Dr Richard Denniss from The Australia Institute writing in today’s Crikey [reproduced with permission]:
The Senate debate about the CPRS is getting close, and with views as diverse as those of Steve Fielding and Bob Brown it’s likely to be a cracker. Unfortunately, while there might be plenty of heat in the debate, whether the CPRS gets up or not will make no difference to global temperatures.
That fact has nothing to do with the tired observation that Australia only accounts for 1.5 per cent of world emissions. When you realise that there are 192 countries in the world, which entitles you to around half a per cent each, 1.5 per cent is actually quite an achievement. And when you factor in that we account for only 22 million of the world’s 6.7 billion people you get a clear picture of just how good at polluting we Australians really are.
The reason that the passage of the CPRS will have no impact on the world’s emissions is simpler than that. The fact is, the CPRS is irrelevant. It is irrelevant to the level of Australia’s emissions in 2020, and it is irrelevant to the world’s emissions in 2020. Both of these levels will be determined at Copenhagen or soon after. The treaty that comes out of Copenhagen will make no mention of the CPRS or its pathetic targets. Why Malcolm Turnbull would stake his leadership on something so meaningless defies logic.
So if the CPRS is so pointless, what’s all the fuss about? Unfortunately, it’s the old story of money, with a little bit of spin thrown in. But before analysing the farce surrounding the CPRS, let’s remove some misconceptions first.
The first thing that needs to be cleared up is that the CPRS targets have got nothing to do with the targets for Australia that will come out of the Copenhagen negotiations. As with Kyoto, Copenhagen will result in a series of different targets for different countries. Australia’s target will be determined by international arm twisting. Our negotiators will be in there arguing for the kind of pathetic targets to be found in the CPRS while other countries will be trying to drag us into the range supported by the civilised countries. The end result will be driven by diplomacy, not the passage of domestic legislation.
The second misunderstanding is that Copenhagen is about creating an international emissions trading scheme. It’s not. It’s about setting targets for countries to meet. How they meet them is up to them. Individual countries can implement domestic emissions trading schemes if they want to but they are also free to have a carbon tax or introduce Stalinist command and control policies. Countries who want to pollute more than their entitlement can trade with countries who want to pollute less. But Copenhagen is about developing targets for countries, not telling them how they should get there.
Thirdly, the world doesn’t give a damn whether the CPRS is passed or not. In Australia we are often told that the passage of the CPRS is somehow central to keeping the whole international push to tackle climate change on track. Without the CPRS the whole thing might crumble. Yeah right. The big countries will sort it out between themselves, the only issue for Australia is which side are we running cover for.
So again, what is all the fuss surrounding the CPRS about?
Let’s start with the money. Once Australia agrees to binding international targets at Copenhagen then something is going to have to change in Australia. Either we can reduce our emissions or we can spend a lot of money buying permits from other counties. The big polluters don’t want to do either as both would cost them money. What the CPRS does is give the big polluters certainty – certainty that they can keep polluting, certainty that they will get lots of compensation, and certainty that the carbon price won’t rise above $40 per tonne.
The point that has been missed in the Australian debate is that if the deal out of Copenhagen means Australia has to reduce emissions, but the CPRS has already assured the big polluters that they don’t have to lower their emissions, then something will have to give. That something will be the Australian taxpayer. If we are silly enough to give the big polluters ‘certainty’ while uncertainty about the outcome at Copenhagen remains then it will be the taxpayer who has to make up the difference. The taxpayer will have to pick up the tab for buying billions of dollars worth of credits from other counties while the CPRS gives a ‘right’ to the big polluters to carry on increasing their pollution.
You can see why the polluters are keen on rushing the scheme through.
And now for the spin. The Treasury modelling of the CPRS tells you all you really need to know about the CPRS. First, Australia’s domestic emissions will be no lower in 2019 than they were in 2008. Second, the carbon price will be so low that no coal fired power stations will be forced to close down. Third, all of the ‘reduction’ in emissions will come from importing permits from other counties.
Put simply the CPRS talks a good game, but it just doesn’t deliver.
The ‘clean energy revolution’ associated with the CPRS does not result in the closure of a single coal fired power station. The ‘transformation’ of the Australian economy does not even include higher petrol prices. And the ‘international leadership’ shown by Australia includes one of the least ambitious emission reduction targets in the developed world.
I can think of lots of reasons why Malcolm Turnbull might not want the leadership of the Coalition, but his party’s hostility to the CPRS wouldn’t be one of them.
This is a pretty poor piece I have to say:
1 – the CPRS will be the main tool for implementing whatever targets Australia is forced to accept in the Copenhagen negotiations.
2 – the CPRS is as much a long-term policy tool as a short-term one – you place far too much emphasis on features of the scheme that are transitional such as the cap on prices that is gone by the middle of the decade. 2050 matters as much here as 2020.
3 – there will be no additional carbon price on petrol because the current implicit carbon price is already an order of magnitude higher than for any other energy source because of excise taxes.
4 – Heavily emitting sectors are not shielded as much as you claim. First, no sector receives 100% of permits free. Second, assistance is benchmarked on industry best practice and not grandfathered. Third, the better the international agreement (less likely carbon leakage) the less transitional assistance for TEEI industries will be necessary. Fourth, no sector is shielded from the price signal coming through the ETS. Ever heard of opportunity costs?
5 – Australia is implementing a cap and trade scheme because all other major developed countries have or will implment similar schemes. Indeed, the way in which Australia will be able to import permits to make up any shortfall is through linking its CPRS to other schemes in existence.
