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Alternative to Carbon Pricing

Guest Post by Peter Lang. Peter is a retired geologist and engineer with 40 years experience on a wide range of energy projects throughout the world, including managing energy R&D and providing policy advice for government and opposition. His experience includes: coal, oil, gas, hydro, geothermal, nuclear power plants, nuclear waste disposal, and a wide range of energy end use management projects.

Below are suggestions for an alternative policy to the CPRS (the Carbon Pollution Reduction Scheme — an emission cap-and-trade system proposed by the Australian Labor government). This is not a complete energy policy, but simply some fragments for possible inclusion in a complete policy.

Aim:

1.To reduce Australia’s greenhouse gas (GHG) emissions consistent with international efforts;

2.To increase, not decrease, Australia’s international competitiveness; this will result in:

a.more jobs and better remuneration for workers

b.more wealth and better standard of living for all; and

c.more revenue to support all the things we want; such as: better Health, Education, infrastructure and fixing our most pressing environmental problems such as the Murray Darling Basin.

Increasing the cost of energy has serious negative consequences for humanity, especially the poorest peoples on the planet. A policy such as the CPRS that sets out to increase electricity costs for little or no overall reduction in world GHG emissions is negligent.

The proposed alternative would help the world by supplying products and services with less embodied emissions than now. For example, the policy proposed here would maintain Australia’s aluminium industry and its jobs and provide the aluminium with less embodied emissions than other countries can. This is just one example to illustrate the benefits of this policy, but an important one.

We do not rule out an ETS or some alternative instrument in the future, but we will not impose an ETS on Australia before the USA and we will not impose an ETS that does not protect Australia’s industry and jobs to a similar extent as the USA’s legislation. (It is not clear that the USA will implement an ETS. There are signs the USA may not take this approach to cutting its GHG emissions).

What is the policy and how will it be implemented in practice?

Electricity generation will have to do the “heavy lifting” in cutting our GHG emissions. Electricity generation causes 34% of Australia’s greenhouse gas emissions, but is capable of displacing around 50% of our emissions by 2050. It is easier to make large cuts in emissions from electricity generation than anywhere else. Furthermore, if clean electricity is low cost (as proposed here), electricity will more rapidly displace gas for heating and oil for land transport over the coming decades. Electricity will replace, to some extent, oil for land transport both directly as in electric vehicles and indirectly through synthetic fuels produced using electricity. But it is essential that clean electricity be low cost for this transition to take place as quickly as possible and to avoid the need for massive, high-cost policy interventions by future governments.

Specific policies for reducing emissions from Electricity, Heat and Land Transport are outlined below.

Electricity

To cut our GHG emissions from electricity generation we will change the “Renewable Energy Targets” to “Clean Energy Targets”.

Instead of ‘20% of energy generated by renewable energy by 2020’, the target will be: ‘20% clean energy by 2020’.

‘Clean Energy’ means a mix of electricity generators that emits less than 200 kg CO2-e/MWh (kilograms of carbon dioxide equivalent per megawatt hour) by 2020 decreasing to 10 kg CO2-e/MWh by 2050 (that is about 1% of Australia’s current emissions from electricity generation).

A ‘mix of electricity generators’ means a combination of generators that can supply power on demand.  Examples of generation systems that can deliver power on demand are:

1.fossil fuel

2.nuclear

3.hydro

4.biomass

5.wind with fossil fuel back-up, energy storage and enhanced grid

6.Wind and solar with fossil fuel back-up, energy storage and enhanced grid

Some examples of generator mixes that would meet the 2020 criteria of 200 kg CO2-e/MWh are:

1.50% hydro and 50% high efficiency Combined Cycle Gas Turbine

2.50% biomass and 50% high efficiency Combined Cycle Gas Turbine

3.50% geothermal and 50% high efficiency Combined Cycle Gas Turbine

4.50% nuclear and 50% high efficiency Combined Cycle Gas Turbine

Wind and solar cannot meet the criteria because of the emissions from fossil fuel back-up generators (Lang, 2010). Australia has little more hydro capacity available. Biomass can make a contribution but at relatively high cost. Geothermal is not yet a proven technology in the Hot Fractured Rock configuration being proposed for and tested in Australia. Only nuclear can make a large contribution to meeting our energy needs and reducing emissions substantially and sustainably.

The electricity generator companies would compete to build the new generation capacity required knowing with certainly what will be the emissions requirements for the electricity generation system for the life of their investments.  They can factor this into their financial projections for the economic life of the plant. This would not be the case with the CPRS. The CPRS rules would be changed with every change of government, with spendthrift governments always needing to collect more revenue to pay for their economic mismanagement.

Land Transport and Heat

After electricity generation, the next two major sources of GHG emissions are from burning fossil fuel for heat and for land transport.

If we establish policies that keep the cost of electricity low, then low-cost, low-emissions electricity will progressively displace fossil fuels for heat and for land transport.  Land transport will be powered by electricity either directly (e.g. electric vehicles) and/or by synthetic fuels produced by electricity.

In short:

1.With these regulations we could reduce GHG emissions from electricity generation by 80% by 2050

2.Low-emissions electricity would be provided at least cost

3.Australia could continue to be competitive in world markets

4.We would avoid a large portion of our national wealth being diverted to financial fraud and to government churn and waste

5.The rate of reducing GHG emissions from heat and land transport will depend largely on how low is the cost of low-emission electricity.

How can we get low-cost, clean electricity?

One currently available technology that can provide this is nuclear energy. Other technologies, such as geothermal and solar energy may be able to in the future but are not economic now and are a high risk to base rational policy decisions on.

Nuclear energy provides low-cost electricity in many other countries. Russia is building new nuclear plants to provide electricity for aluminium smelting for the world market. This is a clear indication that nuclear generated electricity can be amongst the lowest cost electricity in the word. If it were not, they could not produce aluminium at a price they can sell it competitively on the world market. Another example is the United Arab Emirates which has just let contracts for 5,400 MW of nuclear power stations that they claim will provide electricity at ¼ the cost of electricity generated by gas. And this is in the centre of the world’s oil regions.

To achieve low cost nuclear energy in Australia our focus must be on providing low-cost, appropriately safe and environmentally benign electricity. Nuclear generation is already some 10 to 100 times safer than coal fired electricity generation, and far more environmentally benign, so achieving this requirement is not an issue.

The Australian Government cannot be taken seriously on climate change without adopting nuclear as part of its policy. But they are unlikely to implement good policy. If they implement policies that make it a high cost option, this will defeat the purpose.

Implementation Details

This policy:

1.will cut Australia’s GHG emissions from electricity generation by 8% of current levels by 2020 and by 80% by 2050;

2.is by far the least cost option to cut emissions; and

3.will give the least cost electricity of options to cut emissions.

How will this be achieved?

1.Coal power stations will be decommissioned at the rate of 1.4 GW per year.

a.They will be decommissioned as they reach their retirement age,

b.together with a small component of government buy back in a “Cash for Clunkers” scheme

2.They will be replaced with (mostly):

a.Natural gas generation until 2020, then with

b.Nuclear and efficient Combined Cycle Gas Turbines (CCGT) until 2025, then

c.Nuclear (mostly) to 2050.

3.Coal with Carbon Capture and Storage and geothermal may play a role if they become commercially viable.

4.Wind and solar power will have only a minor role unless major technological advances are achieved

5.Some Pumped-hydro will be built using existing dams – for example by connecting existing dams in the Snowy Mountains.

Implementation

1.A project like a modern version of the Snowy Mountains Scheme initially (to about 2025) to get it through about the first 15 years;

2.A Sir William Hudson type person in charge;

3.“Early Wins” – Establish research facilities in at least one major university in every state; and

4.Research – A significant component of the research will focus on how to implement nuclear energy at least cost in Australia. [For example, how will we avoid the political, NIMBY, regulatory and bureaucratic problems that have raised the cost of nuclear in USA and EU.]

Level playing field for electricity generators

What would be a genuine level playing field for electricity generators”?

1.Remove all mandatory requirements (e.g. the Mandatory Renewable Energy Targets)

2.Remove all subsidies for electricity generation

3.Remove all tax incentives and other hidden incentives that favour one generator technology over another

4.Ensure that regulations apply equally for all types of generators. Set up a system to allow electricity generator companies to challenge anything that is impeding a level playing field

5.Emissions and pollution regulations must be the same for all industries and should be based on safety and health effects on an equal basis.

Policy implications of “Emission Cuts Realities – Electricity Generation”

Some policy implications of the paper: “Emission Cuts Realities – Electricity Generation” (Lang, 2010)

1.Mandating renewable energy is bad policy

2.If we are serious about cutting GHG emissions, we’d better get serious about implementing nuclear energy as soon as possible

3.If we want to implement nuclear power we’ll need to focus on how to do so at least cost, not with the sorts of high cost regimes imposed in USA and EU

4.We should not raise the cost of electricity. We must do all we can to bring clean electricity to our industries and residents at a cost no higher than the least cost option

5.Therefore, ETS/CPRS is exactly the wrong policy

Schedule

Following is a proposed schedule for Australia’s federal Government, noting that our next Federal budget is in May 2010.

May 2010 – Federal Budget contains funding for the following to be implemented during 2010-2011:

1.Establishment of a modern version of the Snowy Mountains Authority. Terms of Reference: to implement low emissions electricity generation in Australia such that electricity costs less than from fossil fuel generation.

2.Funding for nuclear engineering faculties in at least one university in every mainland State

3.Funding of research will be largely for the social engineering aspects of implementing nuclear energy in Australia at least cost.

2010 – Government announces policies:

1.to allow nuclear energy to be one of the options for electricity generation;

2.to remove all the impediments that favour or discriminate one generator system or technology over another;

3.that 20% of emissions will be from low emissions generator mix by 2020 and 80% by 2050. A ‘low emission generator mix’ is a mix of generators that can provide power on demand and meet the emissions limits that will be phased in and become more stringent over time. For example, the limit might be 200 kg CO2-e/MWh in 2020 and 10 kg CO2-e/MWh in 2050. The rate would decrease progressively over time – but not necessarily linearly. The rate does not apply to a single generator. It applies to a company’s mix of generators. The 2020 limit could be achieved by a mix of 50% high efficiency CCGT combined with 50% of one of the following: nuclear, hydro, biomass, geothermal, solar thermal with its own energy storage. Wind cannot meet the 200 kg CO2-e/MWh for the reasons explained here: https://bravenewclimate.com/2010/01/09/emission-cuts-realities/

4.to buy back some old coal generators at a fair price in a “cash for clunkers” scheme

5.to conduct first public awareness forums throughout Australia.

2012 – Government announces policies to:

1.allow nuclear power plants to be established in Australia and under what conditions;

2.allow States to bid to host the first nuclear power station and the conditions for selection of the state – this will include a time frame for site selection to be complete by 2013 (I know its fast, but if its urgent we need to get on with it!). In the absence of states bidding and agreeing to meet the schedule the first NPP will be build on Commonwealth owned and controlled land.

3.Establish arrangements with IAEA to act as our Nuclear Regulatory Authority until we are ready to take over.

2013 –Source selection starts for our first four or five NPPs

2014 – Contract awarded for first four or five NPPs

2015 – Construction begins

2019 – First NPP commissioned.

2020 – Second NPP commissioned, and so on,

Regarding the rates assumed here for implementing nuclear power, remember that Hanford B was built in 21 months from first breaking of ground until the plant went critical (ASME (1976). That was in 1944. Admittedly this was not an electricity generating plant, but it was the first ever large nuclear plant. If we could do that 65 years ago with the first ever, why can’t we build nuclear power plants quickly now??

References

Lang, 2010. Emission Cuts Realities – Electricity Generation

https://bravenewclimate.com/2010/01/09/emission-cuts-realities/

(please click on the link to the pdf version because it contains the footnotes, references and appendices; these are not included in the abridged version on the web)

ASME (1976). Hanford B-Reactor

http://files.asme.org/ASMEORG/Communities/History/Landmarks/5564.pdf

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By Barry Brook

Barry Brook is an ARC Laureate Fellow and Chair of Environmental Sustainability at the University of Tasmania. He researches global change, ecology and energy.

536 replies on “Alternative to Carbon Pricing”

Remove Investor Risk Premium on Nulcear – How?

This comment https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-109491 suggests an approach to implementing nuclear in Australia so it can supply electricity for a cost less than from coal. The investor risk premium is one of the major costs; this can be dealt with by the right government policies and legislation.

Here are a few suggestions on how we might remove the investor risk premium on nuclear and transfer it to fossil fuel generators.

The investor risk premium is caused because investors fear that governments are likely to change their mind about nuclear in the future so that the value of the investment and return on investment will decrease compared with what they expected. Investors also fear that the project will be delayed during construction, governments will change the rules and regulations, unions will hold them to ransom once work starts, and there will be never ending public disruption during construction and throughout the life of the plant.

How can we remove this risk premium? The most important thing the government can do is to send an unambiguous message to investors that nuclear is welcome, it is the future, the government will ensure it is profitable and the rules will not be changed, without fair compensation, once the investors have committed their investment. Here are some thoughts on how to achieve this:

1. Public contributes through taxpayer subsidies to the initial builds. This will encourage the taxpayer to be concerned about waste of money on frivolous protests and disruption. This will strengthen the government’s hand to prevent it occurring. (the subsidy for nuclear is instead of the subsidies being wasted on picking winners on renewables and energy efficiency)

2. Allow the construction companies to use non unionised labour if they prefer.

3. Ask the vendor and construction companies what Conditions of Contract are causing them to have to raise their price and what the Owner could do to reduce their price. We don’t have to accept all they say, but atr least we know what of our contract requirements are increasing the cost of the plant. Then we can make changes before the contract is awarded if we want to.

4. Remove all the legislated and regulatory impediments that favour some types of generating technologies compared with others. This would mean removing subsidies, tax breaks and other favouritism. (The NSW government is opening a new coal mine that will be owned and operated by the government to supply coal to NSW electricity generating stations. It has guaranteed it will supply coal at half price until 2030)

5. Direct the Productivity Commission to investigate and report on the distortions that favour one type of generator over another.

6. Set up a tribunal, perhaps as part the Administrative Appeals Tribunal, to adjudicate on claims that one electricity generating technology is getting an unfair advantage over any other. This will allow the distortions to be exposed, so they can be dealt with by government.

7. Fast track planning and site approval – as is being done for wind farms

8. Establish a lean, effective nuclear regulatory regime which is aimed at regulating the industry at least practicable cost for the industry and the community and keeping in mind the goal of achieving least cost low emissions electricity as quickly as possible.

9. These two links describe the costs that have been imposed on nuclear due to regulatory racketing:

http://www.phyast.pitt.edu/~blc/book/chapter9.html

http://deregulatetheatom.wordpress.com/2011/01/27/when-the-aec-became-the-nrc-nuclear-energy-stopped-growing-in-the-us/

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If we can’t have low cost nuclear – due to the Greens and environmental NGO’s anti-nuclear policies – then we will get gas, ever increasing carbon prices and ever increasing electricity prices. That is what will happen in the developed countries. In other countries, they will invest in the least cost option, coal. So the economically irrational policies in the developed countries will have negligible effect on world emissions but will further damage the economies of those countries who implement the polices forced on us by the anti-nuke brigade.

This is a currently running, Oxford style, moderated debate in “The Economist”. http://economist.com/debate/days/view/645 The clear conclusion I draw from this is if we can’t have low cost nuclear we’ll get carbon taxes, gas and high cost electricity.

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This joint report by IEA, OPEC, OECD, World Bank Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative http://www.oecd.org/dataoecd/55/5/45575666.pdf is interesting (see the Context, p4): For example:

Furthermore, subsidies provided to producers of fossil fuels may be on the order of US$ 100 billion per year (GSI, 2009). The total order of magnitude of subsidies to consumers and producers – almost US$ 700 billion a year – is roughly equivalent to 1% of world GDP (World Bank, 2009; OECD, 2008a)

OECD countries have been raising taxes (negative subsidies) on energy, mainly fossil transport fuels, in amounts exceeding US$ 400 billion (excluding Goods and Services Tax and Value Added Tax) in each of the years between 2003 and 2008; these taxes significantly affect relative end-use prices for fuels.2

Subsidies to other non-fossil-fuel energy are considerable and have been increasing over time. A rough estimate by the Global Subsidies Initiative (GSI) indicates around US$ 100 billion per year are spent to subsidize alternatives to fossil fuels. Based on this, OPEC estimates that renewable energy sources and biofuels are subsidized at a much higher rate than fossil fuels. The per unit basis subsidies to renewables and biofuels are equal to US cents 5.0 per kWh, compared with US cents 1.7 per kWh for nuclear power, and US cents 0.8 per kWh for fossil fuels.

Poorly implemented energy subsidies are economically costly to taxpayers and can damage the environment through increased emissions of greenhouse gas and other air pollutants. Recent OECD and IEA analyses indicate that phasing-out fossil fuel subsidies could lead to a 10% reduction in global greenhouse-gas emissions in 2050 compared with business-as-usual (OECD, 2009b; OECD 2010a). Several studies reviewed by the Independent Evaluation Group (IEG) of the World Bank (IEG, 2009) found that subsidies to fossil fuel use tend to benefit high-income households more than the poor, due to the former‘s higher consumption levels. According to the same study, the bottom 40% of the population in terms of income distribution received only 15-20% of the fuel subsidies in developing countries. Nonetheless, some subsidies related to fossil fuels can improve the environment or the welfare of the poor if they encourage reduced reliance on biomass in areas at risk of deforestation, and fund research into ways to sequester carbon emissions from combustion.

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Letter to the Australian today in reply to: http://www.theaustralian.com.au/national-affairs/we-risk-deep-subversion-of-climate-effort-garnaut/story-fn59niix-1225999796798

We do risk subversion on climate change (“We risk deep subversion of climate effort: Garnaut”, The Australian, p8, 4/2), but not the threat Garnaut means. The threat is from two groups. One is from the Alarmists preaching catastrophe and promoting irrational policies, such as carbon pricing. The second is the anti-nuclear forces which comprise: fossil fuel and renewable energy industries, the environmental NGOs and most of the media.

