Australia is set to introduce a carbon tax (details to be released on Sunday 10 July 2011). This post is the place to discuss this policy — the good and the bad.
A description, from the Australian Parliamentary Library:
A carbon tax is a tax on energy sources which emit carbon dioxide. It is a pollution tax, which some economists favour because they tax a ‘bad’ rather than a ‘good’ (such as income). Carbon taxes address a negative externality. Externalities arise when an individual production or consumption activity imposes costs or benefits on others. In market transactions, these costs and benefits are not normally reflected in the prices involved in the transaction, or taken into account in the transaction decision.
By placing a cost on these negative externalities the underlying purpose of a carbon tax is to reduce emissions of carbon dioxide and thereby slow global warming. It can be implemented by taxing the burning of fossil fuels—coal, petroleum products such as petrol and aviation fuel, and natural gas—in proportion to their carbon content.
There is some political support for a carbon tax in Australia as a means of implementing a carbon price. Some groups favour this approach as an interim step on the way to an Australian emissions trading scheme.
Here is what I (Barry Brook) said about Australia’s proposal a while back, in response to the 2011 update papers of the Garnaut Climate Change Review :
Garnaut has elaborated and updated his report in line with the latest science and lack of effective action nationally and globally. But the bottom line, in my opinion, remains the same. We need to scrap the renewable energy target (RET), Renewable Energy Certificates (RECs) and feed-in tariffs (FiTs), set a low initial carbon tax at about $10/t, establish an equivalent of the Board of the Reserve Bank to manage the tax and set future prices, and have some legislated schedules (gateways) such as a floor price of $20/t by 2015, $30/t by 2020, and so on. The rising price – with short-term decisions taken out of Government hands to avoid distortions arising from political expediency – is absolutely key. Finally, and in line with eliminating the RET and FiTs, we need to really level the energy playing field and allow nuclear to compete with renewables and fossil fuels with carbon-capture and storage (CCS).
Here is a useful description of some other carbon prices worldwide (Finland, The Netherlands, Sweden, India, Norway, Denmark, Switzerland, Ireland, Costa Rica).
Australia is proposing an initial carbon tax, followed some years later by a cap-and-trade system. What is the difference? Here is a brief summary (my perspective, with bad points in red and good points in green):
- Politicians or bureaucrats set costs – inefficiencies and pressure
- No guarantee that emissions will fall
- Clear forward price projection = investment certainty
- removes incentives for hedge funds, derivatives etc.
- better allows for long-term business planning
- Can use current tax system
- Better handles emission-intensive trade-exposed industries via import/export carbon tariffs/refunds
- Cap reductions ensure falling emissions – in theory
- Reduce inefficiencies or overpricing
- Creates both incentives and disincentives for abatement
- Chance to profit from ‘doing the right thing’
- Enrich middle men / brokers
- Requires army of bureaucrats / new system
- Encourages rent seeking – pleading by special interest groups
- Limited price certainty – requires projected ‘gateways’
Here are some further details about the history of the discussion here in Australia:
Australia has considered both cap-and-trade schemes and a carbon tax. In 2007, the Productivity Commission suggested that a carbon tax should be implemented.
On 30 April 2007, the state Labor Governments commissioned the Garnaut Climate Change Review, whose sponsorship was joined by the Rudd Government soon after taking office in December 2007. The resulting report, delivered on 30 September 2008, recommended an Emissions trading cap-and-trade system. Subsequently the Rudd Government proposed a Carbon Pollution Reduction Scheme, which after much criticism, was voted down in the Australian Senate by both the Australian Greens (for being too ineffective), and the conservative Coalition (Australia) (for the effect on key economic sectors), as well as independent Senators Nick Xenophon  and climate change sceptic Steve Fielding.
In February 2010, the Australian Greens proposed an interim carbon tax of $A23 a tonne for two years. In April 2010, academics from the Australian National University published a proposal for a carbon tax on major polluters (such as coal-fired power stations and oil companies) that would provide increased funding for Australian public hospitals and other health costs associated with climate change.
On February 24, 2011, Australian Federal government announced a framework to implement a Carbon Tax from July 1, 2012. It is set to be implemented over 3–5 year period upon which it will switch to a cap and trade system. The price has not been set but various proposals have been discussed in the recent past, such as $23/t and $26/t. The announcement came after an agreement between the Federal Labor government, the Greens and two Independent MPs and included commitments to ensure all funds collected go back to homes and businesses to assist in the transition to renewables. This led to accusations that Prime Minister Julia Gillard had breached a pre-election promise not to introduce such a tax where she stated to Network TEN: “There will be no carbon tax under the Government I lead”. The Leader of the Opposition, Tony Abbott, has called for an election over the issue.
On June 5, 2011, the Say Yes demonstrations were held in which 45,000 people demonstrated in every major city nation-wide in support of a price on carbon pollution. Many demonstrations have also been held around the country and in regional towns against the proposed Carbon Tax, albeit to a lesser extent.
For more discussion and critiquing on BNC on the topic of emissions cap-and-trade, carbon taxes and other proposals like fee-and-dividend, please consult the following posts:
Carbon tax or cap-and-trade? The debate we never had
Fee-and-dividend is superior to cap-and-trade for effective carbon emissions reductions
Hansen to Obama Pt II – Carbon tax with 100% dividend
Are voluntary actions meaningful where an emissions cap is introduced?
How to make voluntary carbon offsets a reality
CPRS vs carbon tax: Senate Inquiry
I look forward to some vigorous discussion below. Please restrict all discussion here to issues related to carbon prices, and equally, cease any such discussion on the Open Threads.
350 replies on “Carbon tax in Australia in 2011”
I am with Peter Lang on this one.
Huon suggests that the benefit of the carbon tax is high.
Pray explain what benefit you imagine and who will be receiving it.
Thanks for the question. The chief environmental benefit is the avoidance of AGW; a secondary (though very real) benefit is the reduction of coal’s other environment costs from mercury, SO2 and so on. (Google: coal’s hidden costs top $345 billion in U.S..) We would all be beneficiaries.
I like Robert Lawrence’s two questions, which I might rephrase as follows:
1. Is AGW likely a threat?
2. According to economic theory, what is the best way to reduce emissions?
Huon, I have no objection to rephrasing those those questions in that way.
I just got an email from Bob Brown with a summary of the negotiated package: $10 Billion to be invested in renewable energy! This raises another few questions?
1. How many nuclear power plants could be built with $10 Billion?
2. How much sooner would we reach the 80% cut in Australia’s emissions than 2050 if we stared now?
3. Is there anything in this plan about stopping the export of coal overseas?
RL there was a great deal of wishful thinking from Gillard and Brown in their separate press conferences. Both referred to the UK’s target of 80% GHG reductions by 2050 but skipped over the fact that was predicated on a huge new nuclear build.
Not only G&B but Tony Windsor waxed lyrical about renewables. He mentioned Moree and Chinchilla solar being ready by 2015, about 70 MW average capacity. Geez if that’s closing in on 80% of 56,000 MW my maths is crook.
Combet and Bandt were guarded on the 2,000 MW brown coal buyout. It will be put to tender they reckon with cost criteria kept under wraps. Brown mentioned Hazelwood but earlier media have cited the 240 MW Playford and the 2,200 MW Loy Yang for partial replacement. Whoops I forgot we’ll have 70 MW of solar by then so we should be OK.
I agree it’s kind of pointless trying to knock 100 Mt off our emissions when exported coal and LNG generate over 600 Mt.
I have tried to assist the cause by responding on Facebook to threads on the ABC site (and others including SBS) about the carbon tax and related issues, and I put a link to Brave New Climate’s web site. I also add some basic info about Gen IV. Does anyone else think this is a good idea?
I understand that you believe that AGW is a problem but I don’t understand why you think a carbon tax in Australia will have a measurable effect on that.
My impression of Australians is that they are as careful with a dollar as I am and not given to empty gestures, so this carbon tax initiative is a surprise.
(Comment deleted. BNC is not a website for climate change denial. Please post your views on this at other blogs.)
(The comment to which you refer has been deleted because BNC will no longer host climate change denial.)
Tony Abbott nearly committed heresy by suggesting on ABC that renewables may not be enough to power a mixed industrial economy. Steady there. He also questioned the veracity of post-2015 ‘international offsets’ which will be allowed if interim emissions targets are not met. Since I don’t foresee major emissions cuts due to carbon tax I think this will be an explosive issue in 2015.