6 – It may be the case that acess to international offsets such as the JI and CDM or whatever replaces them will be limited to countries that have agreement compliant emission reduction schemes. It isn’t at all clear that a carbon tax will be compliant in this way.
7 – Turnbull is wanting this off the agenda because the split in the party over the issue is damaging his and the party’s credibility. They have been wedged. It is a political decision as much as anything else.
8 – Calling the targets pathetic is silly. The conditional target and one that will be closest to the final Copenhagen outcome is for a 25% reduction in emissions on 2000 levels by 2020. That will be somewhere north of 40% below baseline in 2020 and given population growth, will represent a very large reduction in per capita emissions. Indeed, larger than almost any other country over that period.
In sum, there are many inefficiencies/inequities associated with the current legislation, but to claim that it is pointless is just ridiculous. The new targets derived from Copenhagen will have to be incorporated into the CPRS legislation. And whatever Australia’s targets, we will need policy tools to achieve them.
Lets go back to basics. The CPRS is such a debased version of a textbook emissions trading scheme that it is virtually impossible to assess Minister Wong’s proposal against the theoretical benefits claimed for such schemes.
First, the targets ignore the science. You dont have an ETS because they are fun, you have one to solve a pollution problem. proposing CPRS targets that are inconsistent with the science is like prescribing a dose of chemotherapy designed to avoid nausea…comfortable but pointless
Second, auctioning of permits leads to the polluter pays principle. The CPRS gives away up to 95 per cent of the permits required by big polluters and will give them more permits if their output increases.
Third, if the price cap is irrelevant what is it doing in there? why were big polluters so insistent that they get price certainty if they didnt think they might need it? The whole point of an ETS is to set the quantity and let the market set the price. The CPRS both sets the quantity too high, but then caps the price just in case.
Fourth, the decision to leave petrol out was taken when oil prices were at record highs. The arguement was that prices were so high that we didnt need more price effects for the CPRS. the world ol price collapsed, but petrol stayed out of the scheme.
Fifth, as i said in the piece, just have a look at the Treasury modelling. The actual level of emissions doesnt fall. No power stations close. Its not the CPRS that drives investment in renrewables, its the RET
The CPRS is not a market based instrument, its a political wedge based instrument. It is designed to suggest to the voters that we are taking ‘action’ on cliamte change while simultaneously assuring polluters that we arent. It’s a sad indictment on our policy process.
Of course parliament will decide if it is good enough. thats their job. But lets be clear about the inherent flaws in the scheme before we decide to settle for it
The flaws, from an optimal policy perspective have been clear for some time. But you exaggerate them in your piece.
Do you honestly believe that the 25% conditional target “ignores” the science? The science says nothing about what the optimal distribution of the short-run targets are across countries. The science tells us about the dangers associated with various global atmospheric concentrations of GHGs. The 25% has been arrived at taking into account a range of scientific, economic and political factors. If the outcome at Copenhagen is that we have to go deeper, then the CPRS will accommodate that – simple.
Second, on the allocation of permits, again there is quite a vigorous debate in the literature about whether all permits should be auctioned up front or whether auctioning should be phased in over time. However, you don’t seem to have internalised the fact that much of the impact of an ETS on emissions is driven by the impact on relative prices, and this impact is very close to independent of the allocation mechanism.
Third, auctioning does not always lead to the polluter pays principle. There is a big differnce between where a tax or other impost is levied and who bares the incidence of it. For a non-trade exposed industry, it will be households and downstream firms that face most of the incidence of higher energy prices. For trade exposed sectors that cannot pass on the price of permits and where common carbon prices do not apply across all countries, forcing such sectors to pay for all their permits without compensation can lead to inefficient carbon leakage.
Fourth, the price cap is not irrelevent, it is a transitional feature that will cap the cost in the short-term. It is effectively a short-term carbon tax. My point was that your piece doesn’t acknowledge that that it is a temporary not permanent measure.
Fifth, the collapse in world oil prices was temporary. Currently, spot prices are around $US70 a barrel. That level, while half of the peak in mid-2008, is still high relative to history, and still implies a carbon price for that sector that is well above that faced by other energy sectors.
Sixth, the RET drives the investment in renewables because the implicit carbon price generated by the scheme is considerably higher than that generated by the CPRS. Beyond 2020, that will not be the case.
Seventh, the idea that the CPRS is not a market based instrument is ridiculous. Again, you are confusing the targets with the mechanism, and failing to understand the difference between the distributional deficiencies of the scheme and the efficiency deficiencies of the scheme.
An ETS is a regulation. The government sets the rules and the market will operate within those rules. You don’t like the nature of the compromises that have been necessary to get this through the parliament. Fair enough. But you take your argument too far. Think of it as a learning exercise. After a few years it will be pretty clear that the economic costs of the CPRS have been limited and that the scheme is more or less working as expected. Over time, more developing countries will agree to binding emission reduction targets. Transitional assistance will be faced out (free permits, low price caps, etc).
In short, you are being too short-sighted and not pragmatic enough. Public policy is about compromise and the government has made plenty. Any other instrument that you could propose to reduce Australia’s emissions would involve the same political horse trading and be compromised as well.
wow – i applaud your passion and commitment to the CPRS. I wish i could be as optimistic.
The idea that the CPRS is a ‘learning exercise’ is interesting. It would have to be one of the most expensive lessons of all time.