The Climate Change Alarmists want us to commit to policies, which will damage our economy, without conducting proper due diligence investigations first. Why?

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’AEMO Cost Data Forecast for the NEM’ – A Critique

AEMO contracted WorleyParsons in October 2010 to conduct a review of the ACIL-Tasman (2009) cost and performance information for existing and new entrant electricity generation technologies in the National Energy Market (NEM). The report, “AEMO Cost Data Forecast for the NEM”[1] is dated 31 January 2011:

The ACIL-Tasman report[2], ‘Fuel resource, new entry and generation costs in the NEM’, has been useful and educational. It has been the source for much of the information for several of the previous articles I have written for BNC, especially “Emission Cuts Realities”[3]

Unfortunately, the WorleyParsons (2011)[1] report seems biased towards renewable energy and towards providing support for carbon pricing. I have these main reasons for this view:

1. Nuclear is not included. It was included in the ACIL-Tasman report and it would appear it has been excluded by a policy directive, not an accidental omission. The report considers 39 electricity generation technologies, most of which are at or before the “bleeding edge” stage of the ‘technology life cycle’ 4], but not nuclear, a mature, low-carbon emissions technology.

2. The descriptions of the five scenarios selected, and the assumptions of rate of change of commodity, equipment and labour cost applied to each scenario. These seem to be biased towards producing data to support the case for a carbon price. For example, Scenario 1 has the most stringent emissions targets and yet assumes the best performance of the Australian economy, the opposite of what most would expect. Scenario 5 has the least stringent emissions targets and yet yields the worst economic performance.

3. The assumptions about the rate that costs will change as a result of ‘learning curve’, especially for the “bleeding edge” technologies like renewables and Carbon Capture and Sequestration (CCS), seem to exhibit optimism similar to previous assumptions applied to solar thermal (e.g. NEEDS (2008)[5] and Sargent and Lundy (2003)[6]). All have proved to be highly optimistic.

Below are extracts from the WorleyParsons report. The extracts are of:

1. the 39 electricity generation technologies covered in the report

2. description of the five scenarios

3. assumptions of rate of change of commodity, equipment and labour cost applied to the five scenarios

Electricity generation technologies considered

The agreed work scope was to review the 2009 AEMO data in particular the relevant cost and efficiency curves for the following generating technologies:

1. IGCC – Brown Coal
2. IGCC – Brown Coal with CCS
3. IGCC – Black Coal
4. IGCC – Black Coal with CCS
5. Supercritical Pulverised Coal – Brown Coal
6. Supercritical Pulverised Coal – Brown Coal with CCS
7. Supercritical Pulverised Coal – Black Coal
8. Supercritical Pulverised Coal – Black Coal with CCS
9. Supercritical Pulverised Coal – Black Coal Oxy Combustion CCS
10. CCGT – Without CCS
11. CCGT – With CCS
12. OCGT – Without CCS
13. Solar Thermal – Parabolic Trough with 6 hrs Storage
14. Solar Thermal – Parabolic Trough without Storage
15. Solar Thermal – Central Receiver with 6 hrs Storage
16. Solar Thermal – Central Receiver without Storage
17. Photovoltaic – PV Fixed Flat Plate
18. Photovoltaic – PV Single Axis Tracking
19. Photovoltaic – PV Two Axis Tracking
20. Wind – Small Scale (50MW)
21. Wind – Medium Scale (200MW)
22. Wind – Large Scale (500MW)
23. Geothermal – Enhanced Geothermal System (EGS)
24. Geothermal – Hot Sedimentary Aquifers (HSA)
25. Biomass – Bagasse
26. Biomass – LFG
27. Biomass – Small Waste to Energy
28. Geothermal – Enhanced Geothermal System (EGS) – Other
29. Geothermal – Hot Sedimentary Aquifers (HSA) – Other
30. Small IGCC – Black Coal
31. Small IGCC – Black Coal with CCS
32. Small Supercritical Pulverised Coal – Black Coal
33. Small Supercritical Pulverised Coal – Black Coal with CCS
34. Small Supercritical Pulverised Coal – Black Coal Oxy Combustion CCS
35. 300MW CCGT – Without CCS
36. 300MW CCGT – With CCS
37. 100MW CCGT – Without CCS
38. 100MW CCGT – With CCS
39. Wave Power

The five scenarios

For each of the above mentioned technologies, the cost curves are required to be established
according to the following five scenarios:

Scenario 1 – Fast Rate of Change
Scenario 2 – An Uncertain World
Scenario 3 – Modest Rate of Change
Scenario 4 – Independent Climate Action
Scenario 5 – Slow Rate of Change

The five scenarios may broadly be described as follows:

• Scenario 1 (Fast rate of change): successful deployment of both centralised and decentralised supply-side technologies, combined with high demand side participation, facilitates a rapid transformation of the sector to meet strong emission targets. Australia remains competitive on the global stage and reaps the benefit of strong international growth.

• Scenario 2 (An uncertain world): carbon policy uncertainty creates barriers for emerging demand and supply-side technologies. Strong international demand for Australia’s resources drives high domestic economic and population growth, resulting in high energy demand.

• Scenario 3 (Modest rate of change) International agreement on carbon reduction targets and the impact of climate change has been reached. The carbon price paths are universally adopted but are only moderate. All sectors of the Australian economy are doing reasonably well, with economic growth at intermediate levels. Moderate carbon price targets push development of new technologies along at a reasonable pace and globally some of the new low emissions technologies are maturing.

• Scenario 4 (Independent Climate Action) International agreement on climate change objectives is not reached and there is no development of and international carbon trading scheme. Climate change is impacting on agriculture and tourism and Australia chooses to move to a low carbon economy faster than its trading partners by imposing a carbon tax on its industry. Population growth and emigration is at the low end of the range and reduces economic growth in Australia.

• Scenario 5 (Slow rate of change): low domestic economic growth and population growth, driven by difficulties accessing capital, slows the rate of transformation of the stationary energy sector. Australia moves further towards a service economy, with some manufacturing and energy intensive industry moving off-shore.

Assumptions of rate of change of commodity, equipment and labour cost

3.3.1 Exchange Rate Variation
Our assumptions for the starting point for exchange rate was based on the current average rate of A$1.00=US$1.00. Therefore the starting point for all capital costs is based on the current exchange rate. Based on the description of the five scenarios we assumed that the average exchange rate variation for the five scenarios would be as follows:

Scenario A$1= US$ Scenario title
1 $0.85 Fast rate of change
2 $0.85 An uncertain world
3 $0.75 Modest rate of change
4 $0.75 Independent Climate Action
5 $0.65 Slow rate of change

3.3.2 Productivity Rate Variation
Based on the description of the five scenarios we assumed that the productivity rate variation for the five scenarios are as follows:

Scenario Productivity Rate variation Scenario title
1 1.75% Fast rate of change
2 1.45% An uncertain world
3 1.30% Modest rate of change
4 1.00% Independent Climate Action
5 0.80% Slow rate of change

3.3.3 Commodity Variation
Based on the description of the five scenarios we assumed that the commodity variation for the five scenarios are as follows:

Scenario Commodity Variation Scenario title
1 3.30% Fast rate of change
2 2.90% An uncertain world
3 2.50% Modest rate of change
4 2.10% Independent Climate Action
5 1.70% Slow rate of change

References

[1] WorleyParsons (2011) – ’AEMO Cost Data Forecast for the NEM – Review of Cost and Efficiency Curves’

Click to access 0419-0017.pdf

[2] ACIL-Tasman (2009) – ‘Fuel resource, new entry and generation costs in the NEM’

Click to access 419-0035.pdf

[3] Lang (2010) – ‘Emission Cuts Realities’
https://bravenewclimate.com/2010/01/09/emission-cuts-realities/

[4] Wikipedia – ‘Technology life Cycle’
http://en.wikipedia.org/wiki/Technology_lifecycle

[5] NEEDS (2008) – ’Final report on technical data, costs, and life cycle inventories of solar thermal power plants’

Click to access RS1a%20D12.2%20Final%20report%20concentrating%20solar%20thermal%20power%20plants.pdf

[6] Sargent & Lundy LLC Consulting Group (2003): ’Assessment of Parabolic Trough and Power Tower Solar Technology Cost and Performance Forecast.’ NREL/SR-550-34440.

Click to access 34440.pdf

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Regarding the comment above, the data in the Worley Parsons report is what AEMO is giving to modellers to use for modelling and for advice to government departments like Treasury, ABARE, Department of Climate Change.

If I am correct about the bias, and it certainly seems biased to me, then how can we expect the government departments to provide good policy advice, without fear or favor, to the government?

How can we expect the government to make good policy if it is being provided with distorted information?

To what extent is this ‘bias’ caused by the departments telling the government what they thinks the government wants to hear?

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I sent this letter to the Australian today in response to this editorial:
http://www.theaustralian.com.au/news/opinion/the-case-for-climate-action/story-e6frg71x-1226000424533

Dear Editor,

“The case for climate action” (Editorial, 5/2) says “The Weekend Australian supports a market-based approach to managing carbon”. And “…underlines how urgently the government must tackle the issue of compensation to householders and businesses”.

Why do you say that government-imposed carbon pricing and compensation is a market based approach? A genuine market-based approach would be to eradicate the policies and regulations that prevent us getting low-cost nuclear energy.

The government should ask the Productivity Commission to determine the impediments that prevent low-cost nuclear, and how they could be removed. Removing them could provide benefits equivalent to the of economic reforms of the Hawke, Keating and Howard governments.

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Garnaut ignores the option of removing the impediments to low-cost nuclear

http://www.garnautreview.org.au/update-2011/update-papers/up1-weighing-costs-benefits-climate-change-action.html

From a quick scan of the Garnaut update papers, I get the impression Garnaut has not considered the option of removing the impediments that prevent us getting low-cost nuclear. His analysis seems to assume all the impediments to low-cost nuclear that exist in the western democracies will be implemented in Australia. He does not appear to have considered what the impediments are, nor quantified their effect on the cost of nuclear relative to coal, nor suggested how they could be removed. This seems like a serious omission to me. It’s as if the whole study is being done to support an entrenched political position.

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Garnaut Update ignores ‘market-based’ alternative to carbon pricing

Garnaut ignores the option of removing the impediments to low-cost nuclear

http://www.garnautreview.org.au/update-2011/update-papers/up1-weighing-costs-benefits-climate-change-action.html

The Garnaut Update does not considered the option of removing the impediments that prevent us getting low-cost nuclear. His analysis seems to assume all the impediments to low-cost nuclear that exist in the western democracies will be implemented in Australia. He does not appear to have considered what the impediments are, nor quantified their effect on the cost of nuclear relative to coal, nor suggested how they could be removed. This seems like a serious omission to me. It’s as if the whole study is being done to support an entrenched political position.

Comments on selected statements in the overview of Paper six and Paper eight:

Paper six: Carbon pricing and reducing Australia’s emissions

The Review examined various approaches to reducing emissions. It concluded that a market-based approach, with economy-wide pricing of greenhouse gas emissions applied through an emissions trading scheme (ETS) or a carbon tax, would be cheaper than regulatory approaches to reductions in emissions.

But the Review did not consider the alternative approach of removing the impediments to low-cost nuclear. Removing the impediments to low-cost nuclear, in parallel with removing many of the impediments to business, could give productivity improvements and other benefits of similar magnitude to the reforms implemented by the Hawke, Keating and Howard governments.

Calling a government imposed carbon pricing mechanism a “market-based mechanism” is spin. A government imposed carbon pricing mechanism is another impost on business, similar to the many that COAG (Council of Australian Governments) is now trying to remove.

The following extracts are not consistent with the term “market based” mechanism. It is advocacy for government interference in the market, the opposite of “market based”.

An efficient transition to a low-carbon economy would require the price on carbon would need to be supported by public fiscal support for research, development and commercialisation of low-emissions technologies, funded out of the revenue generated by the sale of emissions permits. The Review suggested that the ETS and support for research, development and commercialisation of new technologies should be complemented by a small number of targeted policies, including assistance to low-income households and transitional support for some emissions-intensive and trade-exposed industries.

… an ETS should be legislated and its institutional arrangements established, but that it should operate with a fixed, rather than floating, emissions permit price.

The Update reflects on different mitigation policy approaches and carbon-pricing regimes. It considers the implications of Australia’s current fiscal position on the use of carbon-pricing revenue, and discusses the various potential uses of revenue, including support for technology innovation. It examines the rationale for and approaches to providing assistance to trade-exposed industries, electricity generators and households to manage the effects of mitigation policies, and to reduce the national costs of transition. This paper sets out what a fair and efficient mitigation package might look like for Australia in the current, post-Cancun world.

Paper eight: Transforming the electricity sector

The Review noted the likelihood that Australian electricity generation costs would rise rapidly even in the absence of policy to reduce greenhouse-gas emissions.

Yes. But the reason is that there has been 20 years of mucking around with many different economically irrational policies while all the time preventing the option of low-cost nuclear being considered. If Labor and environmental NGO’s had not prevented nuclear from being an option in 1990 and since, we’d have perhaps 10% of our electricity generated by nuclear by now and we’d be at the ‘settled down costs’ stage. We’d have the skills to be able to roll out nuclear at the rate of 1GW per year by now (one unit per 5-years per mainland state, on average).

and exacerbated by extraordinary increases in costs of electricity transmission.

Also due to 20 years of government interference in the electricity market, including Renewable Energy Targets forcing us to build transmission systems to be able to accommodate fluctuating power from renewable energy sources.

Regulatory measures that have been presented as instruments of emissions reduction that are already in place add to the pressures on generation costs. Recent developments show that increases in the costs of transmission and distribution of power have been even more important than increases in generation costs, and raise questions about the policy regimes within which they are occurring.

Instead of having a narrow focus on pricing carbon, we should focus on a solution that removes all the impediments that are preventing us from getting low-cost, low-emissions electricity generation. This would be rally beneficial reform. Some of the impediments to low cost nuclear are listed in the links at the end.

Much work has taken place since 2008 to prepare the National Electricity Market for the transition that will be required in the coming decades. In particular, the establishment of the Australian Energy Market Operator and analytical work on Scale Efficient Network Extensions and the 2010 National Transmission Network Development Plan address some of the concerns raised in the Review.

The changes being made in the electricity system are in response to, and caused by, an environment of government intervention and bad policy: e.g. Renewable Energy Targets and prohibition of the least-cost, low-emissions electricity generation technology, nuclear. This is part of the cause of the cost increases that will be imposed on us over the years ahead.

Reducing Australia’s emissions—such as through a carbon price—imposes costs. These costs flow through to businesses, industries, households and communities, particularly through higher electricity prices. The Update examines the distributional impacts of a carbon price, particularly on low-income people, and suggests cost-effective means of reducing regressive distributional effects.

“The Update examines the distributional impacts of a carbon price, particularly on low-income people, and suggests cost-effective means of reducing regressive distributional effects”. Interpretation: more government intervention in the market. More politicians and bureaucrats “pulling the levers” to make the market operate as they feel it should. More ‘picking winners’. More pork barrelling to win elections. More policy manipulation aimed at winning the votes of swing voters in marginal electorates.

Instead of advocating more government intervention in the market, why doesn’t Garnaut advocate reform that would reduce the cost of business, reduce the cost of electricity, and increase productivity? This could be achieved by removing the impediments to low cost nuclear and removing many of the government imposed imposts on business.

And here is a suggestion on how to do it:

1. Nuclear cheaper than coal in Australia. How?
https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-109491

2. Some impediments to low-cost nuclear
https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-86256

3, Subsidies that encourage fossil fuel use in Australia.

Click to access CR_2003_paper.pdf

4. Impediments to low-cost nuclear – Industrial Relations
https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-110185

5. The excessive cost due to regulatory ratcheting
http://www.phyast.pitt.edu/~blc/book/chapter9.html

6. Suggested Terms of Reference for a “Productivity Commission” Investigation into the impediments to low-cost nuclear
https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-109732

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For a lower-cost NPP, not an ultimately low-cost NPP, consider small modular ones now going though US NRC type approaval.

I mention
http://www.nuscalepower.com/
solely as an example. From the ppt in
Conf. on small modular nuclear reactors; Nuscale in presentation session I-P:
http://bnrc.berkeley.edu/documents/forum-2010/
they estimate $4/W. Maybe if enough are built (in factories), the price might come down to the South Korean AP-1400 cost of $3.8/W. [Either is plenty safe enough.]

If Australia commits to enough Nuscale modules, that company would probably be quite happy to have a factory in Australia with the thought of building still more modules to sell across Southeast Asia.

In any case, with sufficient enthusiasm, constuction of the Nuscale modules in AUstralia could begin as early as the beginning of 2016.

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The State of New South Wales alone is considering up to 4 GW of new baseload. That’s about 90 units of 45 MW each. These will replace or augment the Pt Piper and Bayswater pulverised coal stations. Prime candidates at the moment at combined cycle gas and supercritical coal with air cooling. However the Federal govt has just put out the frighteners by talking about a $30 carbon tax. I don’t think they’ll implement it but it puts nuclear on the table.

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David B Benson,

The vendors’ forecast costs for the small nuclear plants are not the contracted cost for an operating power station. There are many other costs and contingencies to include.

John Newlands,

As we’ve said about ten times at least, $30/MWh will not give nuclear an advantage over gas while the impediments to nucler remain. Gas will beat nuclear all the way to a $50/MWh price on carbon unless we are prepared to tackle the issue of removing the impediments to low-cost nuclear. At any price up to that, gas wins. That means gas will be built and the issue of nuclear will be put off the table (by the public) for a decade or so until the population is prepared to consider the issue again. (just as Australian Republic issue was dealt with at the referendum and has been touched since).

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Barry,
@ https://bravenewclimate.com/2011/02/04/an-environmentally-sound-energy-rich-future/#comment-111937

You said:

Peter, I’d like to discuss this and work towards it, sure. But I’m still not sure what to advocate along these lines that would have political resonance. I think most people in BNC feel the same. What to do, beyond the motherhood statement that virtually all of us would agree with? I really don’t see it as people avoiding this issue because it runs counter to their ideology. People are not tackling this issue because they don’t know how to and have nothing effective to say.

