is direct and immediate. Pretty well what every advisor on Global Warming has called for. It is a mechanism that can be installed in the space of a few months, and in the so doing give full confidence to those involved in the design and manufacture (remember that nearly every part of these facilities will be made in Australia unless there is some compelling cost saving for some sections) of such systems to mobilise with certainty. Under a CPRS the probability of certain and immediate development of alternative energy systems is zero, simply because the investment environment is completely vague, and with todays banking stability speculative enterprise is impossible. This situation will not change for 5 years at least. Hands up those scientists who believe that governemnts can linger without decisive physical action for another decade.
On the household income pressure issue, those with the least ability to pay will already be using far less electricity than the average (retirees, pensioners) and the burden will be very small. For under income families who will have significant electricity bills and will be affected by the extra cost there are already more than adequate social support mechanism to assist them. You will have noticed that where the CSP implementation cost is around 2 billion dollars per gigawatt ( afigure which I test with Dr Franz Trieb a few months before the last election) I have allowed 2.8 billion. There is flexibility. But to say that this cost is intolerable would be ludicrous in the face of our government just handing out $42 billion dollars (6 years revenue from this proposed scheme) in the space of a few months. Governments can make anything happen if they so choose.
True that costs in the business sector will filter through into product prices. This is not as great as you might imagine. Electricity is a minor overhead for most business. The plastics industry would be affected as they must use electricity for machine heating, but most other industries where heat is used have already transfered to gas. The pumping of water and sewerage would be affected to a small degree. Overall the affect of this would be far smaller than a long term 15 cent increase in the price of petrol. And in that there is the opportunity to completely diminsh the effect of this electricity increase. Electric cars are far cheaper to operate than petrol powered cars. As time progresses the switch for the family second car to all electric will reverse the electrity cost increase into a net saving. It is all good.
I challenge the government to prove that this is not a more cost effective proposal than the CPRS. To not do so would be a breach of duty of care.
I see the overall context as one of dire emergency, but we are still struggling to get policy makers to see how dire it is. If, for example we aim at net zero emissions by 2030 (that includes developing countries) we would still be increasing ppms in the atmosphere over that period and then retaining elevated ppms for some decades after that.
The problem is that tipping points seem to be emerging now with methane leakage appearing in both hemispheres, the Amazon approaching a situation where it is becoming dangerously dry, surface melt in Greenland increasing by 10% in 2007 alone and the mass balance of the ice sheet on the cusp of a decisive decline, new information about net ice sheet loss in Antarctica as a whole, The Himalayas melting at 7% per annum, Pakistan entering significant water stress that looks here to stay, droughts in SW US, Mexico, Southern Europe, not to mention here and the isotherms having shifted 4 degrees towards the poles etc, etc. And probably the most serious problems are emerging in the sea with acidification and a threat to the world’s oxygen supply.
More about this sometime soon, I hope. So zero by 2030 is a compromise, it should have been yesterday.
I’m not an economist and am a fairly direct sort of person, so I’d favour a carbon tax on the baddies and use it, some for long shots like CCS, but mostly I’d give it straight to the goodies to send a message and create a level playing field.
Roughly speaking stationary electricity is something like this: about 8% hydro, about 2-3% other renewable and the remainder from hydrocarbons, mostly coal. So I’d tax the 90% and give most of it directly to whatever is needed to make the others competitive – concentrated solar, wind geothermal mostly, and the market would decide the mix between those eventually.
I’d note that geothermal can’t come on stream before 2015 and they claim that it will then be competitive without help, so extra dosh might accelerate this a bit (warning, I have an interest by way of shares).
I’d be very happy to be persuaded that cap & trade can get us there, but I think it would take too long. BTW there was a repeat of an interview with Robert Schapiro at Counterpoint which you can listen to or read the original here.
I think the notion of carbon trading systems in developing countries and advanced economies achieving their ‘reductions’ via purchasing credits there is a real worry. Schapiro reckons it’s not on:
But this is not really my patch and I wouldn’t know.
To hark back to the vexed issue of what happens to voluntary effort, I followed up the hansard link given by Mitchell Porter @ 27. About 30 pages in at p122 from memory Penny Wong repeated again that the target would be adjusted each year to reflect voluntary effort. If Eric Abetz hadn’t been carrying on like a meat chop at the time (he’s no Faulkner or Robert Ray) we might have gotten to the bottom of it.