As for the idea that we will get it right next time. i hope you are right. But lets be clear that the polluting industries will be bigger, and employ more people, in 2020 than they do now. so if we dont have the political courage to upset them now, why would we have it in 2020
And if your argument is that the science will be more compelling then…i would suggest a quick look at the latest IPCC reports.
And the 25 per cent target – look more closely. We have said we will go to 25% if the world is willing to redefine what an emission reduction is by including non-kyoto compliant instruments like REDD. Its like saying i can lose 25 per cent of my weight but only if you redefine my original weight.
I really do hope you are right, but the science suggests we dont have the time for the ‘learning’. I hope i, and the science, is wrong though
Saying “the 25% target ignores the science” is a bit of a handwave.
I expect what Richard means is something like “the science strongly suggests that a global target of {350, 300} ppm CO2e is in Australia and the world’s interests. Given that, the 25% conditional offer is not a proportional contribution to that target, let alone something that might induce other countries to sign up to such a target.”
In that sense, he’s right. However, the odds of getting a 350ppm deal were essentially zero, however much the science suggests it is the right thing to do.
As to the rest of the piece, there are two issues – whether buying permits on the international market is an acceptable way of meeting emissions reduction targets, and whether the buying-off of the big polluters matters.
As far as the buying of permits on the international market goes, there are questions of the genuineness of some of the carbon credits. Furthermore, part of the plan behind “common but differentiated responsibilities” was based on the notion that the developed countries would invent and implement the technology to get to a low-carbon future, which would be shared with the developing world. If a lot of the heavy lifting is done by buying permits internationally, will that tech get developed, particularly in Australia?
As to whether buying off big carbon matters, that’s been debated repeatedly here on LP.
Andrew Welder makes a good point. November is the last chance for the Liberals to be involved before Copenhagen.
http://andrewelder.blogspot.com/
Thanks Richard … you’ve described the CPRS pretty well. It’s an absolute dog’s breakfast, after the dog has coughed it up.
It’s embarrassing to be connected by nationality with this. Hopefully, the Liberals won’t cave, will vote this down, then split allowing Rudd to go early (but without a DD).
Lots of Greens get elected to the senate and then we get a comprehensive all-in scheme where every permit is auctioned with a minimum price for CO2 of $100 per tonne and a trajectory for at least 40% reduction on 1990 by 2020. Coal for power is phased out by 2025 or 2030 at the latest. All plants older than 40 years are closed by 2020. We make a start on reconfiguring our major population centres for higher density (70-90 persons per Ha) living.
One can dream …
The CPRS is pointless, but for a much more important reason than these espoused by Richard Denniss. If he had done his homework, he would discover that there is no irrefutable scientific evidence to support anthropogenic climate change. The greenhouse theory is just that – a theory. No scientist, nor anyone else for that matter, has been able to prove that it is the main driver of climate change, whether warming or cooling. The environmental-activist-dominated Intergovernmental Panel on Climate Change (IPCC) has been able to bluff politicians, the media and the misinformed with mere assertion, complemented by unvalidated alarmist computer modelling. What few seem to realise is that the climate computer models used by the IPCC to project the alarmist outcomes believed by the gullible masses, have not been validated with actual historic data, and never will be, because they are based on the false assumption that climate change is man-caused. The IPCC has failed to explain actual climate history. For example, it was unable to explain why there was a cooling trend from 1940 to 1975, and why there has been a cooling trend since 1998 despite increasing greenhouse gas emissions, and it has failed to predict the El Nino and La Nina effects.
The governments who assert that they can control climate change, are blatant political opportunists. There is no scientific or economic justification for the CPRS and carbon taxation measures that they are proposing. As climate change is a natural process, the best course is to do nothing, and adapt to whatever climate change eventuates.
LO @ 3:
I think I see your mistake, LO. The minute you rank economic factors with anything approaching the importance of the science, you’ve lost it. We can’t afford to take account of economic factors. In fact, it’s probably already too late to avoid catastrophic climate change, but an over-emphasis on the economic effects of doing anything to mitigate or adapt will simply ensure things get even worse, even quicker.
Cicero, you’re right that climate change is just a theory. So is the theory of natural selection (one of the few with even more evidence for it than climate change), and so are the special and general theories of relativity. Oh, and the atomic theory. I could go on.
What’s your point?
Cicero’s point is to troll by threadhijack, David.
Each of Cicero’s claims is a well worn and debunked filth-merchant talking point, so well known in fact that there’s a compendium out which covers these and the others Cicero didn’t get to …
Talking points
Let anyone interested go there …
I know, Fran.
You need to smack these people down, though.
Meh … they want people furiously smacking them down because it wastes time and disrupts talking about the more important issues. It costs them almost nothing to repost this crap all over the internet. Let’s leave them to twist in the wind I say.
Cicero, to quote your namesake: ‘It is a true saying that “One falsehood leads easily to another”.’
LO I truly do admire your optimisn and faith, both in the current CPRS but moreover in some hypothetical, yet-to-be-arrived at future CPRS which is going to solve the myraid problems with this one.
Why are you so confident that vested interests will be any less entrenched by 2020, say? We’ll still be living with relatively few climate change problems by that time, so the ‘urgency’ will be mostly what is is nowl scientists and the informed.
Your faith in overseas carbon markets – sold by developing countries with little to no oversight and often corrupt business and governments – is likewise kinda naive coming from you.
The worst thing is, I typically agree with your thoughts about policy formation, i.e. that politics is itself the act of compromise and slow change rather than revolution – and it should be thus – and that ignoring this is both counter-productive and naive in its own way.