That statement suggests BNCers have accepted (wrongly IMO) that Gen II or Gen III in Australia must be higher cost than coal.

I also suspect that many BNCers do not want to tackle the issue because their loyalty to the political Parties that advocate a Carbon Price exceeds their desire to see substantive policies to reduce emissions. (Remember, carbon price in Australia means gas not nuclear, and that will be the case for a long time and until the carbon price is high).

Debating the alternative to a carbon price – removing the impediments to low-cost nuclear – means facing up to some hard choices that I expect many people just don’t want to have to face up to. Here are some of them:

• Carbon price means gas, not nuclear.

• Removing the impediments to nuclear means backing-off on the demand that ridiculously stringent safety regulations is non negotiable, no matter what the cost.

• Also non-negotiable is that the nuclear power stations must be built and operated by unionised labour, and

• anti-nuke protesters and environmental NGOs can use existing laws and legal loopholes to disrupt construction, operation and potentially force early termination of the power plant (as is happening in the USA)

• we would have to implement genuine reform that removes the favouritism to fossil fuels and renewable energy

• we’d also need to remove many other imposts on business, and

• conflicting with the attempts to remove the distortions in the energy market, we’d have to subsidise nuclear to get it established.

I suggested here https://bravenewclimate.com/2011/02/04/an-environmentally-sound-energy-rich-future/#comment-111937 a way to lead the debate with relevant expert input:

My suggestion is to ask a few suitably qualified people to write some articles.

I would suggest inviting articles from people who would not necessarily have opinions that align with the majority of BNCers. The first person I am thinking of is Alan Moran. He was a commissioner (?) of the Productivity Commission. He could write an excellent and informative article telling us how the Productivity Commission would approach the task if instructed as per the Terms of Reference I suggested here: https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-109732 which says, in part:

Terms of Reference for Productivity Commission Investigation

1. What are the impediments to low-cost, low-emissions electricity supply in Australia?
2. What could be done to remove these impediments?
3. What could be done to give Australia a secure supply of the least-cost, low-emissions, environmentally benign electricity for the next 4 decades?

Another version of the Terms of Reference:

1. Could electricity from nuclear be cheaper than from coal in Australia?
2. If so, how much cheaper?
3. What would we need to do to achieve this?
4. What are the options?
5. What are the benefits and costs, advantages and disadvantages of each option?

Next, you might ask Chris Berg, also from IPA, to write an article to respond to these terms of reference as if he was the Productivity Commission. Here is one of his articles that appeared on the ABC The Drum in December:
”Can’t compare emissions trading and reforms from the past”
http://www.abc.net.au/unleashed/42196.html

Regarding your point “But I’m still not sure what to advocate along these lines that would have political resonance”, I have a suggestion. It is that BNCers who can influence Labor Members of Parliament and Senators point out to them that imposing a carbon price is not consistent with the type of reforms the Minister for Trade, Hon Craig Emerson, MP, is advocating. He is advocating continuation of the types of reforms implemented by the Hawke, Keating and Howard governments. To be consistent with what Minister Craig Emerson is advocating, Labor should change from advocating a carbon price to advocating that Australia continue the reforms of the Hawke, Keating, Howard governments by removing the impediments to business and competition, including removing the impediments that would prevent nuclear being cheaper than coal.

Minister for Trade, Hon Craig Emerson, MP, is presenting the case in Cabinet and in public statements that the government needs to continue the economic reforms implemented by the Hawke, Keating and Howard governments. He is presenting a strong case for economically rational reforms. He wants to remove the impediments to business and free trade. He wants to remove excessive imposts on business and allow the market to do what it does best, with of course appropriate light regulations. What he is advocating is exactly what needs to be done, in my opinion. However, what he is advocating is not consistent with Labor’s policy on carbon pricing. This policy, if implemented, would add more market distortions and imposts on business – by imposing a carbon price and all the many mechanisms to redistribute wealth so as to reward Labor Party voters and bribe swing voters.

Hopefully Labor supporters can find a way to frame and present this message in a way that is acceptable to the Labor Party. Remember, a carbon price means gas not nuclear; and gas means stabilising emissions at current levels for decades not reducing them. If we want to cut emissions by 50% to 80% by 2050 or 2060, nuclear is the only option. I’ve addressed in previous posts why imposing a carbon price first and hoping we will then remove the impediments to low cost nuclear is likely to delay genuine progress on nuclear for, in the order of, a decade. We need to confront the issue of removing the impediments to low cost nuclear first, before the issue is buried under a carbon price.

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Peter at least we agree on one thing namely that the romance with gas will be temporary, See also the quotes from Climate Spectator (which I avoid) in this article http://peakenergy.blogspot.com/2011/02/australias-power-paradox.html

The article seems to agree with that we are in for gas price shocks. It occurred to me that if Australia took the unlikely step of removing the diesel rebate as requested by the OECD then the gas-for-transport push will arrive early, Truckers will pay several times what generators can live with.

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I agree with all this.

But extend your thinking to the next level. We have the choice of higher electricity costs, higher fuel costs because gas price is being pushed up because of the electricity industry demand for it, as well as only smallish cuts in emissions. That is what a carbon price will do because it will force us to gas generation.

The alternative to pricing carbon – reducing the impediments to low cost nuclear so it is cheaper than coal – will keep electricity costs lower than they would be with coal, keep transport fuels costs lower (because there is less demand for gas), cut emissions much more than gas will do, get Australia technically involved in the energy source that will supply the world this century, and most importantly, help to make nuclear cheaper than coal so it can be rolled out to the poorest countries faster (to replace coal and reduce world emissions faster).

What could be better than this.

All we need to do now is:

1. put our mind to brainstorming how to get nuclear cheaper than coal in Australia

2. Feeding information on this alternative to media, politicians and the public (from the BNC website and all who read it)

We are running out of time – again! Let’s get started.

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Another example of an impediment to low-cost nuclear

Another example of an impediment to low-cost nuclear is that nuclear generated electricity includes the cost of nuclear waste management and disposal. The disposal of toxic materials is required to be a permanent solution. But three is no equivalent requirement, to permanently dispose of the toxic chemicals and end products, placed on any other type of electricity generation technology nor on any other industry. Why is this so?

To promote discussion, I am going to argue here that the cost of permanent disposal of nuclear waste should not be included in the cost of electricity unless and until the permanent disposal of all toxic chemicals from all industries and all end use is also costed to the relevant industry.

If we adopt that policy then we do not need permanent disposal for nuclear waste until other industries are also required to dispose of all their toxic chemicals – from their full life cycle. Until then, the nuclear generated electricity should be rewuired to include only the cost of storing used fuel in containers at wherever turns out to be the least cost way to do it. In that case, the cost of nuclear waste storage amounts to the cost of preparing the used waste (or used fuel) for storage, putting it in storage, leasing the land area for storage and maintenance of the area. This would be a small cost compared with the cost to other industries of storing all their toxic wastes. Think of the cost of collecting all chemicals and storing them – just think of the magnitude and cost of this exercise. It would be totally impossible. If we can’t and won’t permanently store our chemical wastes, why do we place such extreme requirements on nuclear waste?

This brings us to IFR. The only justifications for IFR are to extend the use of the nuclear fuel available and to provide lower cost electricity than from Gen II and Gen III. If Gen IV cannot serve those two purposes then it cannot be justified. Burning nuclear waste is not necessary. It is only justified if it is cheaper to do so that to store it.

Since the state carries the cost of the uncontrolled dumping of chemicals, then the state should carry the cost of the storage of used nuclear fuel and nuclear waste.

If we want clean electricity at a cost less than coal, on a properly comparable basis, then the state should carry the cost of nuclear waste management, not electricity consumers.

I realise the emotive response this is going to bring. But I’d urge those who want to respond emotively to recognise that all the talk about radio nuclides and waste management continues to feed the antis with material for their anti-nuke campaigns and feeds the public a stream of complicated, scary stories reinforcing the view that nuclear waste is really dangerous and there is no known solution.

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An excellent article in today’s Australian discusses the situation in the electricity industry concerning investor uncertainty, lack of appropriate price signals and resulting under-investment in generating and transmission capacity.

Burnout for populist power plays
http://www.theaustralian.com.au/news/features/burn-out-for-populist-power-plays/story-e6frg6z6-1226001058940

Following are some extracts of particular interest:

Matt Zema, the managing director of Australian Energy Market Operator, which manages the national electricity market. (The NEM connects about 200 large electricity generators to about nine million users in eastern and southern Australia.)

is quoted as saying

“In big-picture terms, do we have a problem today? No,” Zema says. “The issue is: does the market have enough signals and and is there enough certainty at a policy level for people to invest for the long term? That’s where it starts to get blurry.”

The article does not suggest what the price signals should be. Reading between the lines one of them is that the price cap of $12,500/MWh should be removed. Obviously, the article is talking about the market uncertainty caused by frequent policy shifts and the uncertainty over carbon pricing (which has been ongoing for two decades). I’d argue that even if government does impose a carbon price the uncertainty will remain because industry will expect that governments will continue to intervene in the market. Changes of government, even changes of prime minster within one party, will change policy, legislation and regulations (as has been clearly demonstrated within just the last 3 years and the change of PM from Rudd to Gillard). Furthermore, what policies are going to be implemented internationally is fluid and uncertain.

But, one policy that could send the appropriate signals necessary to encourage investment in the least-cost, low-emissions electricity is to remove the policies, regulations and investor risks that are preventing low cost-nuclear energy being implemented in Australia. See up-thread for my suggestions as to how to do this.

Last year, Tony Concannon, the executive director of International Power Australia – the largest private investor in power stations in Australia – estimated that between $2.5bn and $7bn would need to be spent to reinforce the grid to connect to wind farms, and a further $9bn spent on back-up gas-fired power stations, given the intermittent nature of renewables. Concannon argued that generating power using renewables would cost between $150 to $200 per megawatt hour, compared with about $40 from today’s coal-fired generators.

Total investment required to make wind a goer is $12 to $16 billion. For that we could have 3GW to 4GW of nuclear, and real costs would decrease thereafter. That would supply around 10% to 15% of our current electricity, and do so with near zero emissions – far lower emissions than the same investment in wind and gas power.

But whatever measures politicians think up in populist bids to shield consumers from rising power bills, they are fighting an uphill battle. The RBA noted in its December bulletin that while there had been notable increases in utilities prices, further large increases would continue. And, it hints, crippling investment is anything but the answer.

From what I’ve seen over the past 20 years, I believe a carbon price will not remove the uncertainty. In fact I thinks it will continue the uncertainty that has prevented appropriate investment decisions over the past 20 years. It will push us to build lots of gas generators.

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Extract from: “Climate Adviser misses the point”
http://www.theaustralian.com.au/news/opinion/climate-adviser-misses-the-point/story-e6frg6zo-1226003951163

Unilateral mitigation would, in other words, be anti-insurance: it would increase the cost of the very risks the report paints. Faced with that possibility, the report’s own logic, of maximising net benefits to Australia taking account of uncertainties, would command a prudent decision-maker not to undertake unilateral mitigation.

This is all the more the case as postponing mitigation allows costs to be avoided, but will have little effect on benefits.

That is obviously true in the scenario in which mitigation is and would remain unilateral, as in that scenario, mitigation cannot yield benefits. However, even in the alternative scenario, in which there is eventual agreement, delay will be worthwhile so long as the costs of mitigation do not increase more rapidly than the return on alternative investments.

Historically, annual returns on capital in Australia have been around 8 per cent real. Given continued rapid progress in low emissions technologies, delay is unlikely to cause Australia’s mitigation costs to rise more quickly than that, particularly if the delay is relatively short.

Taking into account these benefits of postponement both in the scenario in which agreement is reached and in that in which it is not, the report’s logic would again tell against unilateral action.

The report avoids this conclusion by not modelling costs and benefits in the scenario in which we abate but the world as a whole does not. It ignores that scenario altogether.

This is inconsistent with the risk assessment framework it rightly recommends.

The report’s conclusions are therefore not properly made out. Until they are, its calls for immediate unilateral action, with all its costs, remain unconvincing.

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I’ve had a discussion with an authoritative source on energy economics.

I presented my argument that if we remove the impediments to low cost nuclear, nuclear generated electricity could cost less than electricity generated by new fossil fuel power stations. My interpretation of the response (with my own embellishment) is:

1. No it couldn’t. Nuclear would be too costly to compete in Australia.

2. We should keep using coal until there is world agreement on how to reduce carbon emissions.

3. Australia cannot change the world on its own, nor can it lead by example. Saying so is a display of naivety and ignorance about how international negotiations are conducted.

4. However, there is considerable support from business for a carbon tax if it will lead to stopping the continual flow of government subsidies and interventions, which are being justified on the basis they are needed to mitigate dangerous climate change.

I am becoming persuaded he is probably correct. My reasons are:

1. It is clear that almost no one in Australia would be prepared to seriously consider the sorts of changes to our systems that would be needed to allow nuclear to be cheaper than coal in Australia. I imagine this would require looking into contentious areas like our ever increasing regulation of everything, nanny state, Industrial Relations, OH&S, and much more. If BNCers are not willing to discuss any of this, as has been clearly demonstrated by the lack of response on this thread, what chance is there that the remainder of the population could discuss it rationally and objectively.

The latest figures for the cost of nuclear power in Australia (and for new fossil fuel and renewable energy power plants) are provided in this EPRI report commissioned by the government and dated February 2010.

Click to access AEGTC%202010.pdf


The figures from this report are being used for modelling by the Australian Government departments. Here are a few selected figures for 2009 in $/MWh
Nuclear = $173
Black Coal = $78 (without CCS),
Black Coal = $167 with CCS
CCGT = $97 (without CCS)
CCGT = $153 (wind CCS)
OCGT = $227 (note: OCGT is needed for wind firming)
Wind = $137 – $214
Solar thermal = $283 – $558
Solar PV = $327 – $436
Geothermal = $85 – $218
Note: The LCOE does not include the cost of back-up for intermittent, non-dispatchable, renewable energy generators, nor the cost of transmission and grid stabilisation enhancements)

2. “We should keep using coal until there is world agreement on how to reduce carbon emissions.” This article in today’s Australian, right on cue, explains: http://www.theaustralian.com.au/news/opinion/climate-adviser-misses-the-point/story-e6frg6zo-1226003951163 This explains very well, why we should not embark on economically irrational polices.

3. “Australia cannot change the world on its own, nor can it lead by example.” The article in today’s Australian (see link above)) explains clearly why this is so: “unilateral mitigation would be anti-insurance”.

4. “However, there is support from business for a carbon tax if it will lead to stopping the continual flow of government subsidies and interventions, which are being justified on the basis they are needed to mitigate dangerous climate change” – such as Renewable Energy Targets, Pink Bats home insulation programs, cash for clunkers, green car programs, green energy programs and many others. $10 billion has been committed by the federal government to such programs in just the past 3 years http://www.budget.gov.au/2010-11/content/overview/html/overview_26.htm and probably an equivalent amount has been wasted by state governments’ climate programs.

At the moment, given we are not prepared to consider what we would have to do to allow nuclear to be cheaper than coal in Australia, I lean towards doing nothing that would damage our economy until there is a world agreement.

If we can’t have nuclear cheaper than coal, we should wait until we can.

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Peter I’m already troubled by Australia’s dependence on fossil fuels. We are bullshitters and hypocrites feigning concern over emissions when Australians are the OECD’s highest per capita emitters and the world’s biggest coal exporter. Our dependence on coal is like that of a Dickens era blacksmith.

Making it worse will be when the fossil fuel system suddenly runs into trouble even without carbon taxes. Specifically
– world peak crude oil 2008
– China peak coal 2015
– gas for everything i.e. power and transport.

Therefore any country that adopts NP early will have an advantage over those who don’t. Take some pain now because there will be more pain later. It seems to me Australia is in a unique position to substantially influence world carbon flows since we can offer more yellowcake in lieu of coal and gas. As it is we are going to meekly follow other countries later on when we could be up to full speed early. As if the old time blacksmith didn’t notice the roads were getting more cars and fewer horses. Sooner rather than later we’ll be left behind.

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This topic should be closed and archived, if necessary iterating a part 2 in its place.

Loading this page took six minutes. I wonder how many will bother.

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John Newlands,

Therefore any country that adopts NP early will have an advantage over those who don’t. Take some pain now because there will be more pain later.

John, very easily said, but I haven’t seen you, in any of your comments to date, advocate us taking a serious look at what would eb required to allow nuclear to be cheaper than coal in Australia. If you are not prepared to look into this, who else would be? So I think advocating pain now is hypocritical because you are not prepared to look into the least pain way.

Did you read the article “Climate adviser misses the point”: http://www.theaustralian.com.au/news/features/burn-out-for-populist-power-plays/story-e6frg6z6-1226001058940 . It explains very well why we should not take economically irrational actions. I am persuaded by this argument, not the “Take some pain now because there will be more pain later” argument.

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Carbon pricing, what is the cost to the country?

Can someone please answer these questions and/or point me to authoritative sources where I could find the answers to them:

1. How high would the carbon price have to be to force CO2 emissions to be cut to 20% of 2000 levels by 2020?

2. What would be the effect of such carbon prices on the economy?

3. By how much would it increase the cost of living?

I would like to know the answers to these questions assuming realistic assumptions, not optimistic assumptions as I understand Treasury has used in its analyses of the CPRS.

For example, I expect we will have to replace most of our fossil fuel electricity generation with nuclear power plants. EPRI projects that the cost of electricity from nuclear is about 2.2 times the cost electricity from a new coal power station, and over 4 times the cost of current coal generation. The source is here: http://www.ret.gov.au/energy/Documents/AEGTC%202010.pdf

I understand the figures in this report are being used for modelling by the Australian Government departments. Here are a few selected Levelised Cost of Electricity (LCOE) figures in $/MWh (in 2009 $):

Nuclear = $173
Black Coal = $78 (without CCS),
Black Coal = $167 with CCS
CCGT = $97 (without CCS)
CCGT = $153 (with CCS)
OCGT = $227 (note: OCGT is needed for wind firming)
Wind = $137 – $214
Solar thermal = $283 – $558
Solar PV = $327 – $436
Geothermal = $85 – $218
Note: The LCOE does not include the cost of the fossil fuel back-up generation that is essential for intermittent, non-dispatchable, renewable energy generators, nor the cost of transmission and grid stabilisation enhancements.