I suspect what is going on is this. Each year the target is adjusted according to the new circumstances but that target does not apply immediately but in five years time.
As I’ve said elsewhere I’m not fully up to speed with this stuff, but piecing bits together I’ve heard separately, that’s what I’ve come up with. Those with greater knowledge, please confirm or correct as appropriate.
Gosh Brian, that Hansard makes scary reading. You get down to page 115 and discover that the reaction rate of the scheme is 15 years. So if the Greenland ice melts completely next summer the CPRS is locked into the current carbon level for 15 years,….so that business will have time to adapt. Great! Let’s take it nice and slow.
BilB
Really? Some links would be helpful. I believe that Garnaut for one has advocated a C&T scheme and not your proposal.
Yep, it could be implemented in months but you are dreaming if you think that this could be passed by Parliament in a couple of months from it being put forward as an idea. The flow on effects to the economy would be significant and yet you just say that they are acceptable. Your examples of energy intensive industries completely overlook manufacturing, aluminimium and refrigeration which can’t simply move to gas to supply their needs, at any rate, why shouldn’t emissions from gas be subject to the same tax as applies to statonary energy?
While you may develop the certainty you need for investment in solar, you decrease it in the other renewables and in business generally who haven’t structured their business around this sort of structure. Rolling this out in a couple of months would be catastrophically stupid. It would lead to significant carbon leakage and EITs moving offshore, particularly if, as you propose, there is no revenue recycling other than the construction of renewable energy infrastructure.
But I am not saying that the CPRS alone will achieve this – you are completely overlooking the 20% MRET scheme which will help drive this investment. The MRET scheme worked very well when it was fiirst intriduced, a little too well as it turned out because the original MRET target was exceeded which caused a collapse in the market.
One other thing wrong with what you propose and that is that it seems to have absolutly no regard to the carbon efficiency of the electricity produced. If a flat 20% tax on electricity sales is applied, it would actually encourage brown coal as opposed to black coal and gas as the cost of producing a MW from brown is lower than these alternatives. This would actually be a perverse incentive for reducing GHG reduction measures if it made the cost of producing electricity cheaper. You need to have a mechanism for choosing which carbon electricity generatons are shut down as your renewables come on line to acheive what you say is necessary but yet you are silent on how this is acheived and the economic consequences of doing this. A carbon tax is par more preferable to what you propose and for various other reasons a C&T scheme is preferable to a carbon tax.
That is the beautiful part of a levy, Dave55, it can be put through in the budget. Followed up with a federal election.
Not that I in any way expect that the Australian government would go the way that I have proposed. Read the Hansard that MitchellPorter@27 links to, and you will see that rud is died in the wool Clean Coal/CCS. The German government officially offered the information on the full CSP trough solar energy plan to the Australian government a few years back, and got absolutely no reply. Nothing has changed. We are stuck with this farcical CPRS.
Shutting down power stations (brown coal) is a government decision as there would need to be compensation. It is a bad signal to energy investors to chop off a businesses viability with a market manipulation and leave that business to loose its primary investment funds. But brown coal will not be shut down. With CCS the liquid CO2 pipelines can be run through the Victorian hill country, on their way to the Simpson desert, and be used as a fire extinguishing system for future bushfires.
The MRET is a token gesture to the green side. The government knows full well that every green proposal is underfunded and is easily knocked off with the 1 dollar for 3 type government assistance, whereas everything black is well funded, supported by state and federal handouts which includes a special half billion dollar fund for CCS to draw on. And Senator Abetz was there in the commitee specifically to find out how his CCS friends would fare if their project failed. There is only one outcome from all of this, and it is not good.
I agree with everything that LO and Dave have commented above.
BilB – please tell us you realise that your “20%” levy and CSP investment would provide no environmental difference in context of CPRS -5% and 15%. and instead just make the cost of reaching the same goal (transformation of energy sector) more expensive.
If you are so confident that costs of CSP will come down, then why is it that MRET modelling predicts ALL 20% will come from wind?
I desperately wish CSP was cheaper and agree that *some* support is needed to kick-start the technology at scale in Australia.