I wonder if the role of the renewables agency ARENA will be to hand out capital assistance in lieu of RECs, FiT and other per-Mwh subsidies. Details are sketchy. They’ve taken it out of the hands of Martin Ferguson who has said unkind things about geothermal. We don’t want realists running the show. The principle of upfront cash is behind the ‘solar flagships’ and the 2000 MW brown coal to gas changeover. $10 bn won’t go far which is why I suspect the government will have a relapse and go back to RECs.
For someone who thinks Australian and world emissions must decrease this is maddening. We’ve got another year to speculate on the likely effects of the carbon tax yet we really won’t know until it happens. If it ultimately disappoints it will have been another year of inaction.
To answer my own question it appears RECs were never in question since wind operators always expeced them to continue
Renewable energy certificates are essentially a market valuation of the 20% renewables target. RECs were worth 3-5c per kwh recently
It means wind power now gets three bites at the cherry
1) carbon tax to penalise coal and gas
3) capital assistance from ARENA
As the song ‘Downtown’ asks How can you lose?
John Newlands, Robert Lawrence …
I am as you know, a supporter of the consensus at this place on nuclear power as foundational to low-cost industrial-scale abatement. In a more rational world than this one, Australians would unemotionally evaluate the options and accept that at least for the foreseeable future, both the world and Australia should roll out nuclear power at the expense of coal as quickly as possible.
That’s not going to happen though because the misgivings in this country that already existed and were frustrating progress pre-Fukushima have been given a shot in the arm by that event. It is useful for us to point out why this is the wrong response, but in practice, it is not going to change a lot of sentiment quickly, and certainly not enough for us even to recover the status quo ante. Now, Fukushima will be adduced alongside Chernobyl every time the matter arises.
What we have to do is to stop the matter being argued out in the venue of FUD. We need to make this as much as possible a question of the calculus of reason. Right now, as with Chernobyl, people are feeling fragile and emotional. Few want to trivialise the suffering there and so unpicking the part of the suffering that has to do with the tsunami and the plant’s failure is in practice very hard.
Those of us who aren’t just sloganeers, but who really want decisive action on climate change need to think what, in this context, are reasonable goals. How can we get people thinking calmly and rationally about the energy mix?
We need an “IPCC” of Energy infrastructure. It needs to be reporting every 3-6 months so that it reamins relevant and topical. It’s not going to change the political context in 1-3 years, but as its reports build an impressive body of evaluation and critique and intersect the failure ogf renewables to meet good cost abatement or scale of abatement performance, Fukushima recedes, and the urgency of climate change increases, the presence of such a body will be invaluable.
Those of us who have been arguing abatement seriously have spent much of the last 20 years asserting the primacy of scientific and evidence-based pblic policy, and it will scarcely be politically possible for those favouring renewables to resist a call for a technologically-neutral and independent “Australian Energy Infrastructure Commission” (or something with an even more impressive title). Yet such a commission, if properly staffed, would have shown by 2020 that the case for nuclear power was sound. Given that we are not going to be getting or even starting any nuclear plants before then, this is no loss in practice.
In the interim, exchanging gas for coal plants can get us about 10% of the way there at a modest premium, which is a lot more than the current 5% (166mtCo2e). And each time the renewabilists complain about lack of ambition, we will have an independent report to which we can point them.
Well done you … They’ve had an overly generous run. They aren’t adding anything beyond the zombie “arguments” and they have the entirety of the mass broadcast media to peddle their nonsense.
This policy by BNC is a big step forward and will be welcomed by all those of us who want evidence-based commentary.
Prof Brook’s latest directive as of yesterday:
This is a website for people who are concerned about climate change, first and foremost. It is not set up to pander to any other subset, and if you don’t care about solving climate change (or at the very least if you’re not neutral on the matter), then BNC is not the website for you. If you are pro-nuclear but consider climate change to be some alarmist conspiracy, then you are welcome to frequent other energy blogs that are populated by denialists – there are plenty of them. Go ahead, it’s a free internet. Otherwise, stay, enjoy, contribute, and follow the commenting rules.
Here is something I had in the Adelaide Advertiser today (including a photo of me, hah): Three experts comment on Prime Minister Julia Gillard’s carbon tax plan and what effect it may have.
Click on the link to read the edited version. Here is the original I submitted (cut down for space reasons):
(there are also comments from Tim Flannery and Peter Vaughan (Business SA).
For those BNC readers in Australia, I’ll be appearing with comments on the ABC 7:30 Report tonight.
A favourite quote of mine:
“No socialist theorist has ever been known to discredit himself with his fellows even by the silliest of proposals.” — F. A. Hayek
Except you could probably interchange socialist with ‘renewables advocate’.
Well said Barry …
A couple of nitpicks:
I doubt the richest 10-20 million will suffer any net detriment from biospheric degradation. They are those on the positive side of embezzling the commons.
Also, it’s the perceived effective price that must rise over time. As tempting as it is to simplify that to the explicit price the commodity markets tell us that business can weigh a range of factors in their investment decisions. If they think the regulatory burden or any other factor predisposing usage of fossil HC will begin to move against it by making it more costly in their hands, they will move regardless of the explicit price at the time. This is one of the reasons for having an ETS, since it invites businesses to guess where prices are going over 20 or 30 years, using the cap as a guide.
This is also why yesterday’s scheme is not properly speaking, a tax. Tradeable securities in emission are created. You don’t get that from taxes. I can’t trade my fuel excise with anyone and I don’t get a service in exchange for payment either.
Moderator and Barry Brook,
Here is my last comment on this blog.
If you folks really believed that reducing carbon emissions was important, you would advocate an end to coal mining in Australia. This would reduce domestic emissions and also emissions from the countries that buy your coal. Tinkering with carbon taxes is an empty gesture.
That said, I wish you well; you are doing great work.
Sean De Boo quoted Hayek:
Hayek obviously never read Lenin, or Engels or Marx, which seems odd, on reflection. Perhaps he was just making stuff up to sound cute.
GC: I’ll be sorry to see you go, you’ve contributed some interesting stuff (and have generally restrained yourself regarding climate change, despite your obvious disagreement).
And there are those of us who *do* want to see a phase-out of coal mining in Australia. We’re realistic enough to understand that it will take a long time to achieve, though, given the $billions in tax revenue it brings. Personally, I think it’ll happen a lot faster than we all think, once the impacts of climate change start becoming really obvious.
Peter Lang: from your comment upthread, where you outline your assessment of the economics of a carbon price:
As the saying goes: “Well, there’s your problem!”
I think that’s an incorrect assumption to make, that GDP carbon intensity is inelastic – quite a few energy efficiency programs have shown real reductions in carbon intensity (and energy intensity in general).
This is a link to a political press release, but the numbers tell the story:
That’s a substantial energy saving. Given Australia’s high carbon intensity for energy, that probably translates to at least a 2.5% reduction in carbon emissions. At the same time as GDP is maintained, or increased (what happens with the money that is no longer being spent on wasted energy? Surely it doesn’t just vanish into a vacuum…)
That’s true of course (though those buying Australian coal could replace it by buying elsewhere or rampoing up use of domestic supplies, which uncertain net effects on world emissions). The problem here is that such a program (if conducted on a very short timeline) would not be politically viable, and while it would sharply reduce Australian-sourced emissions, it would do so at a much higher cost than other programs that could be run to reduce emissions by the same scale. Nuclear energy is one such alternative option.
Advocacy of this point is intended to force proponents of mitigation to choose between appearing disingenuous or wild-eyed gaia-firsters. This is a political wedge tactic. That we don’t advocate such things doesn’t stop opponents claiming that our “real” agenda is precisely that — to shut down coal on a very short timeline.
Your claim also overlooks a much more salient point. At the moment, the developed world relies heavily for its consumer goods on the developing world. Most of the growth in emissions in places like China and India has been a result of western demand. They wouldn’t be burning anywhere near as much coal if we weren’t demanding supplies of cheap computers and TVs or cars or other things. What you ought really to call for is a policy of buying local or not at all. That would cut emissions in practice even more.
Once again though, for obvious reasons, hardly anyone thinks that a good idea. So we are back with the hard and non-sexy work of working out hat low cost industrial scale abatement looks like rather than trying to fix everything with the stroke of a pen.
gallopingcamel, writing on 11 July 2011 at 11:37 pm; and on 10 July 2011 at 9:57 PM,
Sorry to see you go. I understand Prof. Brook’s policy–Peter Lang was gumming up the works pretty badly. And we who are concerned about AGW have many things to discuss, ideally without too many distractions.