I suspect the government is using optimistic assumptions for the amount of energy that can be saved by renewable energy and energy efficiency. The McKinsey report suggested that retrofitting insulating to existing buildings is one of the most cost effective ways to cut emissions (Exhibit 4, http://www.mckinsey.com/clientservice/sustainability/pdf/Australian_Cost_Curve_for_GHG_Reduction.pdf ). They argue it has a large negative abatement cost. Yet the ‘Pink Bats’ home insulation program would have cost $200 per tonne of CO2 emissions saved, and that was if the program had been successful. The program was a fiasco so the cost per tonne avoided was far higher than $200/t. If individuals had to arrange, contract and pay for retrofitting insulation themselves the cost would be much higher. And this is supposedly the lowest of the ‘low hanging fruit’. If the cost of the supposedly least cost option is so much higher than the cost the government is using in its analyses, imagine how much worse the other proposed ‘cost-effective’ efficiency measures must be.

Hence my question asks for the best estimates of cutting emissions using realistic assumptions.

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Carbon pricing, what is the cost to the country?

Treasury analysis of the CPRS says the cost of pricing carbon to achieve the Government’s target of 5% reduction below 2000 emissions by 2020 would be acceptable. But their assumptions were highly optimistic when they were done, and have been proven wrong by subsequent events. This analysis cannot be trusted.

The Grattan Institute also says that the cost to the country of pricing carbon would be small. http://www.grattan.edu.au/publications/026_energy_report_22_april_2010.pdf

This article, “Reality Check” by Roger Pielke, jr. tells a very different story. http://rogerpielkejr.blogspot.com/2011/02/reality-check.html#comment-form
It does not have the authority of the Treasury or the Grattan Institute reports, but it is interesting and worth considering.

The Australian targets imply that Australia would have to achieve the 2006 emissions intensity of Japan … by 2020 for a 5% reduction target. Japan has a highly efficient economy on several small islands with almost no domestic energy resources. Japan also operates the third most nuclear power plants after the United States and France. In other words, in many important respects Japan could not be more different than Australia in terms of the role of emissions in its economy. To think that Australia could achieve Japanese levels of decarbonization within the next decade strains credulity.

The Grattan Institute’s solution is to implement a carbon price so we move carbon intensive industries offshore. That exports the emissions elsewhere and also exports jobs and export income. This is what Europe did with its carbon trading scheme. Now their broke. Do we really want to follow that bad example.

There is a better way, in my opinion. The better way is to remove the impediments to low-cost nuclear to allow nuclear to be cheaper than coal. We are going to have to tackle this issues of the impediments to low cost nuclear sometime, so why not do it before we wreck our economy for no gain – no reduction in world emissions?

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Once we legislate a carbon tax we’re stuffed

Once we legislate a carbon tax it will not be removed – taxes are almost never removed – and this is what will happen:

The tax will be ratcheted up at almost every budget (excluding election years).

It will be used (like other taxes) to pay for profligate spending by incompetent governments and to pay for pork-barrelling to swinging voters in marginal electorates.

The tax will be ratcheted up to meet international commitments made by governments who did not realise what they were committing to.

The government has committed Australia to cut our emissions by 5% below 2000 levels by 2020. But the government has no idea how to achieve this target. So it wants to legislate a price on carbon and then ratchet it up, progressively, until they think the target will be achieved. The problem is that the 5% by 2020 target cannot be achieved at any reasonable cost. So, not knowing what they are doing they will ratchet up the tax until we are in deep recession (just like Prime Minister Paul Keating did when he sent us into the “recession we had to have” by raising interest rates to 18%).

According to “Reality Check” (http://rogerpielkejr.blogspot.com/2011/02/reality-check.html ) to achieve the targets we’ve committed to we would have to build 35 medium size nuclear power plants or 12,667 Cloncurry sized solar power stations by 2020. That would require 24 of such solar power plants coming on line every week.

This is clearly impossible at any cost.

Once we legislate a carbon price, the future is out of the electors hands. We cannot undo it. We will be controlled by the international commitments the government has made. We will be committed to a deep recession as the only way we can cut emissions, because we certainly cannot build emissions free power plants fast enough to achieve the targets. (efficiency improvements on the scale required are impossible too – see the above link to “Reality Check”.)

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Letter sent to The Australian (21 Feb 2011)

“Carbon vacuum fuels the cost of power” (p1, 21/2) says “A carbon price would ease some of the pressures on energy prices”. However, once a carbon tax is legislated it will sky-rocket because the 2020 emissions targets we’ve committed to cannot be achieved no matter how high the carbon price (ref. Roger Pielke jr. “Reality Check”).

The only way we could achieve the 2020 emissions targets is with a long, deep recession – much deeper and longer than Paul Keating’s “Recession we had to have”.

According to Pielke, to achieve the 2020 targets, we would need the equivalent of 35 mid size nuclear reactors, or 12,667 Cloncurry sized solar power stations (24 new plants per week). The cost would be hundreds of billions of dollars.

We are in this predicament because, for 40 years, we prohibited the option of low-cost nuclear power. We need to overcome this with appropriate policies. A carbon price, and resulting deep recession, is exactly the wrong approach.

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Peter as a partial answer to your 1.22 pm post economists often assume a price elasticity of -1.5 other things being equal, That is a 10% price increase causes a 15% quantity drop. Make it a 13% price increase to get a a 20% cut. A $20 carbon tax could add 2c or around 10% more to black coal fired electricity. However there are income and substitution effects as well as hidden variables that amplify over time. A more sophisticated model should attempt to take these into account which needs major computing and data collection resources.

Imposed carbon pricing is a stopgap measure as all fossil fuels will get expensive as they deplete, either in dollar terms or relative to income. That suggests pricing should ideally remain flexible. Hopefully it will lessen price shocks as seen with oil in 1974 and 2008. Some are tipping the next oil price shock will be 2012. Meanwhile China and India are scouring the globe for new coal supplies.

Recall that the NREL calculator found that under reasonable assumptions CCGT and new nuclear both came out around $100 per Mwh without imposed carbon pricing. The high figure you cite for nuclear doesn’t gel with that. Therefore even a modest carbon tax (say $10) swings the pendulum towards nuclear but public fears, long build times and so on work against it.

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John Newlands,

Thank you for the comment.

The statements in your last paragraph don’t make no sense to me. I don’t understand what your reference to the NREL and $100/MWh means. What does this statement mean ”The high figure you cite for nuclear doesn’t gel with that.”?

A $10 carbon tax will favour more gas but certainly not nuclear. https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-109405

And once a carbon price is legislated it will sky rocket and keep going: https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-112726

A carbon price, that is sufficient to cut emissions to achieve the target we’ve committed to, would cause a very deep, very long recession.

Can you provide a link that addresses the questions I asked in the post a 1:22 pm?

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page 14 here http://www.grattan.edu.au/publications/026_energy_report_22_april_2010.pdf states:

The cost of the “free” permits proposed under the draft CPRS is very substantial. The “free” permits for the industries we have studied would cost over $22bn in the next decade, with an annual cost of $2.0bn in 2012-13 rising to an annual cost of $2.7bn by the end of the decade.

We could defer most of this expenditure and achieve much greater emissions reductions by 2030 and beyond. Instead of wasting $22 billion on trying to minimise the economic damage of a carbon price, we could invest a small proportion of that amount in setting up the nuclear regulatory regime, educational facilities and getting started with building our first nuclear power plants.

A deferred expenditure of $22 billion could purchase around 5400MW of nuclear power. However, a better use would be as a catalyst and incentive to give the electricity industry surety that we do want nuclear power and investors can invest with surety that the rug will not be pulled out from under them. Used this way, $22 billion, together with appropriate reforms to remove the impediments to low cost nuclear power, could be sufficent catalyst ot get nuclear economically viable with no more subsidy required – “no more to pay!”

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Peter I don’t know the long term effects of a carbon price in terms of GDP and employment as this requires modelling way beyond my resources. However I believe if we take some economic pain now we’ll emerge stronger as a result. Think of it as giving up smoking. If China and India keep growing their emissions we can simply put a carbon tariff on their goods. We are in a weak moral position as the world’s biggest coal exporter and OECD’s biggest per capita emitter. It also makes us vulnerable to inevitable carbon price rises. Australia is not powerless to influence world carbon flows and it is in our interests to do so. Australians are hypocrites, Luddites and short term thinkers while remaining dependent on the outmoded technology of coal.

The Pielke blog doesn’t appear to attempt system modelling. Their point that we simply can’t create enough low carbon generation in time ignores the immediate benefits of greater fuel use efficiency. Low carbon baseload will obviously take longer. I’m puzzled by the reference to Cloncurry solar thermal. My understanding is that the project has been mothballed because of glare problems.

The NREL calculator is here http://www.nrel.gov/analysis/tech_lcoe.html though it seems to give different results since I last used it. To get comparison figures between CCGT and nuclear I assume both can get 7% financing with plant capacity 85% for both. I leave the O&M costs the same at the default value. In both cases I take the thermal efficiency as 40% so the heat rate is 2.5 X 3412 btu/kwh = 8,530.

For gas I take fuel cost as $5 per mmbtu or GJ, 30 year plant life and capital cost as $2,000/kw. The calculator gives a levelised cost of 6.8c per kwh. For nuclear I take fuel cost as $2 per mmbtu ($1.97 per GJ according to WNA), 50 year plant life and capital cost as $5,000/kw. The calculator gives a levelised cost of 6.9c per kwh. Without carbon taxes or price rises gas beats nuclear by a tenth of a cent! Wait til millions of trucks and cars are running on gas to see if it stays cheap.

Therefore I’m mystified how ACIL Tasman can find all these extra costs for nuclear. It would be a huge amount of work to reconcile the estimates line by line. Thus I believe Australia can and should introduce CO2 constraints in some form starting yesterday.

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John Newlands,

I am mystified by your comments. You seem to continually repeat the same things you’ve stated previously and that were dismissed previously. It is impossible to move forward if we cannot build on what has been sorted before.

Peter I don’t know the long term effects of a carbon price in terms of GDP and employment as this requires modelling way beyond my resources.

I never suggested you do your own modelling. I am suggesting you read, interpret, question, consider and weigh, with suitably sceptical mind, the reports being done by those who do have the capability.

However I believe if we take some economic pain now we’ll emerge stronger as a result.

Why? Did you understand this?
http://www.theaustralian.com.au/news/opinion/climate-adviser-misses-the-point/story-e6frg6zo-1226003951163
And this?
http://www.abc.net.au/unleashed/42196.html
And this?

Click to access 2010.36.pdf


Do you understand what Bjorn Lomborg has been saying?

Try reading them (and understanding them).

If China and India keep growing their emissions we can simply put a carbon tariff on their goods. We are in a weak moral position as the world’s biggest coal exporter and OECD’s biggest per capita emitter. It also makes us vulnerable to inevitable carbon price rises. Australia is not powerless to influence world carbon flows and it is in our interests to do so. Australians are hypocrites, Luddites and short term thinkers while remaining dependent on the outmoded technology of coal.

We can’t “simply put a tarrif” on their goods. Other countries respond in kind and the whole world goes backwards; eventually wars break out. The moral arguments of the Greenies carry no weight with me whatsoever. Moral arguments are like religion. They are based on your personal beliefs. What counts is rational analysis and policy. Symbolic gestures that the moralists keep on coming up with are a waste of money and do not achieve the real objectives (e.g. anti-nuclear, pro-renewables, many more).

The Pielke blog doesn’t appear to attempt system modelling. Their point that we simply can’t create enough low carbon generation in time ignores the immediate benefits of greater fuel use efficiency. Low carbon baseload will obviously take longer.

That is dodging the question. It also dismisses what the Pielke article says simply on the basis that it hasn’t used a modelling approach. How nonsensical is that?

I suggest, instead of making such comments about the article, you should describe how you see a carbon price cutting CO2 emissions by 160 Mt/a by 2020 without driving us into very deep depression. You don’t need a model to do that. Saying you do is simply an excuse. Energy efficiency improvements can make little dent in achieving the 2020 targets.

I’m puzzled by the reference to Cloncurry solar thermal. My understanding is that the project has been mothballed because of glare problems.

So what? You understand the point he is making. You are simply avoiding answering the question by throwing up spurious arguments to avoid addressing the issue. You can use any other of the proposed solar power stations or the operational one.

The NREL calculator is here …

Why do you continually resort to making up numbers based on of your own, unsupported assumptions and input figures? They have no credibility and I can’t be bothered going through and picking apart the many flaws in your assumptions. Why do you continually avoid trying to understand the LCOE in the ACIL-Tasman and EPRI reports? ACIL-Tasman and EPRI provide authoritative figures; they describe the assumptions and how the calculations were done. These are the figures used by the government for analysis and modelling. Why do you continually ignore them and make up your own? If you haven’t first got your head around the authoritative LCOE figures, then what is the point of making up your own? Since your figures have no credibility, the arguments that are built on your figures are unpersuasive.

ACIL Tasman and EPRI both show that gas will be cheaper than nuclear in Australia even with a very high carbon price. These analyses assume that the cost of nuclear in Australia will be roughly in line with the cost in other western democracies – i.e. high. If we want nuclear, we need to face up to the fact that we need to remove the impediments to low-cost nuclear. And, as explained in previous posts, this needs to be faced and addressed before we put a price on carbon. You have continually avoided facing up to that.

Therefore I’m mystified how ACIL Tasman can find all these extra costs for nuclear. It would be a huge amount of work to reconcile the estimates line by line.

Dodging the issue – Again! You don’t have to go through the reports reconciling line by line. All you have to do is to read any one of the reports carefully: ACIL-Tasman, EPRI, UMPNE supporting report on costs of nuclear in Australia, MIT, RAE and many others.

Thus I believe Australia can and should introduce CO2 constraints in some form starting yesterday.

This is the star comment of them all. In effect it says “I don’t understand, so I’ll just go with my gut feel and beliefs. I’ll ignore all rational analysis. Who cares about the consequences.”

Ignore all the points I’ve made in the comments above. Ignore the arguments in the links I provided. Don’t even bother to address any of it. Just go with your gut feel.

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Peter here’s how I think carbon pricing will influence decision making. Let’s assume for argument’s sake that NREL, Shell Europe and others are correct in saying that new nuclear and combined cycle gas costs are about the same. Call it $70 per Mwh. If the CCGT plant emits 450 kgs of CO2 per Mwh then a $20 carbon tax adds 0.45 X $20 = $9. Thus gas fired electricity costs $79 while nuclear remains at $70.

Several investment decisions are then possible. Existing CCGT could be run at higher capacity while planning to build nuclear baseload later on. If output needs to ramp up quickly then new CCGT plant could be built with the knowledge that NP would be more profitable for a given electricity price. In that case build the combined cycle plant now and run it at lower capacity later on when NP takes over the heavy lifting. Either way the NP build decision has to be made within a few years.

Absent CO2 penalties the new plant will be neither gas nor nuclear but coal.

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John Newlands,

Let’s assume for argument’s sake that NREL, Shell Europe and others are correct in saying that new nuclear and combined cycle gas costs are about the same.

No! let’s not make that assumption. On what basis could you justify that assumption? None of the figures I’ve seen that are applicable would support that assumption – unless you can convince me that we are ready to tackle the issue of the impediments that prevent low cost nuclear being implemented in Australia. And clearly you are not prepared to even consider that option. It is also clear that no one else on BNC is either (other than in meaningless spin and motherhood statements).

Until we are prepared to confront the issue of the impediments that would prevent us getting low-cost nuclear in Australia, you certainly cannot make the assumption you have.

The assumption is not valid. The rest of your comment is irrelevant.

You still have not said how we will cut 160 Mt/a of CO2 emissions by 2020. Efficiency improvements can do little, we can’t achieve much switching from oil to gas in the transport sector in 10 years, with high cost electricity there will be no displacement of fossil fuels by clean electricity in the direct combustion sector, there will be no reduction in fugitive emissions, so we are left with trying to get nealy all the 160 Mt/s of savings from the electricity sector by conversion of some coal to gas and wind generation. If we replace Hazelwood and one or two other power stations with gas and wind in 10 years (that’s a big ask), we’ll save perhaps 20Mt/a.

So, now tell me how we are going to save the 160 Mt/a we have committed to?

The only way to cut emissions by anything like this much is to have a really deep, sustained depression. Since the public do not realise what they are supporting (by imposing a carbon price), and the politicians don’t understand or cannot convey to the public the consequences of such a policy, the price of carbon will be ramped up in an attempt to achieve the impossible targets. By the time the government and the public realise that the targets are totally impossible to achieve, we’ll be well into a deep recession and heading downwards. Once that happens, you can kiss goodbye to all the lovely ideas about climate change being a priority issue for the public. Not only will it not be a priority, we won’t be able to afford to do nearly as much to mitigate and adapt to the many problems that confront us – not just climate change – as we could have if we’d pursued economically rational policies.

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Since Australia is Co2 obese by world standards cutting at least 100 Mt by 2020 is a fair cop. That should be evenly spread over generation, transport and direct heat with no giveaways. Some of the feared economic pain is more like a reduction in privileges so we’ll still be OK afterwards. We can drive, fly and air condition less. We can eat less meat. More like 90% not just 30% or whatever of aluminium can be remelted which means less coal in the boilers. We don’t yet know what is possible until put to the test. The carbon money can be spent on new products and industries which will boost GDP in unexpected ways.

Even after all of that GDP may still show a reduction. Then again 50C summers, future Category 6 cyclones and high depletion fuel prices don’t help wellbeing either. In any case I’m not sure Australian GDP will keep growing if and when Asian resource demand rolls back. Remember both world crude oil and Chinese coal production are now at peak. This is why I favour auctioning Co2 (absent scams) rather than carbon taxes as the price can adjust according to what the economy can afford.