However, climate change is far to serious for this approach. It’s like waiting for a gun to rust when you’re playing Russian roulette. Click, click, click; I’d rather not wait for the rust, thanks. If climate change was asbestos in people’s houses, you can damn well bet the government wouldn’t be hedging like it is. I see the risks to us as a nation as no less severe, albeit a generation or two removed.
“… CPRS targets that are inconsistent with the science is like prescribing a course of chemotherapy designed to avoid nausea … comfortable but pointless.”
worse than pointless, because it provides the illusion of something being done while the patient (and our planet) sickens and dies
David Irving, it is irrational and irresponsible to introduce and implement government climate policies or regulations which have no scientific or economic justification, but are driven by political opportunism which will result in everyone being substantially disadvantaged, with the exception of the vested interests.
Indeed Nicki
Apologies for the paraphrase. Perhaps CO2′s product is indeed ‘high fantastical’ rather than pure fancy …
Interesting that you reminded me of this play Twelfth Night which has a woman playing a boy called Cesario in a thread where someone called Cicero has posted.
Spooky
Cicero
The value of using some sort of scientific method as the foundation used to decide what is real and what is mythical was had sometime in the 16th century, you have come late to the debate by about 400 years.
Most commenters on this topic show how misinformed they are about the climate change issue. To become better informed, they could start by reading Prof Ian Plimmer’s book, “Heaven & Earth”. It is written in plain English which even they should be able to understand.
Cicero, in Heaven and Earth, Plimer is either delusional or lying. I’m not inclined to pay any attention to him.
Please ignore the troll. I mean, he’s quoting Plimer!
And misspelling him!
Call it what it is – a Green Sin Tax.
Oh no Razor … as Richard points out, the chief “sinners” get a dispensation for being “trade exposed”. Other “sinners” get a dispensation for being the salt of the earth and driving a car or producing less than 25000 tons of CO2 in a year.
It’s more of a Symbolic Penitence Fee, one aimed at being seen to do something so that we can get back to the important business of filthying up the biosphere.
“Your faith in overseas carbon markets – sold by developing countries with little to no oversight and often corrupt business and governments – is likewise kinda naive coming from you.”
Let me make this clear – the issues surrounding CDM/JI are of course real and I only support linking/accepting offsets where they are genuine, transparent and verifiable. But in principle, international trade in permits is a good idea because abatement should occur where it is cheapest, not where the warm inner glow is strongest.
As for the question of whether one should be optimistic that changes will occur in the future, I think it is instructive to look at the EU ETS. They will commence Phase III of the scheme in 2012 and while it isn’t perfect, each iteration has moved the scheme closer to something that would be regarded as optimal. There are many, many other examples in public policy where beneficial change has occurred in steps rather than in a big bang.
And can we please ignore Cicero? There is no point in allowing these threads to be derailed. Don’t respond and he will go away.
David, you may wish to ignore economic factors when making public policy decisions, but there isn’t a snowball’s chance in hell of any government doing so.
PatrickG, one of the things that annoys me most on these threads is the conflation of the problems with the targets and setting the rules of trading market. The first affects the latter of course, but a governemnt setting weak targets would also set a low carbon tax and have relatively weak incentives for the acceleration of investment in low emission technologies. While the design of the CPRS itself (setting aside the targets) is not optimal, if the targets were appropriate the scheme would likely be very successful in at least achieving the targets.
Beyond that, the assistance to fossil fuel generators and TEEI industries has to be transitional. It will simply be impossible to meet Labor’s own targets for 2050 without a phasing out of non CCS coal fired electricity generation over time. The government knows that very well and the long-term price signal coming through the ETS will ensure that is the case.
As for TEEI, assistance is closely tied to what the rest of the world is doing. And I would argue that if it turns out that the rest of the world doesn’t do enough to make such assistance unnecessary, then Australia committing itself to deep emission reductions will turn out to be somewhat pointless!!
Speaking of the EU ETS (LO 25) it is a pity the government does not look like it has learned from it’s early mistakes, especially that giving polluters free permits just gives them a windfall gain, and their incentives are exactly what they would be if they paid for their permits. Of course you can’t blame people for asking for free money – in some cases it is the same people asking for handouts here who got them there -but that doesn’t mean you have to give it them.
This is not a Green-left fantasy. Garnaut has warned of this again and again.
Electricity generators are not even trade exposed. They face no competition from countries with weak or no targets and aren’t going to pack up their turbines and start making electricity overseas. Their demands are pure rent seeking and the government is caving in totally.
The majority of electricity generators in the EU will have to purchase all of their permits via auction by 2020. There is further transitional assistance in heavily cole dependent countries like Poland, but other than that, almost all of the free permits will go to trade exposed industries, not generators.
On the windfall issue, you have misunderstood the term. Windfall profits refer to over-compensation, not the allocation of free permits per se.
Thanks for the typically thoughtful response LO, but I do feel your argument boils down to some pretty simple points: The system is deeply flawed, but will likely get better; the targets are too low, but likely to be put higher; the compensation is too high, but likely to get lower.
I’m not advocating a sudden 180′ turn here (though honestly, in view of the actual problem we’re meant to be dealing with, I don’t think it’s the worst thing that could happen), but likewise I think both you and the govt are not making the rational decision with this system, especially in regards to large polluters. Essentially you’re arguing, “if we get the system in place, we’ll change it later.” Reducing compensation to large polluters that will be largely unaffected is no different in my book to endlessly bailing out AU car companies.
What did you make of this? I know it was a stunt, but I think there’s a real point there.