But on the other hand, I thought in our short interchange you presented a number of valid points. And valid or not, they are views held by many, if not most, Australians as well as many, if not most, citizens of my country, the U.S.. So we who favor climate protection, nuclear power, and/or a carbon tax had better know how to address these views.
Good luck to you, too.
With regards to silly theories I gather you haven’t seen the Samuelson graphs then. What followed required steadfast adherence to theory to deconstruct what was being doctored to look a winner. His main whinge was that interpretations of original theories would be altered to say ‘no he didn’t quite mean…..’ and a real argument based on principles was extremely difficult to prosecute. Not too dissimilar to the current conundrum. At most debates it’s not uncommon to see a Nuclear advocate display a 30 year graph to highlight ratio of C02 output being low, then only for a solar advocate to use very short time scales to highlight upfront capital costs and energy inputs for Nuclear. Neither side really comparing apples but winning claps from their groupies.
So whilst we wait for 2020 (pushed out from 2000) when GDP of the U.S.S.R finally overtakes over the USA, the problem we now face is that all the information made available by Prof. Brook and others still struggles gain traction in the wider community and amongst nouveau environmentalist (you connect the dots) opinion makers the goal posts are simply moved to suit pet arguments. Not too surprising also is that we are presented with predictions that renewables will be cheaper in 15 years, just like we heard in the 70’s that solar breeders were soon to be the way of the future. Therefore if I could spend only a few resources pushing the case they would all be directed towards the ALP Right as the last remaining hope. This is the bastion of trained economists and those most amenable to reasoned analysis of the numbers.
Sean – would you please supply the links/refs to support your information. This is a requirement on all but the Open Threads on BNC. It assists others to follow up and assess what you have written. Thank you.
So Barry is this true? You no longer accept any posting on scepticism of AGW?
Yes- for clarification please read the up-dated Comments Policy on the About page.
SD, correct, this reflects the changed nature of the BNC blog (an evolving digital entity), and the limits of my patience in trying too hard to be all things to all people (an impossible and frustrating mission).
So, to be clear, the working context in which BNC is embedded is that climate change is a critical problem to solve. The motivation for the blog (henceforth) is to seek the most effective solutions and discuss the pros/cons. If you are a climate change skeptic (or whatever), you are welcome to comment on the relative veracity of the proposed solutions (or even argue that none of them are suitable, if you can put a coherent case). But this is not the place to debate the whole “Is it? Isn’t it? … happening “space. We’ve moved on from that. If such dialogue entertains you, then there are plenty of other places on the ‘net to engage in this ‘repartee’ to your heart’s content. BNC is now principally a place to discuss the options for moving away from fossil fuels, and when there are posts on climate change, they will be about updates to the science.
Such are the choices that must always be made in such intellectual ventures – what to focus on, and what to put aside? If a certain percentage of the audience is turned away by this policy, then so be it.
Apologies as i’m away from home but the sources for the claims were;
On the Solar Breeder pathway, don’t have exact page number for this:
‘Diesendorf, M (1979). Energy and People: Social implications of different energy futures. Canberra: Society for Social Responsibility in Science (A.C.T.).’
And aside from many books on the subject this one:
Catley, R (2005). The (strange, recent but understandable) rise of liberalism in Australia. Sydney: Macleay Press.
Provides as detailed a description as any of the inner working of the ALP during the Hawke/Keating deregulation era. What’s relevant is that tough decisions were made during internal debate inside the party room as to whether or not to go for ‘economic rationalism’, even though it wasn’t popular with the base, the left and would lead to some greater inequality (Garnaut then had published another report paving the way for engagement with Asia and away from the UK). Of interest because I believe we face a similar challenge and that there is form to suggest that when given the full dossier on the economics of future options, they will chose the best option. Namely, the removal of barriers to Nuclear.
What turns some away, others will find more palatable.
A necessary interlude part 2?
An interesting time for this. A carbon price is finally here in Australia. This is an opportunity to break away from the media-consuming, stale debate over this issue and have a renewed, fresh focus on real energy solutions – without the distractions. The playing field is leveling, but far from level yet.
Keep up the good fight, Professor Brook.
Sad to hear that, like the “multiparty” climate change committee, “no alternative view will be heard or contemplated”.
Sad also because we all agree on what is happening, just not on why or to what degree.
Sad also because many sceptics agree with you on NP.
Sad fourthly If so it be then in the words of Sam Goldwyn, “include me out”.
Drongo you should look at it more as having this site to discuss moves to a progressive baseload power source, rather than worrying about censorship of climate views. Realistically it is not even a change of policy as discussion is meant to be “on topic” and unless “Is AGW real” is the topic then people should not be pushing their skeptical or otherwise viewpoints.
I see this as an effort to focus on the actual technical fixes and realities of providing energy in the future. AGW is a side issue, a blip, a distraction from that main issue.
Lets just all agree that there are people who post here who have different viewpoints on climate science, and move on.
I do note, however, that most of Peter Lang’s comments that annoy some are not actually sceptical of AGW science (although he is), he in fact is just talking about energy, and the benefits or otherwise of a carbon tax.
The “alternative view” has been heard, contemplated and deemed to be bunkum or cant. There’s no need for any rational person to keep repeating that exercise this side of something more impressive than some unqualified ranter repeating an old trope.
This is a good move.
It marks another turning point in the evolution of this web site (moving from advocacy of large scale renewables to the “discovery” of nuclear power, a focus on solutions, the trials of Fukushima, and the introduction of moderation). Well done Barry on not being afraid to break with the past.
Without in anyway endorsing their views on climate change I have learnt a great deal about energy from various climate change skeptics and engagement with their viewpoints has been valuable, when expressed without belligerence. camel, thank you for your gracious farewell.
(Comment deleted – as per BNC Comments Policy.)
I agree that, in theory, your plan to depoliticise energy policy by creating an “IPCC of Energy Infrastructure” and an “Australian Energy Infrastructure Commission” sounds appealing. However, careful thought is needed before assuming that such organisations would necessarily give governments the advice that most contributors to this site deem sensible.
I have been dismayed by several so-called expert advisory reports. I seem to recall, for example, that the IPCC has recently reported on clean energy solutions, emphasising reneweables and efficiency with little attention given to nuclear (Lost the source).
In the UK, the government advisory committee on renewables recently informed politicians that the extra costs of intermittency in terms of extra grid connection costs and backup would be relatively trivial even at levels of 80% penetration. Thus, wind (onshore), with LCOE equivalence with nuclear, will seem rational to a government that follows scientific and evidence based policy.. In August 2010,the National Nuclear Laboratory more or less advised the government against pursuit of thorium power. A few years earlier, the Royal Academy of Engineering, though making the case for nuclear, was recommending a far more modest deployment than most here would consider necessary (the subject of an earlier BNC post).
One must conclude, therefore, either that most BNC contributors are delusional about the obvious advantages of nuclear or that many expert committees give incorrect advice. Furthermore, even the nuclear professionals, possibly daunted by lack of progress over the last half century or because many of them derive their incomes from addressing safety and anti-proliferation concerns, appear to offer, at best, lukewarm support for a full blown nuclear renaissance. In particular, this seems to apply to their lack of support or their lack of urgency in wishing to close the nuclear fuel cycle.
Finally, I would like to fly a kite and suggest that nuclear power, though producing almost emissions-free energy can reasonably be seen by politicians (and others) as having more in common with fossil fuels than with renewables in that peak uranium would follow peak oil quite quickly if there were to be a full scale nuclear renaissance. (Yes, I know that uranium won’t run out and that, if the worst comes to the worst, we can go for ocean extraction at a price). It is thus easy to write off nuclear as, at best, a stopgap measure in the fight against global warming. In fact, I strongly suspect that this may reflect official government thinking in the UK. In other words, nuclear is necessary in the interim until such time as the optimum renewable has been identified, the presumption being that such will exist at an affordable price. Unless closed cycle nuclear can be quickly demonstrated at the practical level, I would suggest that nuclear roll out will be too slow and too limited to prevent catastrophic climate change. However, the R&D necessary to accomplish this is unlikely to be spent in liberal democracies with privatised energy markets, substantial debts and ongoing faith in renewable solutions. Given the global nature of climate change, perhaps the greatest good that the UN could achieve would be to coordinate a joint international approach by nuclear capable capable nations with additional financial assistance from nations such as Australia. An alternative would be to leave the Chinese and Indians to it and hope that they would be successful and that the rest of us could afford to buy from them. It is only by closing the fuel cycle that nuclear can be classed as a renewable source of power and this will certainly reduce the potency of the anti-nuclear movement.