I believe we can and should make major Co2 cuts commensurate with our population and lifestyle. It’s up to us to adapt as best we can because sooner or later natural forces will do it for us. If we haven’t knocked off at least 50 Mt from baseline ghg’s by 2020 then we’re not trying hard enough.

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John Newlands,

All this is about belief and moral judgements, for example.

I believe we can and should make major Co2 cuts commensurate with our population and lifestyle.

This seems to be a recurring theme of your posts.

Can you explain to me where you think the 160 MT/a emissions reduction is going to come from? Can you please answer this direct question that I asked in my previous comment. Please be specific, not just hand waving, generalities and motherhood statements. I explained in my previous comment why I think the targets are impossible to achieve without a deep recession. Please answer the question by explaing what is wriong with what I’ve said.

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I accept that 160 Mt cuts by 2020 are what we should be aiming for. We’ve done the carbon crime now we should do the time. If we are on about 580 Mtpa at present the broad possibilities are
1) 30% less CO2 for 30% less GDP vs
2) 30% less CO2 for lower or no GDP sacrifice,

The assumption seems to be that the first scenario won’t happen anyway. I’m not sure. The price of liquid fuels is certain to go up taking food prices with it and dragging down coal demand. Major man-made CO2 cuts are certain by 2050 since coal, oil and gas will be prohibitive. I think it is better to take some tolerable pain in the next decade to prevent a calamity by mid century and beyond.

Artificial carbon pricing makes the phaseout more orderly. It sets up a forced redistribution of wealth so some new economic sectors will pick up the slack. That could be small cars, efficient appliances, unsubsidised home weatherproofing, high speed rail and so on. That will claw back some jobs and GDP. Even if we can’t build any NPP between now and 2020 the build decisions can be made.

Consider the alternative; we keep burning coal and importing more oil so their depletion catches us unprepared in fits and starts. We lock in worse climate change for future generations while getting constant reminders. I think we must take some economic pain now because it’s coming sooner or later.

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John Newlands,

Your answer is all gobbldygoop to me.
Your haven’t addressed my question at all.

Specifically, where are we going to get the emissions savings from, and how?

Perhaps you haven’t understood the question or haven’t read the links I referred you to.

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Peter I shall re-examine all of your links later today. While some of us may appear to be using a ‘motherhood’ approach I suggest some critics of carbon pricing may be fixated with the short term. The long term benefits are difficult to quantify which the bean counters take a sign of weakness. They also see their own little patch not thinking it could be wiped out by a larger system collapse.

Example; suppose a tobacconist makes 87.3c profit on a packet of cigarettes. Now somebody talks about banning cigarettes. Oh no the bean counters cry, what about the sheer decency of hard working ordinary tobacconists who raise kids and support other businesses. Banning cigarettes will have no tangible benefits whatsoever and we’ll lose the 87.3c.

That’s really the essence of what I’ve read before in links opposed to carbon constraints. However I’ll read them again.

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John Newlands,

While some of us may appear to be using a ‘motherhood’ approach I suggest some critics of carbon pricing may be fixated with the short term. The long term benefits are difficult to quantify which the bean counters take a sign of weakness. They also see their own little patch not thinking it could be wiped out by a larger system collapse.

John, Thank you for this answer. I do genuinely appreciate it because it explains a lot for me. Barry doesn’t want people talking about motivations, but this does help because it explains what is the motivation behind your responses to what I’ve been saying (I believe you and other BNC regulars are avoiding this really important issue). I suspect what you have revealed in this comment is probably the motivation for most BNCers appartently not wanting to ‘open a can of worms’ by discussing the topic of carbon pricing and the alternative to it. Barry says the reason BNCers do not want to discuss the alsternative carbon pricing is that they feel they have nothing to contribute. I don’t believe that is the reason. I don’t believe it is the real reason because BNC regulars will dive in and offer their their opinions on just about every other subject. But they won’t touch the subject of the rational alternative to carbon pricing. That is despite it being the key topic for political debate this year. So I don’t buy the argument they are not commenting on this because they feel they don’t have anything to contribute. I believe people don’t want to discuss it is because doing so may threaten achieving their key objectives which I believe are a) to support Labor-Greens policy to help them to get re-elected and b) to get another symbolic gesture, another monument – for the fight against climate change. I accept this is just my perception, but perceptions are real to the person that holds them.

This perception then leads to other perceptions. I feel if people are prepared to avoid a critical debate like this, then they are not objective. If they are not objective on this, then I question whether they have been objective in arriving at their other deeply held beliefs.

Now let me return to this statement:

While some of us may appear to be using a ‘motherhood’ approach I suggest some critics of carbon pricing may be fixated with the short term.

I suggest the opposite is the case. I suggest it is those who want a carbon price, without considering rational alternatives, who are actually focused on the short term. They want a short term win by getting a symbolic gesture and don’t give a damn that by doing so they will lock in, for the long term, policies that will be another serious failure.

The Ergas article explains clearly why economically rational is the right policy for the long term. http://www.theaustralian.com.au/news/features/burn-out-for-populist-power-plays/story-e6frg6z6-1226001058940

The short term is very important. But, not the way you meant it. For me the short term means the next three months and the rest of this year which is when policies will be decided and legislation enacted. This is the time when we need to be trying to get good long-term policy in place, no bad policy. Once a carbon price is set in place there will be no turning back. Once it is in place we will not address (properly, passionately and in depth) the main issues that are preventing nuclear being cheaper than coal. So we will commit to, I suggest, at least another decade of delay in properly tackling removing the impediments to low-cost nuclear.

Once a carbon price is set in place we have committed to wealth destruction. Wealth means less funding leading to slowed growth and reduced maintenance for infrastructure, hospitals, education, and less funds to spend on the environment programs we want. Again, refer to Ergas and Bjorn Lomborg both of whom explain all this well. And also Chris Berg http://www.abc.net.au/unleashed/42196.html

John, you haven’t been able to explain how the carbon price can reduce emissions (by anywhere near the 2020 targets) other than be destroying wealth and sending us inot a deep recession or depression. Replacing Hazelwood with CCGT (with or without wind) would reduce emissions by about 12 MT/a. The target is 160 Mt/a by 2020. Where is the remainder of the cuts going to come from (specifically). We can’t get much from fuel switching in the transport sector. If we bump up electricity prices then we wont replace much fossil fuel for direct combustion. We wont reduce fugitive emissions. So where are the savings going to come from.

I’d suggest we should admit that the 2020 emissions targets are impossible without a deep, sustained depression, so we should dump them. Instead, we will base policy on economically rational policies and technological solutions that can demonstrably cut emissions. We know nuclear works because France has demonstrated it. What we need is policies to bring nuclear to Australia at a cost less than coal, asap. I’ve presented a case how this could be done here. https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-109491 There has been virtually no discussion of that suggestion.

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If $20 carbon tax gets up that will add about 2c per kwh to black coal fired electricity and 5c a litre to petrol if it is included. I agree with Ergas that the coverage should be wide and freebies kept to a minimum, Conceivably it could raise as much as 500 m X $20 = $10 bn. Think of it as wealth redistribution not wealth destruction.

If the carbon revenue was redistributed via paypackets and pensions there would be some clawback ie many would simply pay more for the same carbon. Without access to good models a rough guess is that a $20 carbon tax could cut use of coal, oil products and gas by 5-15%. That is not the 30% represented by 160 Mt. In theory low carbon products and services will get a lot of the $10 bn.

However you’re probably right 160 Mt is a bridge too far barring recession. Dare I suggest we carbon tax coal and LNG exports? That would work out at about $50/t of black thermal coal and half that for LNG. Since carbon tax is supposed to be revenue neutral the importer can ask for the money back if they promise to do green things with it. If on the other hand they get coal from Indonesia instead then we’ll just give less to Indonesia, the $400m language studies program for example.

By taxing carbon exports Australia takes the pain of either lost sales or more expensive imported goods made from formerly cheap coal. This time foreigners also get to share some of that pain. If spot thermal coal ex Newcastle goes from $140/t to $190 that could knock perhaps 80 Mt from all coal exports or nearly 200 Mt from global CO2.

So we’d cut 160 Mt easily if $20 carbon tax applied to all major domestic emission sources (incl. petrol) as well as to exports of coal and LNG.

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John Newlands,

Think of it as wealth redistribution not wealth destruction.

No. That is totally wrong. It is wealth destruction. It is a tax on energy. It is a dead weight on the economy. All economists recognise this. The question is how much of a dead weight is it and what will be the consequences. However, much of the modelling by Treasury is based on highly optimistic and demonstrably wrong assumptions. I’ve written all this up thread. Perhaps you missed it. Grattan institute starts from the Treasury’s figures for the amount of the tax so it si wrong too.

As pointed out up thread, the elasticity figures you are using are based on there being alternatives to oil coal and gas. But we don’t have them. So, to cut emissions, you have to cut GDP back to around what it was in about 2000 – but with a larger population. I am exaggerating a little, but it still means a massively deep depression for the population from now to 2020. Did you read the full Roger Pielke Jr. paper?

You still haven’t answered the question about where the emissions cuts are going to come from. There is no point in avoiding this question.

Dare I suggest we carbon tax coal and LNG exports?

No. I’ve explained to you several time why that is not possible. Please go back up thread and read these posts. Don’t just keep repeating the same ‘pub talk’ ideas that has already been shown as simplistic nonsense.

Any way, that is not even on the political agenda. What is on the agenda is RET (20% electricity supplied by renewables by 2020), a carbon price – which must go as high as is necessary to cut emissions by 5% of 2000 levels by 2020 – on a higher population. This suggests to me the only solution is a deep, long recession.

So once again, please say, specifically, where are we going to get the emissions cuts from? About 8% of the required custs of 160 Mt/a can come from 12 Mt/a from replacing Hazelwood with CCGT (with or without wind power). Where will the rest come from? Specifically, please.

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From “reality Check” by Roger Pielke Jr.

Carbon dioxide emissions = population x per capita GDP x energy intensity x carbon intensity

In 10 years we are going to increas population, and we can cut energy intensity and carbon intensity only a small amount. Therefore, we have to cut GDP, by a huge amount! Thatr measn a deep sustained depression – probably for most of the decade.

I gave you a better alternative in my last paragraph at 09:39 am. What is you objection to that alternative approach? I’d argue we will be weell ahead on emisisons cuts by 2030 and the economy a far better position to manage the many problems we have to encounter. It makes clear sense to me, why doesn’t it to you?

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Barry,

Yes, carbon price is goverment policy, the government being Labor and Greens. That doesn’t mean it is good policy, not that it should be supported by thinking people. It doesn’t mean it is the optimum way to achieve the multiple objectives we should eb striving to achieve. It may get passed becaus eof the Labor-Greens control of the Senate after July 1. But, for the reasons I’ve said on this thread, I beleive it is pretty clearly bad policy. Just because Labor Greens want it, and have all the power and money available to government to promote their agenda, doesn’t mean it is good policy. As most people realise, Labor is very poor at managing the economy and the Greens’ policies are totally irresponsible.

If this gets up, I expect it will be just one more in a string of incompetent, negligent policies imposed on us by governemtns of this persuasion.

What I find really negligent is that so many people who support this don’t even want to look at the alternatives. I am persuaded the support is not rational, but simply political.

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Barry (and anyone else that wants to provide sensible, considered comments),

I have a few questions:

1. How high will the carbon price have to go to achieve the 2020 emissions targets (5% below 2000 emissions levels, which amounts to a cut of 160 Mt/a)?

2. What would be the effect on the economy?

3. Where will the emissions cuts come from (e.g. 12 Mt/a from replacing Hazelwood Power Stations with combined cycle gas turbines (CCGT) and wind power from the total cuts required of 160 Mt/a to achieve the 2020 target)?

4. By how much would world emissions be cut if Australia achieved the 2020 targets?

5. By how much would this change the climate?

6. Would our trajectory of emissions cuts (and other benefits to society) be better served (i.e. deeper emissions cuts attained by 2030 and beyond) by taking the policy decision to remove the impediments to low-cost nuclear now, so we can rollout nuclear earlier, faster and cheaper?

7. Should all potentially viable alternatives be analysed, in a proper option analysis, before deciding on and committing to a policy and legislation?

These are intended to be sensible, responsible questions, not intended to be rhetorical. I suggest, and I presume you would agree, it would be negligent to support carbon pricing if you cannot answer these questions quantitatively.

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John Newlands,

Think of [a carbon price] as wealth redistribution not wealth destruction.

It is both wealth distribution and wealth destruction, as are all taxes. But wealth redistribution is not the primary purpose of the carbon tax. Wealth redistribution and the collection of revenue to pay for government services is done by income tax (progressive) GST (regressive and company tax (mainly). If we want to improve government services and redistribution of wealth then it should be done by focusing on these three main taxes and removing the many inefficient state and federal taxes, levees, etc. This should not be the purpose of the carbon tax.

Your statement:

Think of [carbon price] as wealth redistribution not wealth destruction.

Leads me to ask again the questions I asked here:
https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-102437

Before we implement a massive new tax scheme, such as a carbon tax or ETS, we should be sure that such a scheme will achieve the desired objective(s).
Which leads me to ask, what is the objective of the proposed ETS or carbon tax? Is it to:
1. Raise revenue?
2. Redistribute wealth?
3. Create wealth and prosperity?
4. Help poor countries to improve their standard of living?
5. Change the world’s climate?
6. Change Australia’s climate?
7. Lead the world by example?
8. Cut GHG emissions?
9. Win and hold power?
10. Act as an agent of change to help impose other agendas (hidden) on society?

Your answer is “to redistribute wealth”. That is pretty revealing.

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John Newlands,

Below are copies of three relevant comment from up thread, plus a link to one important comment:

https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-81570

Reasons why we should allow clean electricity to be cheaper than dirty electricity:
1. higher rate of economic growth
2. stronger economy
3. more and better jobs
4. faster real income growth
5. higher income for workers relative to growth in prices of products and services
6. more tax revenue
7. more funds for services such as Health, Education, infrastructure and Environment
8. faster displacement of fossil fuels for electricity generation
9. faster displacement of fossil fuels by electricity for heating and transport
10. faster reduction in CO2 emissions.

https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-81571
What do we have to do to get clean electricity?
1. educate the population to reduce the irrational fears about nuclear energy
2. Establish a regulatory environment that has a low impact on the cost of electricity
3. Remove the investor risk premium
4. Avoid/Remove/Offset the ‘First of a Kind’ costs
How?
1. Establish a “Clean Energy” faculty in at least one university in each state
2. Establish “Clean Power Australia” – a government funded agency, that is independent of political interference, like the Reserve Bank of Australia. The terms of reference for ‘Clean Power Australia’ will be something like:
a. Define how Australia should proceed to get clean energy at a cost that is cheaper than dirty energy, (fund research as necessary to achieve this objective)
b. Develop detailed implementation plans
c. Provide policy advice to government
d. Establish and oversee the Australian regulatory authority for clean power.
3. The government shall remove investor risk premium by:
a. Removing all anti-competitive regulations such as RET, RECs, FiT, subsidies, tax and other incentives
b. Removing all legislative bans on nuclear and all other disincentives
c. Legislating that any future changes of laws or government regulations, implemented by any level of government, that disadvantage the generator will be compensated.
d. The government will have a large stake in the success of the ventures. This is necessary to convince the investors that the government will act to prevent public disruption. Delays will cost the government. Best practice risk management is for the party that is best able to control the risk to carry that risk. So, all cost of delays caused by public disruption, union strikes, etc will be compensated by the government.
4. The government shall carry the ‘First of a Kind’ costs. The justification for doing so is:
a. We have been doing so for renewable energy forever
b. Society caused the delay in implementing nuclear, so society, not just the users, should carry this cost
c. Society wants the clean energy, not just the users, so society should carry this cost
d. Society wanted the cheap coal fired power in the past and has now changed its mind. It wasn’t the users who changed their mind. So society should carry the cost of the change

https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-86256

Examples of impediments and regulatory distortions to the market that are blocking nuclear in Australia are:
1. ban on nuclear power
2. high investor risk premium because of the politics
3. Renewable Energy Targets
4. Renewable Energy Certificates
5. Feed in Tariffs for renewables
6. Subsidies and tax advantages for renewable energy
7. Subsidies and tax advantages for fossil fuel electricity generators
8. subsidies for transmission and grid enhancements to support renewable energy
9. massive funding for research into renewable energy
10. massive subsidies for research into carbon capture and sequestration (CCS)
11. Guarantees that the government will carry the risk for any leakage from CCS
12. No equivalent guarantee for management of once used nuclear fuel
13. Massive subsidies and government facilitation for the gas industry, coal seam gas and coal to gas industries (despite the latter putting toxic chemicals into the ground water and the Great Artesian Basin water)
14. Fast tracking of the approvals process for wind power, solar power, gas industry, coal industry while nuclear industry remains band from even fair comparative studies by Treasury, Productivity Commission, ABARE, Department of Climate change and more. We can just imagine what the approvals process would be like for a nuclear power plant!!

And, this post that is too long to copy here:

Nuclear cheaper than coal in Australia. How?
https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-109491

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Barry,

I don’t get what you mean by the “to achieve” sequence from 8 to 3. However, I do agree with your statement “there are plenty of things missing from the list”. This is what is really important. What are they?

How can we get people to start nominating them? Then building a list, then putting them in a logical order, then estimating their effect on the cost of nuclear energy in Australia, then prioritising them in order of practicality for winding back or removing them. And, lastly, estimating what would be the LCOE of nuclear if we did remove them.

I believe that if we did remove the impediments to low-cost nuclear, as part of a wholesale removal and streamlining of unnecessary impediments to business, we could have Gen II or Gen III at a cost less than nuclear (with the catalyst stubidies I suggested here:
https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-109491

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Peter the PM seems to agree that the RET shouldn’t be necessary however that is predicated on a carbon price being in place. This is Garnaut’s thinking as well. I note in The Australian article to which you linked that SA has un-excelled with 5% contribution from rated windpower in the last heat wave. It can only be the RET that makes them want to build another 20 wind farms.