However, your proposal is essentially a CSP feed-in tariff. and $200 is a signficant annual impost on top of the range of other cost increases facing households and businesses. you underestimate the pressures on households and political risks by your dismissal and claim “there’s enough adequate support mechanisms”.
if you thought it weren’t than why don’t more people sign up for Green Power?
Why is that gross feed-in tariffs have not been adopted in most australian states?
why is that the cwth sought to compensate through the tax system nearly all households for the smaller rise in electricity brought about by the CPRS?
I wish that your policy could just be magically implemented – but it is completely blind to the politics and policy realities of the situation.
Wishing upon a star that “if only the politicians and policy wonks would listen!” is not helpful.
Convince them that your way offers benefits with minimal risks (electorally, financially, economically and technically) and you’ll be on a winner.
also, what do you mean with regards the CPRS when you say the “reaction time is 15 years” ?
gateways (range) are set 10 and 15 years in advance. with caps set for next 5 years.
Bilb
I realise that but look at the trouble the Government had getting the alcopop tax through and that was a purely optional impost – completely within the power of the consumer to decide if they wanted to purchase the product or not. Same for the medicare rebate increase and, possibly worst of all, the non-passage of fuel watch. Given the scare campaigns on these other issues, it is unlikely that a levy on electricity would be passed by the current Senate and an election would only result in the biggest scare campaign in history that may even end up with the unelectable Libs getting back in.
Don’t get me wrong, it is good to debate other ideas, I just think it’s too late for this one given we need action now and much of the debate on this type of thing actually occured 10 years or so ago. What we are seeing now is just a rehash of those debates.
Michael D,
You agree away for allthat you are worth. The CSP has been overlooked because of the monumental arrogance of the bureaucrats, as I said above
“The German government officially offered the information on the full CSP trough solar energy plan to the Australian government a few years back”
this actually happened, and a delegation of local businessmen from my near area who visited Franz Trieb with a view to investing in CSP came back with the same story. I have an independent study commissioned for the California state government which verifies the thrust of what I have said.
No amount of common sense or good judgement that can break through a government with a fixed hidden agenda. This what we have with rud, and everyone is along for the ride.
Fortunately my family has safe passage to New Zealand, for when it becomes unbearable here in Australia, which would be about now if I lived in Victoria. Global warming should work well for NZ.
Dave55,
I think that you are blowing the levy thing way out of proportion. The Australian government has routinely applied higher levies to all sorts of things over the years. Petrol, alcohol, tobacco, airline departures,,,,,,. The world didn’t collapse. However, in this case…on this issue…our world as we know it could very well collapse. Read Brians post above, do a little research on the arctic steppe methane gas releases, look back into your Scietific Americans to the articles on methyl hydrate boil offs in the past. Just think what 13 trillion tonnes of methane gas will do for global warming. Then come back and say “there is plenty of time, she’ll be right, mate”.
BilB
I’m not saying: “there is plenty of time, she’ll be right, mate”. I’m advocating a cap and trade scheme (which incidentally covers emissions that won’t be captured by your proposal) and higher reduction targets than those currently proposed.
As for your Levy, what you are suggesting far exceeds anything like the levy’s you suggest and always have treasury modelling. You are proposing a 20% impost on something everyone uses every day – this is massive! Stationary energy only accounts for around 50% of Australia’s emissions, your proposal does nothing to address or limit emissions increasing in other sectors which would offset the stationary energy emission gains, so not only does it impose a massive cost on consumers with no relief for low income earners who can’t afford that sort of increase, but yu don’t actually guarantee the reduction in emissions which you know are necessary.
It is accurate to label what I have said as delaying the transition to a completely non-carbon energy system, but it is quite incorrect to say that I don’t support immediate (and significant) cuts to our GHG emissions. Transitioning to clean enery is something that needs to be done but it isn’t the silver bullet you appear to be making it out to be.
Here are a couple of appetisers for you
http://www.spiegel.de/international/world/0,1518,547976,00.html
http://www.guardian.co.uk/environment/2005/aug/11/science.climatechange1
Everyone is worried about a few cows farting, wait to see what happens when the Arctic farts. And it seems that we will not have to wait very long.
kevin rud is behaving like an Aceh cleaner moping up some spills in the foyer, moments before the Sunami arrives. The difference here is that kevin has been made aware of the real danger, but continues to mop up the spill. And you can help kevin there, Dave, to keep mopping up those little spills.