The main concern I have with this policy is that in the real world we may be reducing emissions by exporting them to our trade competitors. For example, coal exports taken up by Columbia or Mongolia or Alumina refining to China. If this happens and thousands lose their jobs so the rest of us can feel good about ourselves, but with no nett global gain, then I dont believe it passes any test of equality or sustainability. We are effectively adding a tariff to our exports that isnt imposed on imports from countries without a carbon tax. The impact on exposed industries such as tourism at a time when the dollar is crushingly high is risky. Nevertheless, I think Gillard has made the best of a difficult situation.
Regardless of the strength of the consensus surrounding global warming there is no market based approached for determining the what should or should not be the global response. I would advocate for a temperatures futures market which would set the price for the forward temperature curve. In this way, anyone would be free to hedge their exposure to their perceptions of future global warming. This is already done in the insurance market for hurricanes. By creating a market based pricing system the world would get a much better signal on where the economics really was. As opposed to having the economics set by government edict.
I agree that any independent advisory commission would need to be well-designed/resourced and given a suitable brief to report. It would need expertise in engineering (including of course areas related to nuclear energy), economics & quantity surveying, marketing, and environmental accounting, epidemiology and perhaps even some areas beyond that. It would also need for all of its leading contributors to be at arm’s length from the potential major industry beneficiaries of their advice.
I’d very much like it to operate as a standing commission — able to respond quickly to matters that have caused public disquiet (much as our various Independent Commission Against Corruption in NSW or our ACCC does) or on the other side, public interest. If the latest fad is vanadium flow batteries to firm wind, or molten salt to firm solar thermal — then let us have someone who can quickly decalre on the efficacy of these proposals. If someone says that plug-in electrical vehciles being used to load balance during peak usage makes sense, then again, I’d like someone with authority to do the work and report back within 3 months, and not have to have the government refer it. If someone says somthing troubling about uranium mining in the Northern Territory, then again, let’s see if it is genuine or simply FUD and let’s find that out early before it becomes the latest talking point. Let them decide on what is worth reporting on. A commission that responds in this way will rapidly become the starting point for good information in the public mind.
I agree that nuclear power can itself be seen as a finite resource, but again, this is where a body such as I have proposed can make sense. It is clear that at least in the short to medium term, there will be a lot of “once-used” fuel emerging from existing nuclear reactors and reactors that are still in the process of being commissioned. By 2035 it seems likely that at least in some parts of the world, we will begin to see a substantial roll out of GenIV reactors that will begin to be able to consume the output of the older reactors and also, draw upon thorium and new sources of uranium. Bodies like the “AEIC” could illustrate these timelines mapping out the path to sustainability,showing that in practice, we have thousands of years worth of energy supplies, this side of a breakthrough on fusion other renewables.
This is an old trope.
Nobody has done a single thing to predispose a singe extra ton of substitution of Australian coal to anywhere. In fact, something like $1.3bn worth of support for coal has been proposed, precisely so they can keep operating their gassier mines. It’s also not that easy to import substitute, because price is not the only factor. Qualit(ies) of coal, security of supply, cost of transport, relative currency values are all factors. In the wake of this announcement, substantial new investments in coal mining have been announced, which gives the lie to the scare.
The reality is though that in a global trading system, it really matters very little where goods are produced. What is most important is that they be produced in adequate volume and quality at a price in labour that is acceptable to most who need the goods and can pay for them with some equivalent labour. Before an Australian can buy a good in some other place he or she must have something of equivalent value to trade. The currency is a mere proxy for this value and it would be of little use for any other jurisdiction to produce goods that were in practice unsaleable. A system in which goods are produced where they are produced at the best quality and lowest cost and traded everywhere they are in demand for similarly produced goods is one in which everyone wins. Today, we are including “low ecological footprint” in that quality because we know that producing goods with reckless disregard for the environment imposes costs on the bulk of humanity, and in the long run prejudices productivity.
The fact of the matter is that Australia produces some of the dirtiest aluminium in the world. If it were to be produced elsewhere, it would almost certainly be produced more cleanly. Not only that, but Australian consumers are radically subsidising local production. We could sack every person in smelting aluminium here, pay them $70,000 a year for life, cut emissions (not just of GHGs but toxics too) and still have plenty of change. We aren’t going to do that, but in the unlikely event that the aluminium business upped sticks and left, it would not be a disaster for us.
Threats by metals industries to relocate may be somewhat hollow. Several analysts conclude China’s coal production is peaking now but this week’s Oil Drum gives 2027 as the peak. The new Mongolian coking coal deposits only provide a few years supply at current Chinese consumption. The southern coast of China is better served by coal from elsewhere. It is a strange situation whereby Asia gets iron ore from WA and coking coal from NSW or Qld. They mostly provide the cheap labour and lack of pollution control. That’s why we should carbon tax fossil fuel exports and let them ask for the money back. China and India should not get a free ride on Australia’s carbon restraint when we supply their carbon.
On aluminium I could point to Tasmania’s Bell Bay smelter. They claim to be largely hydro powered when it suits them but they are located not far from two gas fired power plants and the converter for the HVDC cable that brings brown coal power from Victoria. The electricity discount they receive is said to be worth $133,000 per employee. Well if they are truly hydro powered they’ve got nothing to fear from carbon tax. It’s all to do with the ‘pool price’ they reckon. Of course we could always do with less e.g. 20c refundable deposits on soft drink cans.
Thank you Huon, John Morgan and others for your kind words.
Thank you franbarlow for not gloating. With regard to the idea of leaving the coal in the ground, we are doing something similar in the USA by refusing to drill in ANWR and many offshore locations including Florida. This is not as crazy as it sounds because we are passing these resources on to our children who will find better uses for them than we have.
This is still the best site covering energy issues and if I manage to gain access to any more Florida Power & Light generating plants the reports will be offered to Barry first.
Moderator or Barry Brook,
A point of clarification, when you get a chance: Which of these two statements more accurately reflects current BNC policy?
From 11 July 2011 at 8:54 AM, and the official comments policy statement:
“…if you don’t care about solving climate change (or at the very least if you’re not neutral on the matter) then BNC is not the website for you.”
Or from 11 July 2011 at 2:54 PM:
“If you are a climate skeptic (or whatever), you are welcome to comment on the relative veracity of the proposed solutions….”
The following statement from the BNC Comments Policy applies:
Basically no comments sceptical of the consensus science on climate change will henceforth be posted or discussed on BNC. It is up to you to decide if you can comply with this new policy. Your climate change scepticism remains your business. If you accept that limitation you are welcome to comment on proposed energy solutions discussed on BNC.
The following statement by Barry in reply to a similar question by Spangled Drongo may also help to clear up BNC’s new position for you and others reading this.
In response to Franbarlow, my initial post was as much a question but your response is somewhat simplistic. It is a fact now that we operate in a global, competitive cut throat market. I hope you are right. For those in cosy public sector or non exposed industries who blindly support the tax and aggressively shoot down anyone who expresses concern, I hope you spare a thought for those who do lose their jobs or small businesses and thank them for giving you the chance to feel warm and fuzzy while the rest of the world continues to pollute.
This is interesting, from Hans Joachim Schellnhuber, “A pioneer role for Australia“. At one point he says:
On Germany, we’ll see – a grand experiment is underway. As for the ‘free sunshine’ comment, it’s hard to fathom that someone of his caliber in climate science and policy advice could say such a thing.
Thank you so much for giving such a thoughtful answer, and for quoting the full texts so that people can easily compare them. BNC’s position is nuanced: firm but quite reasonable. And, really, it excludes almost no one, provided they play by the rules and advance the search for cost-effective ways to cut CO2.
I think there are many people who would accept the principle that mankind has an influence on the environment in general.
(Deleted – violation of BNC comments policy)
I personally would be happy to accept that mankind may be having a slight effect on the climate. I also think we should wean ourselves off fossil fuels because they are pretty much finite and should be left as much as possible to our children for chemical feedstock. Another reason is political, I think it is unacceptable that we are hostage to certain regimes in the Middle East and elsewhere.
(Deleted violation of BNC comments policy)
I want to see Gen IV nuclear started in Australia- up until now no-one in the Government is advocating this.
Please read BNC Comments Policy on the “About” page before posting again. Violations of the policy will be edited or your comment may be deleted in entirety.