Capital assistance for a FOAK nuclear plant is a subsidy by any other name thereby inconsistent with calls to remove subsidies. Perhaps the govt could be a low key equity partner who in turn has access to soft loans. Energy Australia was originally Sydney Council. Genuinely private sector companies should get loan guarantees from the Federal govt in order to remove risk perceptions from their cost of debt.

Thus I suggest all low carbon electricity suppliers get loan guarantees as well the presumed carbon price which handicaps coal and gas. Nobody gets feed-in tariffs, RECs, quotas or mandates. Wind, commercial solar, geothermal, new hydro and nuclear will all have to compete on their merits. If the risk premium is reduced you’d think in an open market the capital would then flow to nuclear.

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Letter sent to the Australian

I beg to differ with your editorial (25/2). Uncertainty over climate policy has been a constant since 1992 and the Hawke Government’s ‘Toronto Targets’; i.e. “Australia will cut emissions by 20% below 1988 levels by 2005”.

The reason we have uncertainty on electricity prices is because nuclear has been opposed for 40 years. Until we allow the switch to low-cost nuclear – cheaper than coal – uncertainty will continue.

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Another letter sent to the Australian today:

“Political grenade defused by morphing into an economic debate” (25/2, p13). Carbon pricing cannot achieve the 2020 targets without causing a deep, sustained recession – much deeper than Paul Keating’s “Recession we had to have”.

Emissions are dependent on population, per capita GDP, energy intensity and carbon intensity. Population is growing and energy intensity and carbon intensity cannot be cut sufficiently by 2020. Therefore, to achieve the targets we’d have to cut GDP.

Australia’s targets mean we must cut emissions by 160 Mt/a (million tonnes per year) by 2020. Replacing Hazelwood coal power station with gas would save about 12 Mt/a and be complete by perhaps 2017. Where would the remaining 148 Mt/a come from? Efficiency improvements cannot achieve much and, with higher electricity prices, clean electricity will not replace fossil fuels for transport or direct combustion (e.g. gas for heating). We are left with the only way we could achieve the targets is with a very deep, sustained depression. GDP would have to be cut back to about 2000 levels – given population growth and some offset by efficiency improvements and fuel switching.

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Woops,

GDP would have to be cut to about 20% below the GDP in 2000. That is below where GDP was in the deepest part of Paul Keating’s “Recession we had to have”.

That is what the Labor Greens; and their supporters are demanding, although I admit they do not realise what they are asking for.

And all this is being advocated while proposing any due dilligence investigation.

How negligent is that?

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John Newlands,

Yes, we agree that the RET is really bad policy. I think most BNCers have reached that conclusion. Similarly, blocking nuclear for 40 years was and still is really bad policy.

Capital assistance for a FOAK nuclear plant is a subsidy by any other name thereby inconsistent with calls to remove subsidies.

True, but we’ve dealt with that at least ten times. Can we put that to bed, and move on. I’d appreciate it if you could read back over the posts on this, and if you have any remaining issues about it, let’s discuss them and put them to bed once and for all instead of continually rehashing the same old stuff.

Yes, there is a firm called “Energy Australia”. But so what? Call the thing I proposed something different if you want to. You knew what I meant. This is a nit-picking argument that the name I used for making a point has already been taken. How ridiculous. I used that name to align with “Geosciences Australia”, “Reserve Bank Australia” and the like.

Perhaps the govt could be a low key equity partner who in turn has access to soft loans. … Genuinely private sector companies should get loan guarantees from the Federal govt in order to remove risk perceptions from their cost of debt.

I agree these are some of the options. Anything like that is still a subsidy. This is what is being offered in USA, UK etc. Whatever form you want to dress it up, it is covered by what I proposed in the comment I think you are responding to. It doesn’t matter how you dress it up it is still a subsidy. And it can be justified on the basis of precedent, net benefit to society, and the cost of reversing 40 years of bad policy.

Thus I suggest all low carbon electricity suppliers get loan guarantees as well the presumed carbon price which handicaps coal and gas. Nobody gets feed-in tariffs, RECs, quotas or mandates. Wind, commercial solar, geothermal, new hydro and nuclear will all have to compete on their merits. If the risk premium is reduced you’d think in an open market the capital would then flow to nuclear.

I agree with most of this. However, you’ve dodged the important issue of the order that policies should be implemented. If we impose a carbon price before we tackle the issue of removing the impediments to low cost nuclear, we won’t tackle it fully, properly and to the extent needed.

John, you are still avoiding answering the straight questions I’ve put to you and you are avoiding considering a rational alternative to an economically damaging carbon price. The only reason I can see that you would continually avoid answering the questions is that you are obfuscating.

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Peter I’m not going to buy into whether current generation nuclear could be built cheaper. For all we know the showpiece UAE project could have horrendous delays and cost overruns. If so it will be hard to blame unions and meddling bureaucrats.

While I support certain forms of carbon pricing I fear a lot could happen in the next 16 months. Oil pundits are tipping a price shock next year which could undermine Gillard’s nerve. You’d think just the talk of carbon pricing would put the kibosh on new coal plant but the govt could go weak at the knees and say it is approved if it promises to be ‘carbon capture ready’ .

It’s not all bad. Gillard dislikes RET, Hawke and Ferguson like nuclear. BHP, AGL and Origin Energy say they can live with carbon tax.

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John,

I think you have missed or forgotten the main point of this thread. The main point is that there is a much better option than pricing carbon. It is to remove the impediments to low cost nuclear so that nuclear can cost less than coal (with a bit of assistance from us to get it over the FAOK stage – something that is normally practices to bring new industries and technologies to a country, but hopefully based on rational analysis that they will actually be profitable and need no further taxpayer subsidy once they are established).

Pricing carbon:

– will not reduce world emissions
– will damage our economy
– will leave us less able to afford to implement the best policies to deal with problems in the future
– will not assist Australia to get low cost nuclear as quickly as we could
– therefore will not put Australia in a position to be able to assist underdeveloped countries to implement low cost clean electricity
– will not set us on the path that will reduce emissions fastest and the most beyond 2030
– and will delay the rate that we can implement nuclear because once we impose the carbon price, the issue of looking into what is causing nuclear to be so costly in Australia will not be confronted (if we can’t confront it now, we certainly wont after it is covered up with a carbon price – which from what the public has been led to believe will solve the climate change issue)>

The policy is another dud Labor policy. It is a continuation of the sort of policies Labor implemented when last in government to try to win and appease the Greens. The policies are irresponsible. All you need to do is to look at it rationally, and challenge your beliefs that are based on political allegiances.

Peter I’m not going to buy into whether current generation nuclear could be built cheaper. For all we know the showpiece UAE project could have horrendous delays and cost overruns. If so it will be hard to blame unions and meddling bureaucrats.

John, that is simply an excuse for not wanting to confront the issue. There are always problems ahead. Why are you even talking about catastrophic climate change a century ahead if you can’t make rational assessments using the information available.

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Emissions Monitoring – the cost. Is this the best way?

Look at these EPA emissions monitoring and reporting requirements and consider the cost of applying such a scheme in Australia. Also consider, “is there a better way?”

1. EPA – “ECMPS Reporting Instructions – Emissions”

Click to access ECMPSEMRI2009Q2.pdf

2. EPA – “Plain English Guide to the Part 75 Rule” (Emissions Monitoring)

Click to access plain_english_guide_par75_final_rule.pdf

How large would the bureaucracy need to be to manage this?

What would be the cost to businesses of implementing and maintaining it?

The EPA has revamped the system and added new requirements every few years for the past 18 years. What would be the cost of investing in new technology and new management and reporting systems each time the regulations are updated?

What would be the cost to the taxpayer to operate the government bureaucracy, the carbon police force, the prosecuting system and the law courts and appeals system?

What would be the legal costs to the government and the businesses and industries?

Once established, such a system will have a life of its own, just like the Nuclear Regulatory Commission (which has increased the cost of nuclear by a factor of four over the past 20 years, for no real gain in safety). Regulations will keep getting added. Regulatory ratcheting will be applied just like at the EPA and NRC (http://www.phyast.pitt.edu/~blc/book/chapter9.html )

Why are we opting for this without considering the alternative?

Why do all this when there is clearly an alternative that has not been considered by the government?

The alternative is to remove the impediments that would prevent us having low-cost nuclear in Australia (at a cost similar to what nuclear costs in Asia). Removing the impediments to low-cost nuclear, as part of genuine reform to clear out much of the deadwood of regulations that are impeding business unnecessarily and for no real benefit, could give Australia not only low-cost clean electricity, but also give our economy a boost from beneficial reforms equivalent to those implemented by the Hawke, Keating and Howard governments.

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Isn’t this silly “Carbon tax fight turns to petrol”?
(Lead article on front page of today’s ‘The Australian’)

Isn’t this the opposite of what we should be doing? If we want to reduce emissions we should do the exact opposite of what the government is doing. We need clean electricity at least cost so it can more quickly be implemented and will more quickly displace oil and gas for land transport and direct combustion. To achieve this we need clean electricity at the least possible cost while raising the cost of fossil fuels used in transport and direct combustion. Low-cost nuclear is what we need.

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We need Due Diligence before we invest in AGW mitigation

We require companies to conduct a thorough and above board due diligence investigation of major investment decisions.

We should do the same before we invest what will amount to trillions of dollars of Australian’s hard earned wealth on what is likely to be another Labor Party “Tax and Waste” policy.

Due diligence:

Due diligence means “making sure you get what you think you are paying for.”
http://charlesmillsconsulting.com/due-diligence-definition.htm

The process of investigation, performed by investors, into the details of a potential investment

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How do Barry and I differ on AGW, Carbon Pricing and Energy?

It occurred to me it might help if I share what I think are the issues where Barry and I do not agree. I think we agree on most matters relating to energy, but we disagree on these points:

1. I am not persuaded that AGW is a catastrophic problem, nor that it is so urgent that we should risk seriously damaging our economy. I would want to see a thorough and impartial due diligence investigation before we risk squandering hard earned wealth on what could turn out to be really bad policies. The consequences of such policies could cause economic disruption, sustained recession, depression, and retard development of the underdeveloped countries, with all the devastating consequences to humanity that would cause. We require all our companies to do proper due diligence investigations before taking actions that would risk investor’s funds. We should require the same before we risk the country’s and the world’s wealth. No proper due diligence investigation has been done.

2. I am not convinced that pricing carbon is the appropriate policy for Australia as a first step. I believe we should not act to price carbon until two conditions have been met (i) we have removed the impediments to low cost nuclear and (ii) the main emitting countries have agreed an international mechanism for internalising the costs of emissions.

3. I am not convinced that the proposed policies to mitigate climate change will make any significant difference to the climate. I am not persuaded that we would not be better off focusing on a combination of appropriately targeted adaption measures as well as removing the impediments to low cost nuclear energy. Removing the impediments to low cost nuclear energy applies to both the impediments to the existing Gen III plants and the impediments to developing low-cost Gen IV. To achieve this would mean we should probably be focusing on building replacements for IAEA and NRC, from scratch, for Gen IV and all future generations. The new regulatory bodies’ focus should be on providing nuclear power for all peoples of the planet at the least possible cost. I believe that removing the impediments to low-cost nuclear, in combination with removing many of the other impediments to business, would provide massive benefits to the economy. Such reforms could more than offset the costs of mitigation actions. They could provide greater benefits than the economic reforms delivered by the Hawke, Keating and Howard governments.

4. I am not persuaded that the few of us in Australia who have seen the light on nuclear should be spending time advocating Gen IV – at this time. I believe our attention should be focused on attempting to convince the Government (and the population and the media) to remove the impediments to low-cost nuclear and to look seriously at the technological options for providing clean electricity at a cost less than coal.

I perceive that Barry believes AGW is of such critical importance that addressing this issue should have priority over addressing all other issues. For Barry, economics is irrelevant because he believes AGW threatens civilisation and in fact life on Earth. Barry, therefore, is disinterested in the economic consequences of the policies he supports. Barry also wants to avoid a proper due diligence investigation of the evidence for the supposed catastrophic consequences of AGW and wants to avoid proper due diligence of the policies proposed to mitigate AGW.

I do not agree. I think AGW is one of many issues confronting us and it should be assessed in a properly balanced way amongst all issues.

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I believe it would be foolish to impose carbon constraints on stationary generation while exempting transport fuels. There are several forms of interaction
– coal to liquids as done in South Africa
– electric cars charged by the coal fired grid
– tar sands as produced in Canada using gas
– CNG for light vehicles, LNG for semis.

The CTL process produces a lot of CO2 to create the heat and pressure for the Fischer Tropsch conversion. If petrol is hit 5c a litre on the basis of tailpipe CO2 then CTL should be penalised as much again for process emissions. That is the penalty should be 10c/L not 5c or zero. The coal industry will say we make liquid fuel from now on the generators can use gas.

If petrol is exempted then there will be a conga line of others wanting a special deal… steel, bricks, laundries you name it. Also 5c/L is nothing compared to looming price increases.

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John Newlands,

I agree with all you say here but would go further than what you say in your first sentence:

I believe it would be foolish to impose carbon constraints on stationary generation[energy] while exempting transport fuels.

I’d say we should not penalise electricity generation. What I’d suggest we should do is to remove the impediments that prevent us having cheap, clean electricity. We want clean electricity to substitute for fossil fuels in other stationary energy and transport. We want the substitution and transition to take place as quickly as possible. We will not do that by raising the cost of electricity. In fact, there may be unintended consequences such as causing transition from electricity to gas is some situations. I am persuaded (at the moment) it is bad policy to raise the cost of electricity, especially while we are not looking seriously at the alternative of removing the impediments to cheap clean electricity..

By the way, Stationary Energy included more than just electricity generation. It includes electricity generation, fossil fule conversion and direct combustion of fuels in industry and residential (residential includes for heating, hot water and cooking).

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John,

Also 5c/L is nothing compared to looming price increases.

I’d suggest we should be really sceptical about these sorts of figures. The price rise of transport fules and electricity will be far greater that we are being told. We are getting the spin so they can introduce the ‘Carbon Tax”. Treasureis modelling was based on wildly optimistic assumptions. IPART NSW Energy Pricing Tribunal have conducted modelling and believe the price hikes will have to be far higher. To achieve the 2020 targets of emissions 5% below 2000 levels (a cut of 160 Mt/a compared with current projections), we need to cut GDP to (very roughly) 5% below 2000 levels. And that is for a population some 20% higher than now. Efficiency improvements will achieve some cuts (around 1% pa to perhasp 1.2% pa) but without the ability to switch fuels (eg from coal to nuclear), we cannot realistically expect to achieve much improvement in the carbon intensity of the economy – unless we shift energy intensive industries and manufactruing off shore and have a very deep, sustained recession/depression.

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Peter I notice there’s only a couple of us who study the money side of things. I agree 160 Mt CO2 cuts by 2020 is the penance Australia should be aiming for since we a major carbon sinner. A less painful way to do that in terms of what I’d call ‘complicit CO2’ would be to slap carbon tax on coal and LNG exports. The importers could go elsewhere and see how they get on or make a case for a carbon tax refund refund.

In the Crikey snippet linking to Business Spectator Alan Kohler says flatly carbon tax will mean new generation is gas. I’m not sure. On the logistic side SA, Vic and Tas may have to get long term gas from Queensland. The other issue is cost.

Without looking at earlier figures suppose air cooled supercritical coal a la Kogan Ck costs $45 per Mwh but it has the same CO2 as pulverised coal. This is since air cooling erases the efficiency gain from supercritical temps. If CO2 is a tonne per Mwh then a $20 carbon tax takes it to $65. if combined cycle gas is $70 add .45 X $20 = $9 so CCGT becomes $79. Nuclear keeps looking better since both the CO2 price and the raw carbon fuel price must steadily increase.

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John,

Peter I notice there’s only a couple of us who study the money side of things.

Yes. I am absolutely startled by that. Why don’t people understand that it is the economics that decides what we can do. Peoplke understand when it comes to buying a car or a house, but they simply cannot put together that if we want to spend more on one thing in the economy, something else we want has to be cut back. If we drag the economy down, by wanting bad policies, we are in a worse position later to do all the things we want. And that means we will, inevitably, leave the planet in a worse state for future generations (unless we cull population).

I agree 160 Mt CO2 cuts by 2020 is the penance Australia should be aiming for since we a major carbon sinner.

I don’t really agree with your reason for wanting to cut by 160 Mt/a by 2020. I do agree the world must cut emissions. But I believe it should be done in the most efficient way. The most efficient way would be to have an economically efficient, international emissions trading scheme. That is a long way in the future. Until we get there, we all have to do our bit. But that does not necessarily mean that the countries with the highest emissions intensity should take the most pain. The reason I say that is because, if we did have the international ETS in place, Australia would be one of the last countries to get off burning coal. That is because we have cheap coal so it would be more efficient, for the whole world, for Australia to buy emissions permits internationally than to get off coal, until near the end of the world getting off coal.

The above is a really important concept to understand. Understanding this is a key to understanding why we should not be putting a price on carbon at this time. Instead, our entire focus should be on understanding what we would need to do to get nuclear at a cost less than coal. We haven’t even looked into it. We haven’t considered the option (seriously). Why not?

A less painful way to do that in terms of what I’d call ‘complicit CO2′ would be to slap carbon tax on coal and LNG exports. The importers could go elsewhere and see how they get on or make a case for a carbon tax refund refund.

John, you keep repeating that statement, and I keep on saying why that is not realistic and cannot be done. No one is seriously arguing for that. Why do you keep bringing it up? Haven’t you read the answer I’ve given perhaps a dozen time so far? How much do you want to spend on Defence? What do you want to give up?

In the Crikey snippet linking to Business Spectator Alan Kohler says flatly carbon tax will mean new generation is gas. I’m not sure. On the logistic side SA, Vic and Tas may have to get long term gas from Queensland. The other issue is cost.

I can’t believe you actual look at ‘Crickey’. Only Labor and Greens supporters would bother reading that and ‘GetUp’ and the other Labor-Greens web sites.

I agree with Alan Kohler. I’ve explained many times why Carbon price means transfer to from coal to gas. Yes, gas prices will rise enormously over the years ahead and electricity prices will have to also, and there may be some substitution of gas for electricity for heating and hot water, etc, – the exact opposite of what we want to achieve.