Hmmm … “majority”, “by 2020″,”further transitional assistance”.
Take away the weasal words, and it’s my point exactly. And since this is Europe, compensating coal generators will turn out to be a bigger uncapped boondoggle than the Common Agricultural Policy.
Since you haven’t engaged any of my arguments on our CPRS, LO, I take it you agree. It’s hard to see how you couldn’t.
And of course they are windfall profits. The value of the free permits are rents, pure and simple. This is overcompensation by definition.
They are not weasel words Sam, it is actual legislation for Phase 3 of the EU ETS, commencing from January 1 2013. Very few electricity generators will receive any free permits at all from January 1 2013. How about you read the legislation or the recently published OECD survey of this issue and get back to me about how it will actually work?
Have you read the green or white papers? I think you will find the authors would disagree with your charactersisation of the compensation as solely a rent.
“Some coal-fired electricity generators are unlikely to be able to pass on their full carbon costs, because they are constrained by competing generators with a lower emissions intensity. As the carbon price rises, the competitive position of the most emissions intensive coal-fired generators is reduced, resulting in margin compression and lower generation volumes, reducing profits. This is likely to lead significant impacts on the asset values of some coal-fired electricity generators.”
The issue is more complicated than you think.
More broadly, we have been over and over and over this issue on other threads. Is the scheme optimal? I would argue no. Would I prefer that the extent of compensation had been wound back? Of course. But are the scheme’s flaws fatal? I would again argue no because I expect improvements over time, think there is a lot of value in demonstration, and think that the change in relative prices will have more value than many of you think. And this is where we part company.
You all seem to want to throw the scheme out without giving much thought to what will replace it in the real world (as opposed to your own unconstrained fantasies).
I’m all for critiquing the policy and pointing to where it can be improved. But I also think the legislation should be passed.
Can I also point out that I am not in any way tied up with the policy and introduction of this scheme. I just don’t think enough of you understand the political economy of this issue.
And PatrickG, it is in many ways a similar issue to that surrounding automotive and textile tariffs. Is support to those sectors still too high? Yes. But is it a lot lower than it was in the mid-1970s? Hell yes. There have been successive waves of reform in that area. It wasn’t as though the first tariff cut was locked in and no improvement was made thereafter. We have unquestionably moved closer to a more optimal allocation of resources over time. We are still some way from the optimal level, but we are better off than we would otherwise have been.
Razor, it’s more like an Indulgence.
LO you have, as usual, missed the mark by a mile. If we worry about the economy over the environment, we’re fucked. You’re correct, in a sense – no government will ignore economic factors. The implication of this is that we’re fucked. Humanity may survive catastrophic climate change, but our civilisation won’t.
“In recognition of this impact, and to ameliorate the risk of adversely affecting the investment environment in the Australian electricity generation sector, the Government will provide a once-and-for-all allocation of permits to the most emissions-intensive electricity generators under the Electricity Sector Adjustment Scheme. The Government has decided to provide a fixed administrative allocation of permits, delivering assistance of around $3.9 billion to the Carbon Pollution Reduction Scheme most emissions-intensive coal-fired generators based on an initial carbon price of $25 per tonne. These permits will be distributed to each eligible generator over the first five years of the Scheme. The amount of assistance for each generator will be determined up front, before Scheme commencement.
Not all coal-fired electricity generators will receive assistance, since not all generators are likely to experience significantly adverse effects. Assistance will be determined in relation to the historic energy output of the power station between 1 July 2004 and 30 June 2007, and the extent to which the generator’s emissions intensity exceeds the ‘threshold’ level of emissions intensity of 0.86 t CO2-e/MWh generated, which is the average emissions intensity of all fossil-fuel based generation. These factors represent simple and transparent mechanisms to deliver appropriately calibrated support to those most likely to be affected by the Scheme.
A number of stakeholders raised concerns that allocating permits to electricity generators would allow them to earn windfall profits. The quantum and targeting of assistance has been designed to avoid this outcome. However, to ensure that assistance does not lead to windfall gains, a review will be held in 2013 to determine whether generators in receipt of ESAS assistance are likely to earn windfall profits, taking into account actual and forecast net revenues, compared to those predicted when assistance was originally estimated. Where the regulator finds that windfall gains are likely, it can make a recommendation to the minister to withhold all or part of the last two years of assistance. A finding by the regulator that windfall gains are likely may be challenged in the Administrative Appeals Tribunal.”
LO suffers from an inability to see the bigger picture.
More glib pessimisim David? I’d be disappointed if you offered anything else
It’s not glib, LO. I’m terrified.
I see the bigger picture quite well thank you. It just doesn’t happen to be the same vision as yours.
The idea that the CPRS will drive price that lead to significant changes in investor or consumer behaviour is laughable. Luckily its easy to show why.
Lets have a look at the major sources of emissions
1) electricity. In its submission to the White Paper the electricity regulator, NEMCO, pointed out that the carbon prices associated with the (what word shall we use…) pragmatic targets would not be sufficient to close the cost differnce between any coal fired power stations and their next cheapest rivals (ie wind). NEMCO concluded that the CPRS would have no impact on the source of electricity supplied to the grid.