For those who haven’t picked up on it yet, according to page 24 of the main report, Australia’s actual emissions will continue to rise until the late 2020s, before falling and reaching current levels again around 2040 – most of the claimed reductions will come from overseas offsets (paying landholders in New Guinea not to chop down trees). The theoretical 5% reduction on 2000 levels by 2020 will come mostly from these offsets.
Click to access Consolidated-Final.pdf
If it’s true, this is appalling. From Bernard Keane’s piece in Crikey today:
Has there ever been a clearer demonstration that the fossil greens are motivated not by saving the climate, but ideology? Fran Barlow, I realise it’s a shot in your locker you can only fire once, but is it time to start drafting that resignation letter?
A couple of points.
First, the public sector is not so cosy (I do not work in the public sector). Under Abbott’s policy – as enunciated by Hockey – the Direct Action policy of investing some $4 billion will be funded by “reducing waste in the public service” i.e. sacking public servants. $4 billion worth of public servant wages means tens of thousands of people unemployed and hundreds of thousands of associated family members losing the household income.
You may not be sympathetic to this, but I hope you would be and, in turn, not be so simplistic about who’s cosy.
Secondly, it is terribly sad that people will lose their jobs during the transition from the fossil fuel economy. I support every endeavour to manage this transition to minimise hurt. But it’s going to happen. I was trashed when manufacturing industry imploded in 1983.
Now, if the politics of addressing climate change hadn’t been so hamstrung by the “do nothings” of the world and the short-term vested capital interests over the last two decades the transition would not have to be as disruptive. “Buggy whip” industries would have had 20 more years to “adapt” to the inevitable structural changes.
Don’t blame the carbon tax supporters now … blame the do-nothings these last 20 years.
By the way, the present job of transitioning from the fossil-fuel economy is also being derailed by what will be a protracted global debt crisis … the result of uber-capitalists fostering debt-financed over consumption amongst the “aspirational” class. Blame them too.
I recommend this book by Andrew Bacevich – http://www.amazon.com/Limits-Power-End-American-Exceptionalism/dp/0805088156
Proponents of the introduction of a national carbon tax seem to gloss over the complexity of international trade. You can’t solve imbalances and the competitive disadvantage you gain by simply introducing a carbon tariff on goods imported from countries which do not have such a tax. This ignores that there are more than two players in the game. Some countries are net importers. Other countries are net exporters, their economy is built on manufacturing goods and selling them abroad. Germany, for example, sells a lot of high tech machinery to China. If it would introduce a carbon tax, its products would become more expensive. German producers in energy intensive branches of the economy would respond by moving factories to “carbon tax havens”, where energy is cheaper and China would start buying, say, more of the cheaper Japanese high tech machinery instead, because Japan has not introduced the tax. This would lead to a reduction of emissions in Germany, but not in a way intended by carbon tax advocates.
An introduction of a carbon tax has to be a coordinated international effort. Sadly, that is in all likelihood, not going to happen.
“The fact of the matter is that Australia produces some of the dirtiest aluminium in the world. If it were to be produced elsewhere, it would almost certainly be produced more cleanly.”
It’s not the fault of the aluminium industry that the electricity grid is so dirty. It takes a certain number of watt-hours to reduce a tonne of aluminium… and that is what it is, anywhere in the world.
Aluminium is not a problem… coal-fired generation is.
If we could change the fundamental chemistry of alumina electrolysis to reduce its energy demands, we would, but the laws of physics and chemistry don’t work that way. That’s the price we pay for such a useful, valuable metal.
Click to access Consolidated-Final.pdf
I agree with your broad sentiment Alan, but my specific fear is that the pain will be for no nett gain if the tax is not commensurate with our trading partners and competitors. My concern it is a political fix rather than a well thought out strategy. If the tax fails politically, and is seen by the public as job destroying, you will ensure Abbott wins government, and the policy failure will set carbon pricing back 10 years. Like the mining tax fiasco, this has been rushed. I believe that the right approach would have been to incorporate carbon pricing as part of a genuine fundamental reform of the taxation system, particularly business tax. Secondly, we need to think clearly about a long term energy policy and strategy. I think targets are fine but are meaningless without hardheaded planning of how to get there. A Tax and motherhood statements about renewables won’t do it. All of this takes leadership from government and opposition. It also requires some level of responsibility from advocacy groups.
Luke Weston said:
Well yes, obviously. I was merely making the points that
a) if aluminium were produced anywhere else it would probably be cleaner
b) we’d be relieved of a massive cross subsidy AND the associated pollution (not just CO2)
Iceland produces very clean aluminium because it has a a stationary energy system relying almost entirely on hydro and geothermal.
Of course the massive losses and risks associated with going some place else utterly dwarf the imposts we migh impose as a consequence of carbon pricing so the prospect of smelting going offshore as a result are for all practical purposes, zero.
Aluminum ingot takes 15 kwh electrical input per kg according to Wiki. A tonne produced using black coal fired electricity would therefore attract 15t X $23 = $345 carbon tax. Seems they won’t have to pay it fully because they’re iconic or trade exposed or some other kind of sacred cow.
I understand the aluminium recycling fraction is about 1/3. That should increase to 2/3. The industry is like a 7-seat V8 SUV. Do we really need it?
Mark Duffett said:
Let’s consider the problem by asking some salient questions.
1. Why have The Greens adopted this policy?
2. Under what circumstances might we depart from it?
3. Would the departure from The Greens of those who object to this policy but support the party in almost every other respect advance either good public policy or reason on matters related to nuclear energy?
4. Does this policy entail a fundamental breach of any ethical principle for a Green?
5. Under what circumstances could the policy be amended by the Australian government?
1. It’s a logical consequence of our policy to oppose nuclear energy. It would have been absurd for us to have acted otherwise without reversing this policy. Our leaders could have turned a blind eye, but again, the question would arise — why?
2. Plainly, only if we rescinded so much of our policy as excluded resort to nuclear power. That would require a very substantial policy debate on the matter within the party, followed by a positive resolution and at this stage there is still no appetite within the party for such a thing. Such “appetite” as there was declined post-Fukushima. Pre-Fukushima, it was my estimation that perhaps about 5-15% of the party were open to the kind discussion of the merits of the policy.
that would not become heated and nasty. Now, I’d be surprised if it were anything like that.
3. Plainly not. The departure of those of us who would like a reasoned discussion on this matter would make a change of policy appreciably less likely, and also weaken the one political party represented in the parliaments of this country consitently standing up for equity, human rights and the environment more generally. Public policy would suffer without any corresponding benefit.
4. Of course not. The Greens are the same party today that they were when we all joined. If our party had done something both wrong and utterly at odds with our stated values and there was no reasonable prospect of overturning it I would leave, but I daresay I’d not be the only one, for it would mean that our party had become something else entirely, and then our departure would be in favour of building a new and more ethically coherent organisation rather than a simple protest against policy perfidy.
5. The things that count as credits under the system can be amended by regulation by a future government. They don’t require legislation. As The Greens are unlikely to bring down the regime over such a matter, the regime could, if it wished, allow such credits without our endorsement.
So no, I won’t be leaving The Greens over this and don’t imagine anyone else will either. I will continue to work loyally within the party to advance its standing and influence while continuing to encourage my colleagues to reconsider their view of the role nuclear power can play in decarbonising the world’s economy.
I might add that as a matter of policy, it’s not clear that allowing such credits is useful in abatement. While one could argue that allowing them for prospective plants retiring existing fossil hydrocarbon capacity would be useful, allowing them for existing capacity can only subvert the price signal wanted.
I hope that clarifies.
Rick … we may well be in violent agreement at the principle level. At the implementation level, we may differ on many fronts related to “how we would go about it if conditions were far-from-perfect” … like now.
A legitimate concern. However, it is most likely that countries will move somewhat independently in both timing and nature … I have given up on a unified, all together global response. Should we wait to see what our trading partners do? Are they waiting for their trading partners to move? How long do we wait?
Several of our trading partners are already moving and the importance of building in “international linkages” will be critical. The future context will be fluid but, like the old tariff considerations, I believe the carbon price parity will be reasonable.
It is also likely that the “terms of trade” volatility will continue to be more influenced by forex changes than a carbon price which, even for a carbon intensive economy like ours, will be relatively small and very stable/predictable.
The strategy is pretty simple and been around for yonks – price carbon while busting a gut to get a critical mass of developed countries to do likewise and have a reasonable mechanism to trade carbon. The climate science and economics advice to government has been pretty consistent and adequate for years. I don’t see Garnault jumping up shouting “No! You’ve stuffed it!”