Tax on electricity is bad policy!

You keep posting your dud, guessed LCOE figures and making up the effect of a carbon price based on wrong assumptions. I can’t see any point in doing that. The LCOE figures the government is using are listed on ABARE and AEMO and come (mostly) from this report by EPRI: http://www.ret.gov.au/energy/Documents/AEGTC%202010.pdf

The EPRI report gives enough info for you to understand how they are derived. So there is no point in making up other wild guesses.

Without a carbon tax the latest projections for new entrants in Australia are:
Nuclear = $173/MWh
Black Coal = $78/MWh
CCGT = $97/MWh

Clearly, if we want low cost, clean electricity in Australia we need to tackle the impediments that are making nuclear more expensive than new coal.

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Letter sent to MPs and Senators today:

Why is the ‘Multi-Party’ Committee prevented from considering all options?

Why doesn’t the government consider alternatives to carbon pricing?

Why didn’t the government consider technological alternatives for cutting emissions?

Is it for the same reason the Labor and Greens blocked, for 40 years, what France has – low cost, clean nuclear?

Could we have electricity from nuclear cheaper than from coal if we removed all the impediments to low cost nuclear?

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Peter perhaps you can provide a basic explanation why nuclear must be 80% more expensive than gas. Here’s my approach all couched in terms of ‘sames’ and ‘doubles’ if some leeway is allowed:
.
O&M costs – same
thermal efficiency – same
fuel cost – gas is double
capex per watt – nuclear is double
plant life – nuclear is double
annual amortised capex – same
cost of capital – should be same

That’s before carbon tax. In simple terms where does the extra 80% come from?

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John,

Have you read the sections in the EPRI report, ACIL-Tasman, and others where it is all laid out. It would be far too time consuming to go through it all here. You have some assumptions locked in your mind, but me writing stuff here is not going to change them. We’d go around and around in circles forever. So can I urge you to look at these reports. They are authoritative and all are telling roughly the same story (in proprtional costs between the various generating technologies).

Just to show one example of your wrong assumptions, the capital cost of nuclear is not double that of gas. Nuclear capital cost is about 5 or 6 times higher than gas In the EPRI report I linked. I suggest if you are interest in this subject you really do need to put in some hard yards to understand these reports that are accepted by the Government as the best information available.

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I see Ziggy Switkowski is not calling for a carbon price of at least $50/t. That would more than double the current average cost of baseload generation (about $40/t).

The carbon price being described as needed just keeps escalating and it will have to go a hell of a lot higher to cut 160 Mt/a in 2020. The only solution to achieve the targets is a deep recession, as I discussed up thread.

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Unless, of course, we are prepared to bring nuclear to Australia at a cost as close as possible to the cost Asian countries are implementing them for.

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Peter I’ll try to spot key points of difference between the approaches should they become clearer. Meanwhile WNA cites studies by OECD and IEA that find CCGT and nuclear costs comparable
http://www.world-nuclear.org/info/inf02.html

Not surprisingly nuclear has the cost advantage in countries like Japan with existing nuclear and presumably no gas resources. The estimates in the per kwh table seems to mainly show nuclear and CCGT within +/- 50% of each other. If that applied to Australia and the financial risk premium was reduced it means nuclear already looks attractive.

Factor in the likely CNG boom for transport which could maybe double gas prices and even modest carbon taxes (<$20) could swing the decision. However there are still the problems of NIMBYism and the need for coastal sites.

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John,

Peter I’ll try to spot key points of difference between the approaches should they become clearer. Meanwhile WNA cites studies by OECD and IEA that find CCGT and nuclear costs comparable.

Yes, I know about the OECD and IEA cost comparisons (I’ve been following these, on and off, for at about 25 years) and many others, including the study by Martin Nicholson (and Barry and ?). But you are missing an important point. In Australia, under the existing types of political, regulatory and other risks, the costs of nuclear would be higher than in USA, Canada, UK and Europe. We need to determine what all those impediments are as the first step. (I’ve mentioned some up thread in comments some of which are listed here: https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-110262 and in more recent comments.)

I agree that gas fuel prices will rise. This is allowed for in the various comparisons of the LCOE of the different technologies in future years out to 2030. If you want to argue that all these groups have underestimated the future cost of gas, then that is a different argument.

Everyway I look at it, the issue is clear. We need to look, in detail, at what are the impediments to low cost nuclear in Australia. The fact that no one on BNC wants to consider this issue (including Barry), is mind boggling.

John, I agree with you that nuclear could and should be cheaper than coal. But avoiding looking, in detail, into what is preventing that from being the case, is not going to help to get it addressed.

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John Newlands
@ 4 March 2011 at 8:30 AM
https://bravenewclimate.com/2011/02/20/open-thread-9/#comment-113413

Perhaps we need a new thread ‘why gas may not replace coal’. Here’s why I doubt the world’s dirtiest power station Hazelwood will ever be fully replaced by combined cycle gas, carbon tax or not. The reasons are
1) gas will soon be needed to replace oil
2) key States don’t have long term gas.

Thus replacement of Hazelwood with combined cycle will enormously increase electricity costs not just now but particularly into the future due to competition for distant gas. Either the pesky carbon tax will be watered down or we will pretend that baby trees and less flatulent sheep have fixed the problem. Most likely Hazelwood will still be there puffing away in 2030. Whether this applies to new baseload stations in NSW is less clear.

You have made some intersting points here. Let’s build on this.

What this means is that, being realistic, there is not much opportunity for fuel switching, given that nuclear is off the agenda and even if it wasn’t it could not be implemented before 2020. Wind and solar will not make much contribution. Switching from oil to gas for road transport will be hugely expensive and therfore it is unlikely that much will happen by 2020. There will be a little switching from coal to gas for electricity generation as you point out, but probably not a lot.

Therefore, even with a very high carbon price, there is little opportunity for fuel switching between now and 2020. Energy efficency improvements between now and 2020 cannot achieve much either (we can’t rebuild all our buildings in 9 years, for example).

If we face up to the facts, it will be very difficult to achieve the 2020 targets of cutting 160MT/a by 2020 without a deep, sustained recession.

If we look at this equation:

Carbon dioxide emissions = population x per capita GDP x energy intensity x carbon intensity

Click to access 2010.36.pdf


we can see that we cannot do much to change the rates of change of population growth, energy intensity or carbon intensity. The one variable we can change is the GDP growth rate. So that is what the carbon price will have to do. It will have to cause a deep, sustained recession if we want to achieve the 2020 targets.

But then we need to ask the unaskable questions: “for what purpose? By how much would forcing a deep recession change the climate?” And furthermore, will setting back economic growth make it easier or less easy for us to cut emissions in future (e.g. once we have accepted nuclear and it is available at a cost less than coal).

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Now HERE is some repetition!

I forget which, but one of the 2 documentaries below made the point that as we approach peak oil we will be increasingly vulnerable to the internal domestic disputes of the tiny oil providers. When a 1% provider becomes unstable and the price starts to super-spike, what does it say about how tight the supply demand gap is? Yet you deny we’re near peak oil while ranting about a tiny tax. Phew! Something’s a bit off in your priorities mate.

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EN,

The topic of this thread is “Alternative to Carbon Pricing”. Could I urge you to post your comments about Peak Oil on the appropriate thread (the one you wrote the lead article for). Once done, perhaps you could ask Barry to delete the two ‘off topic’ posts. (hoping you will oblige)

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Hi Peter,
*I know* this thread is all about your precious politics. It’s why I posted here. ;-) One just can’t ignore $100 a barrel hey? ;-)

How about I just leave friendly reminders of the *geology* of peak oil on this thread, just for you, as the price rises and dips and rises again in the coming years. Let’s say every $10 or so. I won’t be as consistently vicious and paranoid and bitchy as you have been, nor as busy. You’ve really outdone yourself repeating the same mantra till BNC readers’ eyes bleed with it!

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Peter I agree that 160 Mt CO2 cuts by 2020 is what Australia should be aiming for since we are morbidly obese in emission terms. I also agree that such large cuts will cause severe economic pain. I’ve suggested we could spread that pain by slapping the carbon tax on coal and LNG exports. I think others will point this out when/if the carbon tax arrives in 2012.

No-one can yet quantify the effect of declining crude oil production so we might be in trouble by 2020 regardless. Our main customer China might implode. Secondly gas replacing brown coal is not the only form of improbable fuel switching. I doubt either efficiency or renewables could achieve 30% primary energy replacement within a decade. Only a reduction in overall consumption can achieve that short term.

If the carbon tax gets up and it is $20+ with full coverage (petrol etc) then these things should become painfully obvious. Nuclear is the only low carbon energy source which can plug the gap but in the longer time frame. I see Prof. John Quiggin is going to explain on his blog why he thinks otherwise. To some extent we will have to live off our fat for another decade. During that time we will think seriously about what can replace not just 30% of our primary energy but eventually 80%. If it takes a stiff carbon tax to force this realisation then bring it on I say.

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John Newlands,

You keep on repeating the same points that I’ve refuted upthread. If you want to repeat them after they’ve been refuted, then surely it is up to you to provide argument to support them, not just repeat them again and continually repeat that it is your belief. I’ve posted well supported arguments, in many comments on this thread, as to why a carbon price in Australia, before two conditions are met, will not achieve the government’s (or BNCer’s) objectives. I’ve asked questions of BNCer’s. The questions have not been answered (sensibly), and the arguments have not been refuted. Therefore, I am remain persuaded that they are correct. In short, carbon pricing is bad policy and is not the way we should proceed to achieve the stated objectives. The objectives of all significant stakeholders can be achieved with an alternative policy, as I have argued on this thread.

Peter I agree that 160 Mt CO2 cuts by 2020 is what Australia should be aiming for since we are morbidly obese in emission terms.

The target, 160 Mt CO2 cuts by 2020, is impossible to achieve without a deep, sustained recession or depression. The consequences of that would be really bad for Australians. Such a policy cannot be sustained, politically, so it will not happen. We should junk the carbon pricing idea now and get on with explaining, promoting and then implementing a rational policy.

I also agree that such large cuts will cause severe economic pain. I’ve suggested we could spread that pain by slapping the carbon tax on coal and LNG exports.

It is pleasing to note that at least someone on BNC is prepared to acknowledge the economic pain that the carbon price to achieve the 2020 targets would entail.

I have a few problems with your second sentence.

Firstly, you have made the same statement many times upthread. Each time you’ve made the statement I’ve explained why it is not possible. You haven’t refuted what I’ve said by explaining how it is possible, so I say your statement is refuted.

Secondly, it is not on anyone’s agenda. The government is pushing for improvements in infrastructure to allow more coal to be exported and the Minister for Climate Change, Greg Combet, said, yesterday, “coal jobs are safe with Labor”. Furthermore, Industry Minister, Martin Fergusson has said “nuclear is off the agenda” and Australian Labor Party National President, Anna Bligh, said last week “nuclear is too expensive”. Labor has no intention of cutting back on coal exports or coal jobs. So what is the carbon tax for?

Secondly, why are you avoiding considering, seriously, the economically rational alternative to carbon pricing?

No-one can yet quantify the effect of declining crude oil production so we might be in trouble by 2020 regardless.

If you believe this, why are you arguing for a carbon price? Why would we need a carbon price if we are going to run out of oil anyway? Anyway you look at it there is no sound argument to support the carbon tax. It won’t change the climate at all, it won’t cut world emissions, but it will severely damage Australia’s economy. Meanwhile, you are not prepared to seriously consider the rational alternative policy for cutting emissions. The ongoing avoidance of considering rational alternatives, and continually trying to make up arguments to support a carbon tax, does not give me confidence that the alternative has been given due and proper consideration.

I doubt either efficiency or renewables could achieve 30% primary energy replacement within a decade. Only a reduction in overall consumption can achieve that short term.

I agree. And a reduction in overall consumption means recession. Why not be honest and say it. Many people believe that causing a recession or depression is not the way to achieve sustainable cuts in emissions. It is a politically unsustainable policy. And why even advocate it, when there is a far better way? The better way is what has been laid out in many comments on this thread – and never refuted!!

If the carbon tax gets up and it is $20+ with full coverage (petrol etc) then these things should become painfully obvious. Nuclear is the only low carbon energy source which can plug the gap but in the longer time frame. I see Prof. John Quiggin is going to explain on his blog why he thinks otherwise. To some extent we will have to live off our fat for another decade. During that time we will think seriously about what can replace not just 30% of our primary energy but eventually 80%. If it takes a stiff carbon tax to force this realisation then bring it on I say.

John, I fully realise that this is the argument you, Barry and others are making to support the case for carbon pricing. However, it does not make sense to me. You must remember the pain that Paul Keating’s 1990’s recession caused to people. What you are advocating would be far worse than that. How can forcing a deep, long recession on the population be a politically sustainable policy? It cant!

Paul Keating called it “the recession we had to have”. Are you saying we have to have a recession to stop global warming? And are you arguing for this deep, long recession without even considering the alternatives to a recession? And it appears you are arguing for a recession without being able to demonstrate that the next “recession we have to have” will have the slightest effect on the climate.

Why advocate such a draconian solution without considering the economically rational solution? It is this question that I would really like you to answer. Why won’t you put aside arguing for a carbon price until you have seriously considered the alternative. Anyone who refuses to consider alternatives before arguing for their pet solution is not objective in my opinion.

So please tell me: why are you avoiding considering the rational alternative to carbon pricing?

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////It is pleasing to note that at least someone on BNC is prepared to acknowledge the economic pain that the carbon price to achieve the 2020 targets would entail.////

I’ve already admitted as much you buffoon. But the Carbon Tax is such a *small* threat compared to the inevitable geology of ever declining oil production that it’s like getting your knickers in a knot over a wave at the beach jumping up and wetting your pants when in the distance you can see a Tsunami heading your way!

PS: I can’t believe you actually asked me to limit my hobby horse to one thread? How hypocritical of you! Your ‘economic rationalism’ burns through your fevered mind with such zeal that it has blinded you to that primary human condition we call self-awareness. You barge into every other thread on this site like a bull in a China shop. You have screamed *insane* accusations at everyone — including the blog host — and left your suspicious, sulking paranoid taint over every discussion here.

If you’re allowed to do it, why can’t I? ;-)

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Carbon Pricing is bad policy

Chris Berg, on ABC The Drum:
http://www.abc.net.au/unleashed/42196.html

Henry Ergas, ”Climate Adviser misses the point”
http://www.theaustralian.com.au/news/opinion/climate-adviser-misses-the-point/story-e6frg6zo-1226003951163

Roger Pileke Jr., ”Reality Check”
http://rogerpielkejr.blogspot.com/2011/02/reality-check.html

Roger Pileke Jr., ”An evaluation of targets and timetables of proposed Australian emissions reductions policies”

Click to access 2010.36.pdf

Henry Ergas, ”Unilateral action creates costs without benefits”
http://www.theaustralian.com.au/national-affairs/unilateral-action-creates-costs-without-benefits/story-fn59niix-1226013133637

Gary Johns (Minister if previous Hawke-Keating Labor government), ”No happy ending for carbon tax fairytale”
http://www.theaustralian.com.au/news/opinion/no-happy-ending-for-carbon-tax-fairytale/story-e6frg6zo-1226014940249

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Peter I don’t subscribe to most of your arguments for cheaper NP. You hold up the UAE contract terms as an example to be followed yet we don’t know yet if they will get close. Some have suggested mini NPPs but the proposed new baseload stations at Mt Piper and Bayswater in NSW are each around 2 GW. So we’ll need our own UAE scale project probably before theirs is half built. My suggestion for lower cost nuclear is for governments to help reduce the perceived financial risks, not the physical risks.

On fossil fuel depletion and gas as a substitute for both coal and oil this is a difficult prediction problem. It could work out that oil reaches a plateau of $150 a barrel (as in 2008) and the world economy shrinks in sync with declining volume. Moreover some believe that China’s domestic coal production is peaking now and that imports cannot fill the gap. That has knock-on effects to manufacturing output and other raw material demand. All kinds of scenarios have a ring of plausibility. That’s why I think the CO2 price should be flexible once reduction targets have been set.

What distinguishes humans from dinosaurs is that we are supposed to see problems coming. If we simply exhaust fossil fuels then we’ll have both excessive warming and under-investment in alternative energy sources. Imposed carbon pricing should help solve both problems. Some short term pain is better than a long term disaster.

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John Newlands,

Peter I don’t subscribe to most of your arguments for cheaper NP. You hold up the UAE contract terms as an example to be followed yet we don’t know yet if they will get close.

John, this is a fair point. (Although, as an aside I’d like to clarify that I am not “holding up UAE contract terms as an example we should follow”). If we can get into discussing what you believe is wrong with the alternative to carbon pricing I’ve proposed, then I’d feel more comfortable that we are actually considering it, instead of simply avoiding it and arguing for carbon pricing. So let’s leave the carbon pricing aside for a while and let’s look at the alternative to carbon pricing.

If the UAE contract can’t get close and EPRI is saying that nuclear in Australia would cost 2.2 times the cost of new coal (without tax), and gas generation is only a little more costly than coal, then it means that nuclear cannot compete even with a carbon price. That means we do not have any feasible solution. However, I am not convinced this is the case. I agree nuclear is not viable as long as the enormous public resistance remains. The resistance causes the many impediments to low cost nuclear to remain in place. However, I believe if I could persuade BNCers to seriously tackle this issue we may be able to attract some bright and knowledgeable people to expose what they know about what are the impediments and how they could be removed. What I really want is for the government to ask a genuine, non partisan question of the Productivity Commission. The question is: “what are the impediments that would prevent Australia implementing nuclear at the least possible cost of electricity? How could they be removed”

An alternative framing of this question is:

What would we need to do in order to implement nuclear energy in Australia at an LCOE less than from new coal?

Since we cannot direct the government to ask this question of the Productivity Commission, all we can hope to do is to have a really intelligent and positive (solution oriented) brainstorming session in a public forum such as BNC. You just never know where this might lead. And you may convince me I am wrong, but that won’t happen if we (by which I mean the best brains BNC can attract) don’t give this a really good, honest try.