Dave 55,
I was thinking as I was driving that maybe you have miss read what was proposed. What I put forward was a levy that would cost the average family under $5 per week directly. Are you really seriously saying that this is a massive cost that will reshape the economy???????…..?
Reality check on aisle 55!
BilB – I can see where you are coming from, but the main impact of your policy on the economy will not be through the impost on household budgets – your policy, as far as I understand it, involves making a large proportion of our existing capital stock obsolete within a very short time frame and making another chunk of it less productive – so the policy effectively amounts to a large, short-term negative supply shock to the economy, which will have implications in terms of lower real GDP growth, lower real wage growth, and in the short-term higher structural unemployment. I don’t know whether you are in a position to do so, but if you are, try and find the resources to commission someone like the Centre for International Economics or another organisatin with a CGE model, to model the impact of your policy. Following that, we can then have a discussion about whether the costs of the policy are in line with the benefits.
Also, as Dave said, every global warming policy adviser is not advocating that approach – there are sharply divergent views about the best way to go about reducing emissions and the optimal speed with which those emission reductions should occur….
LO,
Certainly coal fired power stations will become redundant in due course, but not necessarily that quickly. Some of our power stations have been limping along for years. Munmora has been running at half capacity for some time. The older stations would be retired first. All of the gass turbine facilities would be retained indefinitely for non solar operation. The Snowey Mountains is now effectively peak storage (pump up during the day, power at night). The pace of change can be adjusted according to how Global Warming develops. The coal power stations have to go, but I can see that the most efficient of them will see out their planned commercial life.
On the employment front CSP until recently has been requiring 2 people per megawatt. So 1 gig required 2000 staff. Largely cleaning mirrors. There is a lot of automated machinery being developed for this work. But CSP is still going to be more labour intensive than any other energy facility. On the other hand the fuel is free. CSP converts more solar energy to a useable form than any form of agriculture or biofuel fuel stock by a factor that I cannot remember. CSP is also sutiable for combined electricity generation and water desalination. Dr Franz Tried is the authority on that as well.
More on the employment and economic impact side, remember that these plants occupy 20 square kilometers per gigawatt (if that sounds large keep in mind that the hunter valley open cut coal mine covers 600 sq kilometres). That area is covered sustantially with steel frames cradling mirrors. The mirror producing plant would be built on or near the site, and the steel frame work is all produced from sheet substantially automatically, also on site. The boost to inland employment and industry will be phenomenal.
Reading the Hansard on the senate committee, Wong said that the CPRS will bring to the government 11 billion dollars. Most of this will be given back to the public in various ways. This means that the impost on every household will be about 7.5 dollars per week and something more for businesses. I really doubt that there is sufficient deterent factor in that cost penalty to cause any meaningfull change that will cause the elimination of coal as a fuel. Wong also said that business would be given 15 years warning of any change in the level of CO2 emissions. Wet bus ticket slapping which makes me think that the CPRS will be as successful as the NSW Tcard.
What I meant to say regarding advisors was “scientific” advisors, not “economic” advisors. So Dave55 was right to pull me up on that one.
The costs of failure to act decisively on climate change will make everything discussed here seem trivial by comparison. Remember to compare your next house insurance bill with the last one in the wake of the Victorian fires. And the ride has barely begun. Much of these impacts cannot be prevented by what we are talking about, but we have to seriuosly try to minimise the far more devastating impacts yet to come. I believe.
Dave 55 – If it isn’t important, then why the hell are we contemplating changing the CPRS to accommodate this.
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I have no idea. The trouble with discerning ‘alturistic’ behaviour is that you have to define it legally. Once you do that you inevitably will exclude some people who are being altruistic and create loopholes for lawyers to claim alturism on behalf of self-interested concerns exploiting the legislation. It’s a huge bureaucratic mess. I suspect that the Australian govt, like all Australian govts will be creating cozy conditions for the coal industry whilst appearing to ‘do something’.
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In my opinion peoples’ beliefs don’t really matter. This is not some legislative underwriting of the New Gaian Religion it’s a practical matter concerning the capacity of the human race to sustain its civilization.
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It seems to me that the debate is being hijacked by various interests ranging from the anti market brigades to the climate deniers, each with their own barrow to push; the victim will be the planet
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Hear fucking hear.