With Europe, China and India and a number of US states doing something now I’m happy for us to jump into the pond. Sometimes it is necessary to bite the bullet rather than waiting and waiting for all the ducks to line up.
I agree. This is a mess. Lots of uncertainty.
The key, interdependent issues for me are (i) what is the timeline for retiring the fossil fuel power stations (I think 30-40 years in total but what’s the profile over the next 10-15 years?); and (ii) given this profile and our energy demand changes, what energy solutions fill the gap.
I worry that the “renewables are good” meme is so pervasive that people will not examine the detail. I worry that the “nuclear is bad” meme is so pervasive that people will not examine the detail. I worry that there is a lot of uncertainty about the capability of both sets of solutions and it will take a lot of time and money to reduce that uncertainty below the natural risk tolerance of the community (i.e. when not backed into a corner)
So I am not uncomfortable that we have acted. This will force R&D and commercialisation and retirement of coal power plants. This will force “reality” so long as we make sure there is good governance around major decisions. And that is a key challenge … how to assure sound decisions whatever the residual risk profile.
Yeah, well … it is what it is and it is ugly. Barry Jones wrote a fantastic article a couple of weeks ago about political “conviction”.
The government lacks conviction because it has stuffed up a lot of programs, the GFC derailed consumer confidence and the crazy media facilitated FUD about climate change. Enter an Opposition which, less than 2 years after being decimated at the polls, regathered themselves and are pushing with extreme conviction.
Advocacy groups – be they left or right(pejoratives deleted) – can be expected to act with extreme conviction but questionable sense and responsibility.
What has to change? What will cut through?
IMO there needs to be a resolution on the carbon tax … either it comes to pass and does some good and the world doesn’t end and Abbott is left a loser; or things blow up and Abbott is the winner.
Whichever ways it pans out it will be decisive and give the victor space to settle down. Whether ‘sense’ and ‘responsibility’ return is another question but I wouldn’t expect to see them back until ‘reality’ and ‘perception’ collide.
Middle-of-the-road advocacy groups just have to keep battling on.
The wildcards are the media and the global debt crisis. The media and politics are a positive feedback pair. They go crazy together and they go sane together. If the global debt crisis keeps on keeping on, the US and some EU countries will be brought to their knees … the US will fall to the rabid right come November 2012 … the media circus continues … sense and responsibility continue to be sacrificed … yuck.
Fran Barlow – superb post.
I think we’re headed for a renewables reality check long before 2020, more like 2013 I’d say. The figure bandied about for an annual emissions cut between 2011 and 2020 is 166 Mt. I can’t recall how that was derived but since emissions were about 500 Mt in 2000 and they are now about 580 Mt I think we need to cut at least 580-480 = 100 Mt.
Incidentally since emissions from exported coal 260 Mt and LNG 20+ Mt would exceed 600 Mt I wonder if we’ve taken our eye off the ball.
Anyways 100 Mt over 11 years is 9 Mt annual reduction, ie 580, 569, 558… We might do that for a year or two then it will get progressively harder without a recession. It looks like the Equatorial Guineans will have to suck up that CO2 for us. It is kind of them not to chop down their forests for the time being until we can send them a few dollars.
Reading the clean energy paper linked upthread I see there is lot of talk about wildlife corridors and indigenous participation. It seems to gloss over the nuts and bolts issues like what happens if we don’t meet the target. The plan lacks both realism and any sense of urgency.
A carbon tax can be fairly simple. Here’s what I’d advocate for the US, where I live.
1. Have reasonable targets, say $15 by 2015, and $20 by 2020. These amounts approximately equal the floor price of Australia’s proposed ETS.
2. Ramp up gradually to the $15 price. See Barry Brook’s comment above on 7 July 2011 at 10:04 AM.
3. Return to the public all of the tax revenue coming from the public. James Hansen recommends doing this through a “green dividend”; British Columbia has done it via lowered personal income taxes.
4. Return to companies all of the tax revenue coming from companies. This should be done by lowering the company (income) tax; such a tax swap would limit damage to the economy.
Because this simple carbon tax would do little harm to the economy, and quite possibly might help it, the plan should be relatively appealing to people across the political spectrum, whatever their views about climate change.
@ John Newlands
A Government document with no clear scientific objectives?! Does’t sound right at all!
Reminds me a lot of Australia’s Biodiversity Conservation Strategy 2010–2020 – full of words but no substance.
“The vision is vague and where it is clear it is wrong.”
Huon I thought you might have come from Huonville
around these parts. It would be a good test of EV commuting while only 40km from the capital Hobart there are two steep hill climbs over old glacial valleys.
What Hansen calls ‘fee and dividend’ we call ‘revenue neutral’. The idea in Australia is that companies are price setters and pass on carbon costs to consumers. The consumers get compensating tax cuts and welfare increases from the carbon tax revenue. Some high emitting industries get other help eg replacing coal fired power stations with gas. Some corporate help is thought to be too generous and is disguised protectionism eg the steel industry. I think the carbon tax is a step in the right direction but on it’s own it won’t deliver the required CO2 cuts.
Actually I took my name from the Huon Pine from the same neck of the woods as Huonville.
A carbon tax, even a modest one, may be a lot more effective than you think. This report descibes how a $15 tax might be sufficient to decarbonize natural gas:
As for nifty ev’s, check out this mite, the bugE.
If my reading of the specs is correct, it can cruise at 30 mph using 50 watts of power. That means by replacing one lightbulb in your house you’d have the equivalent of a oil well in your backyard, supplying you with a lifetime of free petrol. Well, I exaggerate a bit, but it’s still pretty amazing.
Second part of your comment is off topic. Please continue with that on the Open Thread.
The hardships endured by the Huon piners was legendary. Only a couple of them (people not trees) still survive.
The ceramic fuel cell has been known for a while but to I think to capture the CO2 it would need concentrated oxygen intake not air. Otherwise you get N2 and NOx in the exhaust gas. The auxiliary loss of a PSA oxygen concentrator would lower the EROEI as would the post-combustion CO2 capture. A CSIRO solid oxide fuel cell ran at 800C if I recall so is unsuitable for vehicles. What happens to this technology when natural gas runs out?
If they could solve the seepage problem in methanol fuel cells that could be a massive breakthrough. Alas little progress.
Veering off topic. Please continue on the Open Thread.
You are quite right; thanks for the correction.
“The figure bandied about for an annual emissions cut between 2011 and 2020 is 166 Mt.”
John, the 160 Mt came from here (page 1/figure 1)
Click to access australias-emissions-projections-2010.pdf
In other words, to achieve the 5% 2020 target on 2000 levels would require the equivalent of shutting down Hazelwood (1600 MW) ten times, or planting new forests equivalent to four times the area of Tasmania by 2020, etc..
Click to access 100910_Email_Size_of_Abatement_Challenge.pdf
GP thanks for the info. I presume export related emissions cover such things as gas burnt within the Australian maritime zone to drive LNG trains. I believe these operators want to be exempted from carbon tax because they are some kind of economic saviour. If exported gas and coal was carbon taxed then the question wouldn’t arise.
I thought Australian steelmakers (OneSteel and Bluescope) would complain that foreign rivals didn’t have to pay c.t. on emissions from the same coking coal. The government sidestepped this problem by overcompensating the local industry.
The foreign connection will keep coming back to haunt this scheme. Somehow reduced fossil fuel use at home is good but increasing fossil fuel exports is also good. Perhaps the govt could explain that. Secondly we will have to buy foreign offsets in 2015 when the reduction falls short. Not that anything could go wrong
John, thanks for the link – Andrew Macintosh also provides a good overview of REDD for Australia.
Perhaps REDD will one day be seen as on the great scams of the early 21st century? But what else is the government supposed to do when the left forces it to adopt impossible targets? Try to educate the public on the scale of the challenge when lots of people believe all we need to do is install a few more solar panels and change our light globes?
$10? Feeling the pain? “$10? Feeling the pain? Carbon class war? You must be joking”
This article is a classic.
A little perspective is always a good thing.
The European Union emissions trading scheme doesn’t recognise carbonsink offsets such as afforestation because it believes they are not permanent. However they rely on the even dodgier ‘clean development’ kind of offset whereby someone using less than their presumed entitlement to emissions creates a credit. Like the Magic Pudding double the presumed entitlement and you double the credit.
