Guest Post by Martin Nicholson. Martin studied mathematics, engineering and electrical sciences at Cambridge University in the UK and graduated with a Masters degree in 1974. He has spent most of his working life as business owner and chief executive of a number of information technology companies in Australia. He has a strong interest in business and public affairs and is a keen observer of the climate change debate and the impact on energy. He is author of Energy in a Changing Climate, as well as an upcoming book on sustainable energy systems, and is the lead author of the 2011 paper in the journal Energy “How carbon pricing changes the relative competitiveness of low-carbon baseload generating technologies“.
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The Australian Government Treasury modelling of a carbon price shows that Australia must purchase the benefits of overseas abatement efforts if it is to meet its emission reduction target by 2050. That is, foreign abatement will be required to supplement domestic abatement efforts. If more domestic abatement were available, fewer foreign credits would be needed. As an example, the analysis here shows that for the core Treasury policy scenario, Australia could save up to $185 billion net in abatement costs by 2050 if 25 gigawatts of nuclear generation capacity were built instead of building new fossil fuel generators.
In July 2011, the Australian Government Treasury released its report titled Strong Growth, Low Pollution – Modelling A Carbon Price . Treasury modelled a range of scenarios which explored different environmental targets and design features in a carbon pricing scheme.
To deliver Australia’s electricity supply over the period to 2050, the Treasury modelling assumes a mix of renewable and fossil fuel technologies. To conform to current government policy, the Treasury modelling excludes any contribution from nuclear power in Australia. Here we model a technology scenario for Australia without that imposed constraint. The main finding is that including nuclear power in the abatement portfolio would make Australia much less dependent on overseas abatement credit purchases and would save the economy up to $185 billion.
For simplicity, we will consider the core policy scenario in the Treasury modelling where a carbon price is introduced in 2012, moving to a flexible price cap-and-trade scheme in 2015. The core policy assumes the world takes action to stabilise greenhouse gas concentration levels at around 550 ppm by around 2100. Although some will argue that this stabilised concentration level needs to be much lower, this core policy from Treasury provides a reasonably credible mid-range scenario, and provides for Australian emission reduction targets to be 5 per cent below 2000 levels by 2020 and 80 per cent below 2000 levels by 2050.
For Australia to achieve these reduction targets, the Treasury modelling shows that in addition to domestic emission reductions, Australia will need to purchase abatement permits from overseas. Our analysis of the Treasury modelling shows that it will be necessary to purchase a total of 9,100 Mt CO2-e of overseas permits by 2050 at a cost of $716 billion.
The focus of this analysis is to consider whether some of this cost of purchasing overseas permits could be saved by investing some of that money in nuclear power to further reduce domestic emissions. Reducing domestic emissions negates the need for overseas permits, and is more easily verifiable as actual reductions.