2) It is the RET that drives all the investment in renewables. Fortunately for the coal industry the way the RET is designed the more wind we feed into the grid the less (relatively low emission) gas fired power power we get. again, the ‘price signals” under the RET are insufficient to do any harm to coal
3) There are no price signals for petrol – whoops
4) Agricultural emissions may come in in 2015 – my view is that will never happen
So after we introduce the CPRS the price signal we get does nothing to reduce coal fired power, petrol consumption or agricultural emissions. what a scheme!
again, i refer you to the spreadsheets from Treasury’s white paper modelling which can all be downloaded from the treasury site. they make it crystal clear that australia’s emissions are not going to fall. coal fired generation is not going to fall.
if all we are trying to do is import some permits from PNG so be it, but lets have an honest conversation about the best way to riase the revenue to buy them. we could raise the necessary revenue much more cheaply with a small carbon tax.
LO, I’m all for passing the CPRS, deeply flawed as it is, and probably more flawed after Turnbull’s amendments. But hell, at least its something, and it does have the potential to become an effective tool to reduce emissions one day, even if its next-to-useless in its current form.
What I find hard to fathom is your faith that binding targets will be agreed to in Copenhagen. I’d be amazed if they put a number on anything, and even if they do its likely to be weak and impossible to enforce. I mean, Canada ratified Kyoto, blew through its targets by 30% or more, and what happened? Nothing. The Canadians are too busy mining oil sands.
So, where to for the CPRS after a failed Copenhagen?
David Irving, please keep up the glib pessimism. People need constant reminding this is not some trade negotiation, or new tariff policy, that requires a bit of policy finessing to get right. Its human civilisation at stake here.
Carbon, apologies if I gave the impression that it was likely….But it was Denniss that said that Australia would be forced to adjust its “pathetic” targets through Copenhagen…..I was more trying to say that I didn’t think our conditional target was that bad….
In that light, did you see the news that Australia has working to secure an agreement that would mean that emission reduction committments would not be internationally binding? That is, emission reductions would simply be a matter for countries domestic legislatures? If that goes through I would have grave doubts that reducing global emissions would be a nash equilibrium….Credible committment would become almost impossible…
I can’t agree carbonsink. In its present form the CPRS is worse than useless because it is an obstacle to good policy. If the polity doesn’t really think that GHG-mitigation is that big a deal it should be explicit about it and not taint those of us who do with its nonsense. That way it at least unmuddies the water and we can argue for mitigating GHGs without anyone saying that it’s already addressed.
I favour Australia moving aggressively on mitigation not because I think the direct effect of Australia reducing emissions will make that much difference to ecosystem services, but because I would like us to set a best practice benchmark, but that obviously cuts both ways. And getting rid of coal for power and fossil oil for transport here in Australia would be good for non-GHG reasons too. If our example is simply Smoot Hawley for CO2, then we are really inviting the world to do zip AND to protect the big polluters. It’s repulsive that even in this case, we are handing them an incentive to pollute.
Let us honestly decide what we want and then do that. If it really is the case that what “we” honestly want is pollution-as-usual and we really have given up on the whole idea of our grandchildren living as well as we have and foreclosing a catastrophic reversal of human fortunes so that we can save a few hundred dollars each year on energy now running our plasma TVs and sitting in traffic and poisoning those living in the footprint of coal plants then let us at least avoid cant. Let us make Alfred E Neumann our mascot and move on.
But if on the other hand we really are worried about the future, if this really is “the moral challenge of our generation”, let’s get serious and stop farnarkling about …
This thread is pretty confused, even leaving aside the efforts of Cicero and those who responded to him to derail it completely, but that is probably the result of the confusion-inducing approach of the initial post.
There is little point in debating Copenhagen and the CPRS in the same breath. As LO points out, one is about setting goals (in the form of targets), and the other is about a mechanism to achieve the targets.
You can argue that it is entirely the wrong mechanism – but since emissions trading is the mechanism of choice for almost all other developed countries, and climate change is a global issue on which only collaborative action will produce a result, going with an ETS which will enable global trading is sensible in principle. And you can argue as many are doing with a whole lot of the features of the government’s legislation. I am largely with LO on that, but it is in any case a completely different issue from Copenhagen and has been done to death on many previous threads.
As for the relative importance of the two, that is apples and oranges. Both goals and mechanisms are needed. One could make a respectable argument, though, that the utter failure of the Kyoto Protocol to achieve anything meaningful by way of emission reductions in 10 years is sufficient evidence that a target-based approach won’t work. The mechanisms, and thus the CPRS, are more important.
The other problem with the post’s reasoning is, as carbonsink points out, that it is predicated on the breath-taking assumption that Copenhagen will come up with meaningful, binding targets at a country level. The chances of that at this stage seem slim to non-existent, at least if you take “meaningful” and “binding” in their literal senses.
Cicero @ 8,
You make some interesting points, some I agree with and some that I don’t.
I believe anthropogenic climate change is happening, and this results from many things associated with the human race, however it isn’t just as simple as looking at the release of carbon dioxide into the atmosphere. Our impact on climate includes land use changes, aerosols, dust as well as carbon dioxide and many other things.
The false belief that controlling carbon dioxide is going to result in climate control is just plain wrong. Politicians can introduce a CPRS, an ETS and/or a carbon tax, none of these will control the climate.
No, but it doesn’t surprise me in the slightest. There are few countries in the world with a greater vested interest in the continuing use of fossil fuels than Australia.
Can you imagine Saudi Arabia supporting an international treaty to reduce oil consumption? No? Why then do we believe Australia would be (genuinely) supportive of a treaty to reduce coal consumption, when we are the world’s largest coal exporter?
Ignore the rhetoric from politicians and look where the dollars are being invested today. Billions are being spent on new coal mines and improving our coal infrastructure; roads, rail, ports etc. One day you’ll see Rudd banging on about the CPRS and climate change. The next you’ll see Marn or a some state Premier opening a new facility at a coal port, calling it “critical national infrastructure” FFS!