BilB
In the spirit of cooperation, how does this sound as an alternative (kind of a combination of your proposal and the CPRS market based system) – rather than the Government using a levy, it makes available several $Bn for low interest loans to be used for private enterprise to construct the power stations. On the balance sheet, this shows up as neutral for the Government but does make available the funds necessary for the scale of infrastructure you need. The Government can use the infrastructure itself as security for the loan so if the company goes bust, the Government retains ownership.
This can be done in conjunction with the CPRS. By doing it this way, you provide the liquidity and certainty for the renewable industry which you are seeking while ensuring emissions in other sectors are also reduced. The Government also benefits through tax receipts etc from the company. Of course the MRET and CPRS targets (probably in the second 5 year period because it will only be by then that the first projects come on board) to ensure that the renewables remain competitive in the market. This doesn’t result in the infrastructure ending up in Government control but as I have pointed out, the electricity market is sufficiently large and robust in Australia to be run privately provided there is adequate regulation.
BTW, did some quick sums on my home energy bill and it would cost me an extra $3.70ish a week under a $25/tCO2 permit price/ carbon tax. While this wouldn’t be a problem for me, this sort of figure is sufficient for some people to oppose the current CPRS – an impost of $5/ week without any additional revenue to offset the impact on low income earners is probably politically unpalatable (as environmentally unpalatable that thought itself is). By using the low interest loan option as opposed to the direct levy, you achieve the same outcome but without additional cost to the purchaser. Additional loans can be made available as the old loans are paid down and the new infrastructure comes on board.
As for compensating the power generators, the Brown Coal stations in the La Trobe valley should be the first to go. When the Vic Government sold these,the writing was already on the wall regarding GHG emissions. If this wasn’t factored into their prices and or future plans, tough luck – that’s just poor business planning.
Adrien
My sentiments exactly.
I am working on your suggestion, but look what I found while looking for the new cost of coal fired power plants
http://anz.theoildrum.com/node/4508
BigGav is a researcher of Brian’s calibre. Truly awsome.
Great thread. I appreciated people taking each other’s perspective seriously and being prepared to go into detail.
I have to say I’ve with LO and D55 on this. Emotionally I’m with the engineers (BilB and HB) but they’ve spent too much time building stuff and too little time lobbying (silly duffers!). The cynic/pragmatist in me says that the only system that has any chance of working in the current political climate is the CPRS.
I disagree about $5 being a significant impost. I remember clearly being unemployed and thus on a very low income. I mean, $5 did matter to me, but it would still have been nothing compared to the end of the world as we know it. Call me glib/out of touch/evil but most households could certainly afford to eat five bucks less food a week FCOL. Let’s invest that spare tyre in some new generating capacity folks.
Robert Merkel says:
These aspects of the CPRS program are bugs to Robert Merkel, but they are features for others. Perhaps its time to re-think the strategy for constraining carbon?
If Ive said it once Ive said it a million times: a carbon trading scheme is designed to be rorted and racketed. Any policy denoted with the words “trading” and “scheme” is prima facie dubious.*
Carbon taxes levied by states are certainly economicly inefficient than carbon prices revealed by markets. But they are simpler to understand and harder to avoid.
No doubt some hybrid scheme will eventually evolve. AUthorities will keep the trading scheme to mollify elites. But the taxing system will do the heavy lifting amongst the populace. Think about it: the recent oil price spike acted as a tax, albeit levied by OPEC, which had a dramatic effect on popular carbon usage.
Only a cabon taxing system sends the right message, which is: get out of carbon town by sundown.
More generally, political authorities have to consider the reality of the Big Picture. An AGW tipping point is most likely going to be caused by coal-powered energy generation coming out of the developing BRICA world BRZ, RUS, IND, PRC and ARAB. Thats about three billion people aspiring to the global middle class over the next couple of generations.
Most of these people are not going to be able to achieve middle-class status in that time frame if they pay full carbon-mitigated energy costs that will prevail in the USE. SO they will not sign onto a scheme that makes them pay for the sunk costs of the OECD’s previous carbon usage.
Therefore the only way that the OECD can guarantee to curtail carbon usage sufficiently to avoid an AGW tipping point is to actually pay installing clean carbon free energy capital in these countries. Thats going to cost alot more than Stern’s one trillion dollars. But less than the cost of an Antarctic meltdown.