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Now John,
If you keep making sense like this Peter might get off his bandwagon. That would be tragic, as I’ll miss out on the satisfaction of seeing Bob Brown paraphrase Peter’s arguments as:

“Cheaper Older Nastier Unsafe Nukes for Australia”. Then I wouldn’t get to say “Told you so”.

////On fossil fuel depletion and gas as a substitute for both coal and oil this is a difficult prediction problem. It could work out that oil reaches a plateau of $150 a barrel (as in 2008) and the world economy shrinks in sync with declining volume. Moreover some believe that China’s domestic coal production is peaking now and that imports cannot fill the gap. That has knock-on effects to manufacturing output and other raw material demand. All kinds of scenarios have a ring of plausibility. That’s why I think the CO2 price should be flexible once reduction targets have been set. ////
Good argument. Kjell Alektlett actually thinks the price barrier is closer to $100 a barrel, and said as much at Barry’s Environment Institute talk (if I remember correctly). So we might be closer to the beginning of the “Greater Depression” than we think.

////What distinguishes humans from dinosaurs is that we are supposed to see problems coming. If we simply exhaust fossil fuels then we’ll have both excessive warming and under-investment in alternative energy sources. Imposed carbon pricing should help solve both problems. Some short term pain is better than a long term disaster.////
Agreed! But John, you’re wasting your time. Even though Peter says he has worked in energy infrastructure he wears such strong ideological blinkers that Peter will not admit peak oil until he cannot fill up because the rationing has started.

So once again I expect Peter to twist this thread around to “OMG the CARBON TAX IS THE END OF CIVILISATION AS WE KNOW IT!” because if the sea splashes your pants now it makes you blind to the Tsunami bearing down on you.

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///What would we need to do in order to implement nuclear energy in Australia at an LCOE less than from new coal?///

How about — gosh I don’t know — we do something like put a price on carbon? This could then fund Gen3 nukes.

Japanese consumers pay twice as much as we do for electricity, yet they don’t look quite like Somalia. They look *something* like a first world economy. ;-)

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John Newlands,

Continuing my reply to your comment @ 5 March 2011 at 12:14 PM:

My suggestion for lower cost nuclear is for governments to help reduce the perceived financial risks, not the physical risks.

I agree. I’ve been saying this for a long time. But I got howled down by everyone on BNC – even Barry.

I’d go further. It is not just the perceived financial risks. It is the actual costs that are caused by our regulatory environment. If reducing the financial costs and financial risks requires backing off on some requirements that are being justified on the basis of perceived but unjustifiable improvements in safety, then we should do what is needed to reduce the costs. An example of a requirement that may be justified as necessary for safety reasons but would increase the cost, would be to require that the NPPs must be located far from major cities. That causes a cost increase but the additional safety is not justified in my opinion because the nuclear plant is already much safer than the coal plants it would replace. The decision on siting should be made on purely objective criteria. There should be no bias that favours fossil fuel generation, or any other type of generation, over nuclear. There should be no bias against nuclear. If we can build a coal or gas plant near a city it should be 10 to 100 times more acceptable (meaning easier to get siting approval) to build a nuclear plant near a city (because nuclear is 10 to 100 times safer than coal). This is just one example, so let’s not get sidetracked into discussing siting. The point I am making is that we need to remove all the impediments that are preventing us building nuclear at least cost in Australia. What are they? We need to get the list as a first step

On fossil fuel depletion and gas as a substitute for both coal and oil this is a difficult prediction problem.

I agree. So let’s put it aside. We could spend forever crystal ball gazing. It gets us nowhere.

That’s why I think the CO2 price should be flexible once reduction targets have been set.

All these arguments for a carbon price I find unpersuasive while we continue to avoid looking at the alternatives. To me, carbon price means economic pain (as you have agreed) fo no gain. You have not been able to show that there is any benefit to be gained for the pain. The economic pain makes us less able to take the appropriate actions in the future. If you disagree with these statements of mine you really do need to show why. You need to be able to refute the several articles I linked in the earlier comment this morning.

What distinguishes humans from dinosaurs is that we are supposed to see problems coming.

Are you implying that economically irrational people are dinosaurs?

If we simply exhaust fossil fuels then we’ll have both excessive warming and under-investment in alternative energy sources

That is not going to happen. It is a silly comment. It doesn’t take economically irrational people, imposing their irrational beliefs on society and trying to regulate everyone to the way they think the world should be run, to make the right decisions. We will get to the right decisions. But imposing a carbon price is not necessarily the right policy. In fact, I believe it is definitely the wrong policy until the two caveats I’ve stated upthread have been met. In the meantime, the right decision is an economically rational one – part of which is to remove the impediments to low cost nuclear.

Some short term pain is better than a long term disaster.

The problem with this statement is that it is bound up in your beliefs. Firstly, the pain is very real, as Keating’s Recession demonstrated. What you are advocating would be much worse than Keating’s Recession. And, as the GFC demonstrated, once the economy retracts, there is little apetite to tackle far off problems. This should be pretty obvious, no?

Secondly, it is not clear that the pain will produce any gain – it is not clear the carbon price will have any effect on the climate. Thirdly, we probably can and should achieve the goals without causing the pain (or as much pain). To avoid even considering the alternatives is highly negligent, IMO.

Lastly, many are not convinced that the “disaster” you talk about is a realistic description. The more the Alarmists repeat their mantra and refuse to hear what the doubters are saying the more the dounters are turned off by what they interpret as exaggeration, alarmism, hype, spin and ideology.

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Peter Lang
how about you chase up the Bezyond Zero Emissions claim that the Japanese pay twice as much for electricity?

With all your foaming at the mouth about a Carbon Price, how they pay this much and remain a functioning civilisation I cannot guess. ;-)

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Peter what you are saying is that Cyclone Yasi, the Brisbane floods and the Victorian bushfires are for wimps. They only came with 0.8C of warming not 4 or 5C.

I think you may get your wish for no effective carbon pricing. All the signs point that way
– Combet has assured his coal industry mates they have nothing to fear
– any State politician who supports carbon pricing gets defeated
– Ferguson has been told to pull his head in and make gurgling noises about wind and solar
– Garnaut wants to pay nice green farmers not the nasty brown kind.
I’d say carbon pricing will be near irrelevant in its final form.

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EN I think Alkelett is saying all liquid fuels will be down from about 90 million to 65 million barrels a day by 2030. Others say the decline rate will accelerate due to various factors. Opinions vary on peak coal and gas but the biggie is China with 3.2 Gt of annual coal consumption declining as of now. Some with access to general circulation models say this will limit warming to 2.6C, which is still horrific.

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That’s interesting about Chinese coal as it hasn’t hit the wiki yet. What study are you thinking of?

Here’s the wiki quote:
http://en.wikipedia.org/wiki/Peak_coal

The People’s Republic of China is the world’s largest coal extractor and has the third largest reserves after Russia and the United States. The Energy Watch Group predicts that the Chinese reserves will peak around 2015.[4] The EWG also predicts that the recent steep rise in production will be followed by a steep decline after 2020. The US Energy Information Administration projects that China coal production will continue to rise through 2030.[8]

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Hi Peter, while we’re talking Carbon Prices, a wise man I know just wrote the following and unlike you had it published in this thing we call a Newspaper. Response?

////The largest source of Australia’s emissions of climate-changing greenhouse gases is coal combustion to generate electricity. As long as coal represents the cheapest source of energy, it will continue to be used. There are only two real options for altering this current reality. One is to put a price on carbon emissions, to drive up the cost of coal and other fossil fuels. The other is to drive down the cost of alternative energy sources through new technology and more targeted investments to bring scale and focus to energy planning.

I’d argue that both approaches are necessary and vital.

A steadily rising carbon price, either via a simple tax or a more elaborate emissions trading system, is critical for triggering change and driving novel strategic planning. If it is certain that energy costs will rise under a business-as-usual scenario, then governments, markets and individual consumers will all seek lower-cost alternatives. Without it, we will simply default to the devil we know (coal and gas). The starting carbon price need not be high, but it must form a long-term commitment and it must be known that it will rise over time.

With a carbon price in place — or indeed before, if possible — we must clear the floor for all alternative energy technologies to compete, on a fair and level playing field. This means including nuclear power in addition to renewables, in the commercial portfolio of options. With a price on carbon in place, it is essential that we seek lowest-cost abatement, and have available to us proven energy sources for delivering low-carbon, baseload electricity.////

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Or as Fran says in the Open Thread…
****

It’s amusing that Australia can introduce a value-added tax (the G&ST) of 10% and not be down the toilet 10 years later, but a similar style of charge gathering a quarter of the amount of the G&ST for possibly 3 years, with compensation in a period of a tight employment market and with full compensation will lead to ruin, according to resident let-the biosphere-be-industry’s-free-sewer activist Peter Lang.

Why is he more bothered by a small rebated VAT than a large unrebated biospheric sewer?

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John Newlands,

Peter what you are saying is that Cyclone Yasi, the Brisbane floods and the Victorian bushfires are for wimps. They only came with 0.8C of warming not 4 or 5C.

That is getting down to a really low level of silliness. Surely you don’t expect any reasonable person to believe the Yasi Cyclone was due to AGW, do you? Do you swallow Bob Brown’s line that it is was due to the coal miners? You are really getting desperate with this sort of argument.

I think you may get your wish for no effective carbon pricing. All the signs point that way
– Combet has assured his coal industry mates they have nothing to fear
– any State politician who supports carbon pricing gets defeated
– Ferguson has been told to pull his head in and make gurgling noises about wind and solar
– Garnaut wants to pay nice green farmers not the nasty brown kind.
I’d say carbon pricing will be near irrelevant in its final form.

Then clearly, the best thing to do is to drop it now and move to developing and implementing rational policy. Why are you still opposed to even considering it?

It is important that no carbon price be implemented until the two preconditions I’ve mentioned up thread are achieved. The reasons are explained upthread. But one of them is that once a carbon price is implemented it will be raised by future governments and will become just another source of revenue. It will be used by incompetent governments for “tax and waste”, to cover up the incompetence of spend thrift governments and for pork-barrelling (handouts at elections to swing voters in marginal electorates). It will also be used as another excuse to redistribute wealth to suite the supporters of the party in power. So, I do not want a carbon price in any form until after the two preconditions have been met. The preconditions are: (i) we have removed the impediments to low-cost, low-emissions electricity generation (e.g. nuclear) and (ii) the main emitting countries have agreed to an economically efficient, international mechanism to internalise the costs of greenhouse gas emissions.

The points I’d urge you to consider are:

1. Carbon pricing needs to be very high to achieve the 2020 targets – high enough to cause a very deep, very long recession.

2. Such a retrenchment of the economy will have devastating consequences for real people – much worse effects than Paul Keating’s “The recession we had to have”.

3. Taking this pain will make absolutely no difference to the climate. So a lot of pain for no gain.

You seem to be advocating and supporting a carbon tax because you don’t want to consider the economically rational alternative. Clearly you are squirming every way possible to avoid considering this alternative.

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Barry said:
@ https://bravenewclimate.com/2011/02/20/open-thread-9/#comment-113487

I’d argue that both approaches are necessary and vital.

With a carbon price in place — or indeed before, if possible — we must clear the floor for all alternative energy technologies to compete, on a fair and level playing field. This means including nuclear power in addition to renewables, in the commercial portfolio of options. With a price on carbon in place, it is essential that we seek lowest-cost abatement, and have available to us proven energy sources for delivering low-carbon, baseload electricity.

I have a few points to make:

1. It is interesting to note that Barry makes this comment on the “Open Thread” and yet has avoided, for over a year, presenting his arguments or discussing the issue on the “Alternative to Carbon Pricing” thread.

2. The arguments I have been presented on the “Alternative to Carbon Pricing” thread have been ignored and Barry has simply restated his position on the “Open Thread”.

3. Barry says “With a carbon price in place — or indeed before, if possible …” but has never argued to look into the “before” route. In fact he has not supported even considering it.

4. Barry has not answered the point I’ve made many times that once the carbon price is in place it will be extremely difficult to get public or political focus on what we would need to do to get the level playing field. It just won’t happen if we tackle it after we’ve implemented the carbon price. We will always have high cost nuclear

5. Barry has not explained why we should proceed with the carbon price before we tackle removing the impediments to low cost nuclear.

6. Barry says: “With a carbon price in place — or indeed before, if possible …” But where has Barry ever argued to look in to the “before if possible” route? Has Barry ever made any attempt to pursue it? It strikes me this is one of those add in lines to divert attention, but he has made no attempt to support it.

7. Barry has not argued how a carbon price can cut emissions sufficiently to meet the 2020 target of 160Mt/a (or anywhere near it) without causing a very deep, prolonged recession. I’ve asked the question repeatedly and it has been ignored (by everyone)

8. Barry has not answered my question about what effect would implementing a carbon price in Australia have on the climate.

9. Barry has not explained what is wrong with the arguments in the articles I listed here: https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-113462

10. Barry has not answered these questions: https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-112962

Barry (and anyone else that wants to provide sensible, considered comments),

I have a few questions:

1. How high will the carbon price have to go to achieve the 2020 emissions targets (5% below 2000 emissions levels, which amounts to a cut of 160 Mt/a)?

2. What would be the effect on the economy?

3. Where will the emissions cuts come from (e.g. 12 Mt/a from replacing Hazelwood Power Stations with combined cycle gas turbines (CCGT) and wind power from the total cuts required of 160 Mt/a to achieve the 2020 target)?

4. By how much would world emissions be cut if Australia achieved the 2020 targets?

5. By how much would this change the climate?

6. Would our trajectory of emissions cuts (and other benefits to society) be better served (i.e. deeper emissions cuts attained by 2030 and beyond) by taking the policy decision to remove the impediments to low-cost nuclear now, so we can rollout nuclear earlier, faster and cheaper?

7. Should all potentially viable alternatives be analysed, in a proper option analysis, before deciding on and committing to a policy and legislation?

These are intended to be sensible, responsible questions, not intended to be rhetorical. I suggest, and I presume you would agree, it would be negligent to support carbon pricing if you cannot answer these questions quantitatively.

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Peter it may turn out the carbon tax is a dud with too many escape clauses. However if 2013 is a climate shocker as Barry suggests the blame game will on asking why we didn’t take decisive measures. Therefore I would be wary of advocating inaction as the mob will be looking for scapegoats. Here’s a couple of parallels to the argument for unilateral carbon pricing by Australia

1) the marginal effect of voting
A single vote usually has a tiny influence on the result. However the voter hopes to be part of a bandwagon effect. If Australia adopts carbon constraints that is a powerful signal to other countries which may amplify the effect.
2) compulsory superannuation
Many people will not save for retirement or hold naive ideas about living off the land or whatever. Governments are justified in forcing people to save since they will be blackmailed into assuming the burden anyway. Same goes for retirement of the carbon economy.

I’m suggesting that Australia can justify going it alone on carbon pricing for those two reasons i.e. the demonstration effect and to prepare for an inevitable low carbon future. In fact we are not really that minor if you include coal exports which we supposedly control. 400 Mt of domestic and exported coal times ABARE’s conservative CO2 multiplier of 2.4 comes to nearly a Gt of CO2. The world annual total was 30 Gt when I last looked yet Australia has just 0.3% of world population.

Major CO2 cuts are both in our own interests and our responsibility.

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I’d like to provide some supporting comments to this point I made in the previous post:

4. Barry has not answered the point I’ve made many times that once the carbon price is in place it will be extremely difficult to get public or political focus on what we would need to do to get the level playing field. It just won’t happen if we tackle it after we’ve implemented the carbon price. We will always have high cost nuclear.

The Greens, the environmental NGO’s and the government are all arguing for a carbon price but none are arguing for a level playing field for electricity generation. In fact, a week or so ago, the Greens forced the government to reinstate the subsidies for the ridiculously uneconomic and economically irrational Solar power program.

None of these groups are arguing for a level playing field for electricity generation. They are all arguing for renewable energy targets and subsidies. The federal and state government are subsidising Underground Coal Gassification. The NSW government is subsidising coal for NSW electricity generators – the NSW government is opening up a new, government owned and government operated coal mine and has guaranteed to supply coal at about half commercial price for 20 years to NSW power stations.

There is no sign the government or any of the other groups that are arguing for a carbon price would want to look into levelling the playing field for electricity generators. There is no indication that any of these groups – or Barry or BNCers – are interested in looking into removing the impediments to low cost nuclear power.

So, Barry’s afterthought “ or indeed before, if possible” does not seem to have any genuine desire to try to achieve it, or even to look into it.

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John Newlands,

Peter it may turn out the carbon tax is a dud with too many escape clauses. However if 2013 is a climate shocker as Barry suggests the blame game will on asking why we didn’t take decisive measures. Therefore I would be wary of advocating inaction as the mob will be looking for scapegoats.

You are still avoiding looking at the alternative. You are dodging and weaving all over the place. The arguments in you latest posts seem to be clutching at straws. To me they are really sill, the last straw you can try to puill, and, in truth are just avoidance. Please address these points:

The points I’d urge you to consider are:

1. Carbon pricing needs to be very high to achieve the 2020 targets – high enough to cause a very deep, very long recession.

2. Such a retrenchment of the economy will have devastating consequences for real people – much worse effects than Paul Keating’s “The recession we had to have”.

3. Taking this pain will make absolutely no difference to the climate. So a lot of pain for no gain.

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@ John,
let’s not forget a third reason for the Carbon Tax, which is general efficiency. While I agree that it is entirely appropriate to consider the ‘Swing’ effect in our nation joining the EU in putting a price on carbon and the other matters you raised, remember the magic of the marketplace. Once a price is specifically attached to carbon it may or may not change business practice, but it will also help create a low carbon culture. My sister-in-law has a Phd in Ecocity design and can visualize cities that use half, a third, a quarter… even an eighth of today’s energy to run and maintain. Think walk- ability, public transport, and a Dense and Diverse city plan that is more European than Europe. Imagine buying nice shoes instead of nasty cars. Is this just crazy hippie crap or a new cultural reality? According to Prof Peter Newman it’s already a growing reality!
http://www.abc.net.au/rn/scienceshow/stories/2009/2571785.htm

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