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Carbon pricing in Australia

by eurogreen Thu Sep 30th, 2010 at 08:11:53 PM EST

A quick note to provoke thought and discussion, about perhaps the biggest challenge facing mankind over the next couple of decades.

There is surprisingly wide concensus among Serious People, all over the world, that putting a price on carbon is both necessary and urgent, in order to mitigate the risks of runaway climate change. (The fact that the US Senate is not part of this concensus, is both unsurprising and a major obstacle.)

This concensus notwithstanding, both major parties in Australia (Labor and the Liberal/National coalition) went into this month's elections with stated policies of no carbon pricing.

This is astonishing, for a number of reasons :

  • Australia is on the bleeding edge of climate change. Its extensive agricultural sector is in decline, partly because of unsustainable land management, but partly from demonstrable effects of global warming. The major cities now all have expensive, energy-hungry desalination plants in operation or in construction, because of the dramatic decline in water resources.
  • Climate change was the major political issue in the previous legislature. Public opinion was (and is) in favour of urgent action, including carbon pricing. Industry lobbied against it, but was expecting and preparing for it.

Kevin Rudd's Labor government prepared legislation on carbon pricing, but could not find a majority to approve it in the Senate. They needed the support of either the Greens or the right-wing opposition. Their proposal was too weak to win Green approval; thus, they counted on the Opposition accepting the inevitability of carbon pricing, and letting it through.

However, climate change was the reason that the leaders of both major parties got rolled, in the year before the election. When Coalition leader Malcolm Turnbull staked his leadership on allowing the legislation to pass, he lost to "climate  sceptic" Tony Abbott. Then, after Rudd ignominiously shelved the whole question until after 2012, he was ousted in favour of Julia Gillard, who pledged that she would be introducing no carbon taxes.

At the time, I interpreted this as a heavy defeat for the fight against global warming, not only for Australia but internationally. But democracy is a funny old thing...

In the event, neither party won a legislative victory: after a week of horse-trading, Gillard patched up a majority with three independents and the one Green MP in the Lower House.  In any case, she does not control the Senate : the Greens were the big winners there, and now hold the balance of power. This means that all legislation requires Green approval (or that of the Opposition) to be passed.

 Interestingly, the agreement between Gillard and the Greens is very succinct, and contains very few guarantees : they will vote confidence and supply, and on everything else they will consult. They are holding the whip hand. Let's hope they play their position wisely.

So, why did Labor back away from climate change legislation? Why did the Coalition assume the "skeptic" stance?

It is not out of the question that both were bought off by industry. Australian politics can be extremely raw and crude, and corruption is endemic.
But as far as I can tell, both parties were pandering to supposed popular sentiment against any increase in taxes. If so, they badly underestimated the intelligence of the voters.

The Greens have imposed the creation of a climate change committee, which will prepare pricing options. Clearly, the Greens will be pushing for legislation as quickly as possible, and they have the means to impose it.

This is a complete turn-around with respect to the prospects of international agreement. A decade ago, Australia was Bush's sole ally in opposing climate change action; this was a natural position for them, as an extractive economy, they saw no reason to be on the leading edge of economic sacrifice (this position has since been inherited by Canada). After tasting the reality of global warming, decisive action seemed possible, then impossible, now possible again...

There is a distinct perspective of Australia joining the leading nations (notably Europe and Japan) on climate action. This could have far-reaching consequences on the possibility of moving forward internationally.

So, what's the moral of the story? The stupidity of politicians should never be underestimated. Especially when they are Australian politicians.

Carbon pricing is a good idea, but only if it's pricing the energy value of carbon.

Carbon credits and emissions trading (ie pricing CO2) are complete bollocks IMHO, and brought to us by the same people who brought us the Credit Crunch.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Sep 30th, 2010 at 08:40:35 PM EST
(I will not rise to the bait on credits and trading. Let's see if the discussion gets off the ground, then come back to it.)

Design an emissions limitation plan for Australia, on the back of an envelope.

Here are some parameters :

* Labor's target for reduction in carbon emissions is
5 to 25 per cent by 2020

  • The Greens' target is 25 to 40 per cent by 2020.
  • The Opposition has backed away from its failed flat-earth election policy of climate denial. They now claim to want unspecified reductions, but claim it can be done for free by regulating power stations, and that it is urgent to do absolutely nothing until everyone else on earth does it first. They can be relied on to drag their feet, and their knuckles, on this issue (they declined to take seats on the climate policy committee). These people will probably be the government in three years' time.
  • The public want carbon reduction. I would guess that they will accept ambitious targets, if it can be shown that it won't cost them more than a few dollars a week.
  • The extractive industries want certainty. They currently can not make coherent investment decisions, since they don't know what the constraints will be in five years' time.

Over to you...

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Fri Oct 1st, 2010 at 05:54:05 AM EST
[ Parent ]
Step One - implement a levy in Aus $ on all carbon-based fuel sales and gradually ramp it up over a transition period.

Step Two - invest part of the resulting 'Carbon Pool' Aus $ fund in renewable energy projects (mega watts) and energy saving initiatives (nega watts) by direct investment in Units redeemable in payment for energy of all types.

This would be achieved by working with development/operating partners who receive an agreed proportional share of production or savings, or the associated revenues.

Step Three - distribute an 'energy dividend' of Units equitably to individuals and businesses.

Using this approach the recipients of Units have the choice of redeeming Units against profligate use of carbon fuels; exchanging Units for something else of value to them eg in the local shops; or of direct investment in Mega Watts of renewable energy production, or repayment of 'energy loans'  denominated in (say) kilo watt hours or equivalent, received to make (nega watt) energy saving investment.

The outcome is that Australian renewable and energy saving projects are essentially receiving value now in return for issuing Units which will cost nothing to redeem in the future. Moreover, to the extent that such Units begin to circulate as currency (which they will) there is an interest-free loan - aka seigniorage - available to finance renewable energy production and energy savings.

This approach - of monetising the intrinsic value of the energy in carbon, rather than attempting to monetise by 'fiat' CO2 which is intrinsically worthless - will IMHO achieve these targets.

This presentation to the Scottish Energy Institute set out the approach. I outlined it to a committee of the Scottish parliament, and it has received a great deal of interest up to and including ministers - watch this space.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Oct 1st, 2010 at 04:32:23 PM EST
[ Parent ]
Odds are, jobs and unemployment are also Aussie concerns. Maybe they should concentrate on making renewable energy jobs -especially wind turbine, solar hot water units for households, and solar thermal systems.

They need a Feed-in Law something fierce.

And a tax on coal and natural gas EXPORTS would also do wonders, allowing this to fund governmental operations and also some energy conservation improvements -notably more tans for urban areas and to thus displace gasoline consumption.

After that, maybe some CO2 pollution taxes can be gradually be implemented.

Anyway, try this on for size:


by nb41 on Sun Oct 3rd, 2010 at 01:09:53 PM EST

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