* You would think that govt regulated “trading schemes” would be in bad odour given the fall-out from the “Debtquity and Diversity” recession. But these sort of slogans and schemes obviously have zombie like properties, able to stay alive despite being riddled with bullets.
BilB and LO:
Do you know about the Climate Futures Bill presented by John Kay to NSW Parliament last year? It would not cost any jobs because it meshed with the retirement schedule of existing plant.
The speeches make for interesting reading, particularly those interested in the politics of climate change denial.
By the way, Bernard Keane at Crikey has spotted something very interesting. The goverment is in the process of preparing an energy white paper, and pretty much haven’t told anybody except the fossil fuel and uranium industries.
Here’s the whitepaper page. Here’s the high level advisory committee – oil, gas, uranium, the PM’s National Security Adviser, but no specialists in renewables. Off the top of my head, about the only one there with a major stake in renewables is the COO of Origin Energy, and even that’s a fairly small part of their portfolio.
Yep I noticed that too, Rob. I was also digging through some old files and noticed that Rudd appointed Roger Wilkins – bow tie wearing Howardian adviser – to head up his climate change strategic review late in 07, hence the too clever by half CPRS etc.
Diet Howard much?
ps. This old Keith Lovegrove piece is worth a revisit
The game is lost……….!*’
Don’t go emo on us now, BilB!!!!
For the record, Dave55, when I started to look at the replacement cost for coal power electricity plants, for which I am seeing figures like US$1 billion for 300 megawatts, and comparing the operating costs where each facility has to repay the investment in a equal manner, coal power is anything but cheap. The oft quoted 5 cents per unit has to be the bottom figure taken from the most efficient of the oldest capital written down powerstations. When this is compared to early CSP trough solar installations with labour intensive practices, of coarse solar looks expensive. CSP in the past has required 2 workers per megawatt mainly for mirror cleaning and pipe maintenance, but with automated mirror cleaning machinery becoming available staffing will drop to 500 per gigawatt, and fewer over time.
So if you are comparing a new CSP plant with a new Coal fired plant in the same investment environment, CSP trough solar is cheaper to install and cheaper to run and has an indefinite commercial life versus a 40 year commercial life. I have to collect more information and do more work in order to quantify and verify this.
BilB, what form of storage are you suggesting?
The form that is working the best so far with CSP is massive concrete blocks which are giving up to 16 hours storage. In the longer term the best smoothing comes from a mixed system. Geothermal is a logical companion for CSP but wind and gas generation give flexibility. CSP is fairly reactive versus coal, so if wind power is delivering well then the CSP can be ramped back to take advantage. Extended non solar is handled with the gas hydride CSP ie burn gas to power the CSP turbines.
BilB
I’m sure you are right re the cost of coal. Until quite recently, the coal stations in NSW have been buying very cheap coal from prices locked in when the public coal mines were privatised. This, along with the Government subsidisation of plant and powerline construction has created significant investment hurdles for renewables simply because the existing suppliers’ true operating costs are not factored into the price.
I really haven’t looked at the costs of CSP v Wind v Geothermal much at all. What I have been focused on in my research over the years is developing a market in which the true operating costs (taking into account externalities like climate change) of various energy systems are identified. I am confident that, as you p[oint out, the renewable technologies can compete on this sort of level playing field and investment will flow into these technologies. Thjis will in turn result in improved eficiencies in these technologies futher improving their competiviness v fossil fuel sources. It will also drive investment in better fossil fuel use and storage technologies which is not bad in itself however given fossil fuels are not in endless supply, ultimately these technologies will need to factor this into their design life costs.
You should have a good look at the mistakes made in California in the 80s when they introduced their wind and solar farms using subsidies for construction. In the long run these ended up being white elephants because they could not compete on level terms with the coal and nuclear stations already built. It is for this reason that you need to look at the whole market rather than simply start-up costs. While your levy idea works to level the playing field in some ways, it needs to be targetted at carbon efficiency rather than accross the board to ensure that there isn’t a perverse incentive to transfer the component of energy from coal to less efficient operations.
The way that it was shaping up, Dave55, was that 5 cents per unit could be met but 6.5 cents per unit was comfortable for the European design of CSP trough solar with a zero interest loan and refunding capital over 20 years, while employing 500 staff per gigawatt.