Apart from rubbery accounting I’m sure other fudges will emerge. Perhaps someone will put some solar troughs in front of Hazelwood and declare the whole setup to be honorary renewable. Not just Australia but Germany, Japan and others will be doing it too.
[…] At $23 per tonne of carbon dioxide, however, little will be immediately different. Coal will still probably be the cheapest option. So the price must rise over time – or else the carbon tax will fail to deliver. […]
Over on the “Hansen warns…” thread I asked, “In the US we already get 20% of our electricity from nuclear. But how can we best get a carbon tax (and more nuclear?”
Here I’ll outline an answer. Getting a carbon tax enacted in the US can be much easier than people think. I’ve already sketched what the tax should look like above on 14 July 2011 at 9:27 AM.
To pass the tax may require just a few citizens–or even one–working with Congress. The secret is to make the deal attractive to most citizens and lawmakers. Democrats (the left) will get the holy grail of controlled CO2 emissions; Republicans (the right) will get lowered corporate and capital gains taxes, with replacement revenue from a less-distortionary consumption tax.
Since there are many moderates in the Senate who want both these things, they should be contacted first to form a nucleus of support.
I recently came upon the following post, which, I believe, provides a fairly balanced assessment of Australia’s carbon tax:
The article you pointed to says:
But the carbon tax in Australia will not do anything about climate change. It is a symbolic gesture only. However, it will severely damage our economy. Did you see these two comments:
( Deleted link likely to incite unhelpful and unnecessary political arguments.You have been asked not to do this.)
It seems I am still having comments deleted, but I don’t understand why.
See note appended to the comment in question.
Thanks so much for mentioning John Daley, of the Grattan Institute, I assume. The Institute has some excellent analysis of a carbon tax, such as this piece:
Click to access 095_wood_oped_afr_eng.pdf
@PL & Huon
Agree, John Daley, Tristan Edis (and recently Tony Wood) have provided some of the best, considered, analysis of carbon pricing. While their “technological agnostic” position is economically credible, it is obvious that no matter how effective carbon pricing might turn out to be in achieving marginal reductions and uncovering “unthought of opportunities lying under rocks”, a failure to address the core issue of baseload replacement will result in a failure to ever achieve deep reductions. Like Garnaut, Jotzo, Quiggin and others, most economists have yet to be convinced that the critical issues of power and energy density, intermittency, redundancy, and limits of thermodynamic cycles cannot be overcome with carbon pricing.
While I think carbon tax is necessary some of Tony Abbott’s criticisms are justified. I think c.t. is needed to prevent new coal plant being built and to spur at least some efficiency gains. Now minister Greg Combet has to defend the likely purchase of overseas offsets at the 2015 progress review. 2010 emissions were 580 Mt CO2e and we want to get to the weak target of 480 by 2020. The midpoint is 530 but I’d guess by 2015 we’ll be around 550. Thus we might need to buy around 20 Mt of offsets say at $5/t costing $100m. Some lucky sustainable basket weavers are in for a bonanza.
Liberal spokesman Greg Hunt suggests the offsets may not be genuine GHG reductions.
I agree; they are not real cuts in the sense of permanent reductions from a fixed baseline. Therefore the outlay is a delusion, a waste of money and a copout. Other carbon tax woes include the fact Hazelwood can never be fully replaced by gas and the quiet laugh Asian steel mills must be having getting our coking coal carbon tax free while locals Bluescope and OneSteel have to pay it. Don’t ditch the carbon tax, fix it.
Graham Palmer @ 24 August 2011 at 7:36 AM
The Carbon Tax and ETS is arguably the most important policy decision facing Australians right now. It will have consequences that last many decades. Therefore, I am surprised it is not the dominant item of discussion on BNC. The BNC comments policy states:
So, why isn’t the carbon tax and alternatives to it dominating the BNC discussion?
I’d like to expand Graham Palmer’s comment.
Carbon Tax and ETS in Australia will make no difference to the climate. But they will severely damage our economy. They are productivity destroying policies. This will make us less able to implement the most effective solutions (to everything) in the future.
The carbon price in Australia will not affect world emissions, unless it is so high it drives us into a deep, sustained recession. In the absence of economically viable technologies to replace fossil fuels, the only way we can get deep emissions cuts is with a deep, sustained recession.
The economic damage will be much greater than Treasury has admitted.
I share some of your concerns Peter – the complete absence of serious public policy discussions of baseload alternatives in the political and policy debates makes the whole exercise rather pointless – discussions of wind, solar, hypothetical geothermal, theoretical carbon capture, are really just a sideshow if the serious work of baseload coal replacement is ignored. There are a myriad of marginal abatement opportunities if we try hard enough, or raise the carbon price high enough, but they are always going to be peripheral while we remain dependent on coal. Regrettably, any attempts to raise serious debate in the Australian media tend to be stifled, or revert to belief systems, such as “baseload wind or solar”. Here’s one small attempt in Dissent magazine (sorry, article not available online):
Thank you for the link. Isn’t it interesting that the editor of the page chose to put Mark Diesendorf’s article ahead of yours.
I agree with your points. This is the one I think is the most important.
I’d like to develop this thought.
My main point is that without alternatives to fossil fuels, we cannot cut emissions by much without a deep sustained recession. The reason is that without the ability to substitute non fossil fuels for fossil fuels, there is little opportunity to cut emissions.
If we raise the carbon price high enough we will shift our high intensity industries off shore. And we will stall economic growth. That would reduce emissions. It would also cause devastating social consequences, health issues – including fatalities! This is not exaggeration.
How serious is the problem. Let’s consider this one step at a time. Let’s look first at the limit position.
Case 1 – Emissions inelastic to carbon price, no international carbon permits trade.
Energy use and carbon intensity are somewhat elastic to price. The energy intensity and carbon intensity of the Australian economy has been improving for decades. The key question is: how much faster can it improve if we impose a carbon price without allowing economically viable alternatives to fossil fuels?
We can improve energy efficiency a little faster than we are already doing. But we cannot reduce emissions intensity much without a viable alternative to fossil fuels.
CO2 emissions in 2020 = CO2 emissions in 2012 x compound growth rate of
• GDP per capita
• Energy Intensity (GJ per GDP)
• Carbon Intensity (t CO2/GJ)
If we assume no international trade in emissions permits and the rate of improvement of energy intensity and Emissions Intensity will not increase (the assumptions for Case 1), then the only variable that responds to the carbon price is the GDP per capita growth rate.
Applying the parameters used in the DCCEE’s projections, the GDP per capita growth rate would have to fall from 1.2% p.a. (Treasury Projection) to -1.7% p.a. average for 8 years. That is a very deep, very long recession.
Once again, the key question is: how much faster can emissions intensity improve if we impose a carbon price without allowing economically viable alternatives to fossil fuels?
Let’s get some feedback and discussion about Case 1 before we consider Case 2.
(Correction made as requested.)
Blake Alcott provides an interesting take on your CO2 equation, see page 8, figure 5
Click to access CapsJCLEPRO.pdf
I think the obvious answer to your scenario is that the targets will be re-written, the tax will be modified or repealed to maintain political credibility, and business-as-usual will prevail until necessity forces a community re-evaluation of energy policy. But a sobering quote by Dr W.H.Connolly in 1969:
Cecil Edwards, 1969, Brown Power : A Jubilee History of the State Electricity Commission of Victoria, page 276
Thank you for the link tom the Alcott paper and the two quotes. I’ll havce to read the Alcot paper in slow time.
The quote by Dr W.H. Connolly in 1969 is a sobering reminder of how much time we have wasted; 42 years and counting.
I agree. However, my fear is about how the community re-evaluates energy policy. If the practices of the past 42 years are a guide to the future then we will have more community “guidance” and intervention in the details of what energy policy should be. More intervention by those who don’t understand.
What we should have instead is the policy that defines the required outcomes – energy security, high quality, least cost and leas environmental damage in all ways. That can be controlled with light regulation.
This excellent Chatham House report of a year ago gives the two options. It also says the half way house, which is what we have, is the worst of all options.
Investing for an Uncertain Future: Priorities for UK Energy and Climate Security
I gave the wrong link in the previous comment. The link should be:
Click to access 0610pp_grimston.pdf
I’ve read the Grimston paper before – interesting read with important lessons for Australia.