Until Australia comes to grips with the fact that we export climate change, and we profit enormously from it, there is no way forward.
A recent good quote from the climate scientist Roger Pielke Snr reads,
“The news today includes an article by Richard Cowan of Reuters titled “US climate control debate heats up in Senate” . The article itself is informative.
However, the claim in the header of the article that the government can design a program for “climate control” is absurd.”
The CPRS is a fiscal and political issue only. It has little to do with, and will have negilgible impact on climate, because climate is not just influenced by the single factor, carbon and/or carbon dioxide.
Great news! The proposed coal plant at Kingsnorth in Kent, England has been abandoned with the activists successful.
Well done them …
Can you imagine thousands of Aussies protesting against a new coal-fired power station or coal mine? I can’t, unless it was for NIMBY reasons.
John Michelmore, if you speak to a climate scientist (or even a reasonably well-informed amateur like me), they’ll tell you that of course CO2 isn’t the only influence on the earth’s climate. You’re also quite correct in believing that the CPRS is merely a fiscal and political construct – the only substantive result it will deliver is that the same spivs who’ve exploited creative financial products over the last 20 or so years will use it to hoover the last scraps of money out of our pockets.
However, if the CO2 level in the atmosphere gets too high (rather less than it is now, which is largely as a result of all the fossil fuel we’ve burnt over the last couple of hundred years), we’re fucked.
If you take either of the Pielkes seriously, you’re a fool. They are both either deluded or lying.
Carbon, as one of 500 or so who protested at Hazelwood in Victoria last month, I can easily imagine thousands protesting against a new coal-fired station. We’ve been quite open our involvement with the protest in the media in our sleepy neck of the woods and I’ve been surprised at the lack of ‘you’re a stupid bunch of head-in-the-clouds wankers’ coming back at us. I really think the dangers of coal are becoming more obvious.
This in itself doesn’t necessarily translate to thousands at the barricades but I’m getting a sense that the protest movement around it is growing with actions taking place at the moment at plants all around the country.
This list shows the international actions that have been taking place, though I see it misses recent ones in Aus. Ones I know about have been at Hazelwood, Port Augusta and Helensburgh, south of Sydney – which is happening this weekend.
Aussie Oskar, you’d probably get more protesting against ugly, noisy wind turbines
BTW, has there ever been a protest at a coal port? Australia exports a lot more climate change than we create at home.
MARK: Please delete previous
Incidently, Richard, I just caught your quote here on the waste of food …
This is a very important thing, especially since on average for even for vegetable-based nutrients. the EROEI is about 10:1 i.e. about 10 calories of energy for every one calorie actually potentially useable by humans — and much worse for meat-based protein of course. We talk a lot about energy waste and turning off our standby appliances, but wasting food is much worse. Much of it is wasted before it gets to us of course, in transit. I read somewhere that only about 65-75% of food produced in the US gets consumed.
It would be interesting if anaerobic digesters were used to recover some of this along with other green waste as methane-for-energy rather than tossing this into landfill. I understand this is done in parts of Sweden.
Germaine on on Q&A last night:
We’re determined to sell as much coal as we can, as fast as well possibly can, but at the same time we pretend we’re going to play our part in reducing global carbon emissions.
We won’t. We’re kidding ourselves. We’re all living on coal money.
Carbonsink @51: “We won’t. We’re kidding ourselves. We’re all living on coal money.”
And our Plan B for when the rest of the world decides that coal is a bad idea, finds an alternative, and stops buying it…??? Drop in GDP I guess?
I was just reading a story about the Yom Kippur War yesterday, in the book “The Decisive Moment – How the Brain Makes Up Its Mind”. The Israeli generals, Mossad and their military intelligence guys are smart, motivated and well-resourced. They had all the information needed to predict that an attack by Egypt was imminent. They had plenty of meetings discussing the information.
However, they just didn’t believe it was possible, believed the reassurances that nothing serious was happening, confidently thought they had their bases covered, and took no mitigating preparatory action. They were attacked alright. Oh bugger, bad judgement…
The amazing thing was they were all smart guys and they HAD all the evidence they needed to reach the correct conclusion.
Do we have a similar problem here with Climate Change?
There’s one possible difference, Elise @ 52: Mossad probably didn’t have a bunch of Egyptian agents telling them that there was nothing to worry about.
Other than that, it’s an excellent analogy.
David @53, Ah, actually they apparently went as far as asking the Egyptians what they were doing building up armaments within range of the Israeli border.
Answer? Wot you reckon they said?
“Errm,… just pan-Arab military manoevres for practice purposes, nothing to worry about…”, or words to that effect.
This thread is probably cold but can’t help noticing that Dr Denniss has it the wrong way around.
After two straight weeks of international negotiations in Bangkok in preparation for Copenhagen, and two years of negotiations since Australia ratified Kyoto, it’s become clear that getting a deal, any deal, should not be our objective in climate change negotiations.
The future of the world – the survival of the barrier reef, the Murray Darling basin, of entire countries in the pacific, requires an international treaty that forces rich countries to cut their emissions.
‘A deal’ in Copenhagen does not necessarily do that. As a climate change activitst and someone who believes in that core Australian value of a ‘fair go’ I think that ‘no deal is better than a bad deal.’
This is because we don’t need a ‘new deal.’ The world already has a framework to reduce carbon emissions – it’s called the Kyoto Protocol – all Kyoto needs is for developed countries to announce their new targets for the period after 2012.
But what’s happening in the negotiations at the moment is that the United States, the EU and yes, Australia, appear hell-bent on scrapping the Kyoto Protocol to ‘start again.’
The problem with this re-start is that developed countries’ proposals for what a ‘Copenhagen Protocol’ looks like are even weaker than their obligations in Kyoto – which has been widely criticised for not doing enough!
Kevin Rudd ran in the 2007 election on a policy of ratifying Kyoto and taking action on climate change. He needs to be honest with the Australian people about what’s changed in 2 years that makes him think the Kyoto protocol is not worth saving.
If he isn’t honest – if Australia, the US and the EU keep playing procedural tricks and promoting weak proposals – then any deal in Copenhagen will only lock-in business as usual, which, as all the science makes clear, will have devastating consequences.
If Australia is serious about playing a ‘middle power’ role in the climate negotiations then we need to start listening to developing countries and start living up to our responsibilities – which are clear in international law under the Convention on Climate Change and which we affirmed in 2007 with Kyoto.
Developing countries have been clear – they will not sign onto a deal that does not acknowledge and honour rich countries’ climate debt. We owe this debt because if global carbon emissions from 1850 through to 2050 are limited so that dangerous climate change does not occur, and then shared equally between all the people on earth – people in developed countries will have consumed 80% of all the possible carbon space. And that’s even if we were to cut emissions by 45% (rather than 25%) by 2020.
To make up for this unfair over-consumption, developing countries are simply asking that we repay them for the space they will not be allowed to use – and they will use our money to finance sustainable development so that global aggregate emissions do not keep rising.
This is how we stop climate change – by acknowledging our responsibility and starting to take real action, with real finance, to do something about it.
Nicholas Stern, in his appropriately titled book, the Global Deal has an conservative estimate that the developed world’s climate debt to developing countries is at least US$23 trillion. A mind boggling figure – except when put in contrast to the $11 trillion that was raised in a matter of weeks last year in response to the financial crisis.
How can Australia, the US and the EU go into Copenhagen expecting developing countries to write off their right to an asset worth US$23 trillion – in exchange for developed countries taking no legally binding emission cuts?
If we’re going to be a good international citizen – we simply can’t. If Kevin Rudd wants to live up to his campaign promises – he simply can’t.
Developing countries agreed to the Kyoto framework 12 years ago because, for its flaws, it has equity at its base and requires developed countries to meet at least a part of their responsibility for reducing emissions and financing action in developing countries.
These poor countries are now desperate to keep this flawed framework for fear that ‘a deal’ in Copenhagen will simply lock in the IPCC’s worst case scenarios – which of course, according to the World Bank, will cost the world’s poorest, those who can least afford it, $102 billion a year in adaptation costs.
There’s an old diplomatic saying that ‘nothing is agreed until everything is agreed.’ But there’s something already agreed – the Kyoto Protocol – and Kevin Rudd has a responsibility to the Australian people to save it.
CarbonSink@49: has there ever been a protest at a coal port?
Newcastle is one to watch as both Greenpeace and Rising Tide shut it down from time to time and there are regular protests. http://www.risingtide.org.au and http://www.greenpeace.org.au http://www.theherald.com.au/news/local/news/general/rising-tide-protest-to-blockade-newcastle-harbour/1465407.aspx It hasn’t been seriously affected largely because the PTB have made it clear that the difference between protest and terrorism is effectiveness.
I don’t think the world can “just stop buying coal”. Look at China, for instance, where they’re commissioning a new coal to electricity plant every week or so. So in that sense Australia is quite safe. On the other hand, we’re not very well off on the “proportion of population living below 20m above sea level” or “agriculture likely to benefit from climate change” measures, so it behoves us to be smart about it.
Still and all, Moz, I think it would be an interesting thought experiment to imagine how the world might respond if we knew for certain that supplies of coal at current recovery prices would be exhausted within 5 years and would eventually reach a price ten times what they were now by 2025.
Would it be the end of civilisation as we knew it? Could most of the 7.6 billion or so in 2025 have adapted and live no worse than we do now? How would we do that?
Fran, my point is less that it would be hard for Australia to get by without coal exports as that it seems extremely unlikely that the problem will arise. I think it would be incredibly useful for Australia to announce a ten year plan to eliminate coal exports as one of the main planks of our response to climate change. Simply saying “as of 2020 no coal will be exported and substitution industries will be required to be strictly carbon neutral” would show strong commitment as well as being a concrete disproof of the “Australia can have no effect” strawman.
One question I have is who thinks the value of coal will drop over time? Given non-renewable supplies of a non-decaying commodity whose real price is increasing over time while extraction costs drop, what possible reason is there for selling it immediately? Under what scenario would Australia lose by selling the absolute minimum we need to stay solvent?
A difficult question but it very much depends on how energy policy plays out over the next 25 years. If coal is replaced by nuclear in new plants, then coal prices will remain stable or decline in real terms, and of course a CO2 price will drive it down further until of course it becomes clear that there will be no more coal and then there will be a rush to phase out coal-based technologies to avoid sunk cost losses or hostage pricing.
We have no plan B. Australia has become a resources-only economy (as far as exports are concerned anyway). Regardless, we almost certainly won’t need plan B, because developing Asia will demand vast quantities of the stuff over the next few decades.
HAHAHA! That’s not even close to being on the agenda with TPTB. To suggest such a thing in would immediately label you a fruitcake.
Cue some painfully pragmatic comments from Labor Outsider…