My one observation is that in the Australian pre-privatisation era, the technical agenda was set by engineers within the respective SEC’s who actually understood power systems (even if they insisted on wide reserve margins). But the Kennett privatisation era coincided with the emergence of the climate debate, with the result that the agenda on energy policy began to be set by social scientists rather than engineers, and has been dominated by the ‘soft left’ ever since. It seemed to me through the late 90’s and early 2000’s, that the professionals pushing a ‘realist’ position on energy policy were often climate sceptics, which undermined their legitimate advocacy and simply pushed the educated left towards the idealist/environmentalist position. The result now is that we have a completely dysfunctional energy debate. My analogy is that the current carbon tax debate is akin to the government implementing a major health reform, but completely ignoring public hospital reform, preferring to talk up naturopathy and homeopathy as the ‘long term solution’ to health policy.
I agree with much of what you say here. But not sure about one alignment. I think enginreers are rightly “realists”, cautious and rational.
More evidence the bureaucrats are getting further divorced from reality comes with yesterday’s announcement
In 2015 Aussie farmers will be able to sell their carbon credits on the international market. However unless they are unusual kinds of farms that don’t have vehicles, livestock or fertiliser most of them won’t have credits to sell. Less-emissions-than-otherwise is not less emissions from a fixed baseline.
The other big event in 2015 is the move from carbon tax to emissions trading. That means a CO2 cap for Australia which is supposed to be 480 Mt CO2e and subsequently declining. If the whole world gets on board that almost certainly means less coal and LNG exports. See the ‘our coal’ link in the sidebar.
Hypothetical question; what if the rest of the world does not get on board? Well in that case I guess we’ll have to do it for them and cut their fossil fuel allowance by x% a year. If other countries can get cheap and reliable gas and coal elsewhere good luck to them. Strangely Abbott can see this is the logical course of events but Gillard can’t. As for the bureaucrats they are in dreamworld.
Graham Palmer, @ 24 August 2011 at 8:20 PM,
Thank you for Alcot’s paper. I am going away tomorrow and won’t have time to read it carefully beforehand. Here is a preliminary comment having read only part of it so far.
Alcot says in the Abstract:
France demonstrates this is not true. France’s emissions from electricity are low due to over 90% of it being generated by nuclear and hydro. This demonstrates “Technology”, a right side factor, can enable a country to be affluent without emissions.
If we allowed nuclear, and had allowed nuclear for the past 50 years without impediments, world emissions would be 10% to 20% lower now and nuclear would be safer and far cheaper than it is. Importantly, the world would be in a better position to implement a faster emissions reductions trajectory. Therefore, I believe Alcot is wrong when saying, in effect, tax and regulation are better solutions than technology.
Alcott’s definition of technology does not refer to the type of power technology but rather, technological gains in efficiency, such as the technological improvements in vehicle efficiency. He suggests for example that improved car fuel efficiency will lead to more kilometres driven, more money to spend on other goods, a decrease in fuel usage leading to: lower demand, lower costs, which simply drives more demand by others. He believes in high rebound or ‘backfire’. This is quite different to the case of ‘nuclear technology’.
Yes, but this ignores the most important factor (IMHO). As I discussed in the post @ 24 August 2011 at 6:33 PM, ‘Emissions Intensity per GDP’ comprises two factors: ‘Energy Intensity’ and ‘Emissions Intensity per GJ’.
He is dealing with only the Energy Intensity component. That is improving but cannot be improved a lot faster than we are already doing. Improving Energy Intensity without a substantial change in ‘Emissions Intensity per GJ’ will have only a small effect on total emissions and will behave as Alcott says.
But he has ignored the important component: ‘Emissions intensity per GJ’.
If we want to reduce emissions from fossil fuels we have to substitute non fossil fuels for fossil fuels. If we do that economically we can have both affluence and low emissions. France has proved that for electricity. If we allow low emissions electricity to be cheaper – remove all the irrational impediments we have imposed on it over the past 50 years – then low emissions electricity will displace fossil fuels for heating and land transport.
(I still haven’t read the whole paper, so may have misinterpreted what II’ve read so far)
As a citizen of the US, I am especially interested in what James Hansen, one of our leading climatologists, would say about Australia’s proposed carbon tax. I haven’t seen any recent comments–he’s probably too tactful to offer a direct opinion. But this marvelous story from about a year and a half ago gives one a good idea.
He’s basically for a rising price on carbon and for including nuclear in the energy mix.
If James Hansen is objective on this subject he might suggest to Australian’s they should ask themselves these questions:
1. Will the CO2 tax change the climate? If so by how much?
2. Will CO2 tax applied in Australia reduce world emissions? If so, by how much?
3. Will the CO2 tax have an effect on the ecology of Kakadu and the Great Barrier Reef? If so, by how much?
4. Will the CO2 tax change the rainfall in the Murray Darling Basin? If so, by how much?
5. What will be the total cost of administering and complying with the scheme?
6. How will the emissions avoided be measured (for example by wind farms) given we have no way of measuring the emissions avoided by wind farms. (Australia does not measure emissions from power stations)
7. What will be the effect of changing assumptions – such as when the government is eventually forced to recognise that wind farms and solar energy avoid far less emissions than the government’s and Green’s propaganda would like us to believe.
8. How much fraud will there be with Carbon trading in Australia? Who is the ultimate victim of the cost of such fraud?
9. How much fraud will there be with our purchasing of international carbon permits? Who is the ultimate victim of the cost of such fraud?
10. How can we expect to prevent carbon trading fraud in Australia, let alone in international trade of carbon permits, given we can’t even control internet scams and fraud now?
11. What is the benefit? What is the cost?
12. Is the Carbon tax simply “Socialism dressed up as environmentalism”?
13. Do we really want to go down the path of economic destruction that the EU has persued?
Let’s see whether we can find some common ground. I like best your succinct question #11: What is the benefit? What is the cost? Regarding the latter question, I’ve seen mentioned on some conservative sites, including one that you have quoted, a projected cost of A$1.35 trillion over 38 years, based on government estimates. For discussion purposes, would you accept this figure as a starting point?
No, I do not accept that cost estimate. See: https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-133858
The starting point should be the benefits. Start at Q1.
Happy to oblige. The theoretical basis for the benefits of a carbon tax are: The consensus of science–and the assumption of this website–is that climate change is a serious threat. The consensus of economics is that a carbon tax would be the most cost-effective policy remedy to combat it.
Yes, Australia has some special circumstances, and the grounds for rejecting this particular carbon tax are not without merit. If you in Australia do reject it, fine with me. You may get a better one later on, perhaps after Australia accepts nuclear.
But it may be the other way around–the carbon tax will pass, and pave the way for nuclear. Do you have any interest in discussing this question: Will the passage of a carbon tax hasten or retard the acceptance of nuclear?
Yes. if it is a serious discussion.
However, I have discussed that at length on the “Alternative to Carbon Pricing” thread. I’ve made around 200 comments on the subject on that thread. So I’d ask you to background yourself on those comments as a first step. I explain why, IMO, the Australian Carbon Tax will not lead to a faster reduction of Australia’s emissions nor world emissions. In fact, I believe it will have the opposite effect.
I would expect you to answer my direct questions with direct, straight answers. Something which has been largely avoided to date.
I will be unable to get involved in any serious discussion for a few days.
The problem that I think PL alludes to, which economists understand but few others seem to have picked up on is that the tax churn is enormous relative to the abatement because the tax will apply to EVERY unit of carbon based energy, but only result in abatement at the margins. IMO, it is hard to criticise taxing, say carbon, rather than income, profits, etc., even if it turned out that taxing carbon didn’t actually reduce carbon emissions much, providing the scheme simplified the tax system and was strictly revenue neutral. This could have been an opportunity for reform, but alas looks like another expensive tax churn, without a matching energy policy to actually drive investment in low emission baseload.
Hullo Grahame, good to hear from you.
I agree about the tax churn. This an important issue. There are many other issues as well. I’ve addressed them in considerable detail on the “Alternative to Carbon Pricing” thread. I’ll make some short points off the top of my head below.
First, for Huon’s benefit, you do not need to explain the theory to me. I’ve been involved in and following this since 1993 when ABARE led the world on ETS for CO2 emissions (“Tradeable Emissions Permit Scheme”, ABARE Research Report, 93.5).
1. Australian Carbon Price, in the absence of an economically efficient international trading scheme, will not reduce world emissions. It may increase them.
2. Australian Carbon Price will seriously damage our economy if it is set high enough to achieve the 2020 unconditional emissions target
3. Once we damage the economy we are less able to take the most appropriate actions for all the wants and needs society, not just CO2 emissions
4. Once that happens, long term issues like CO2 emissions will be put on the back burner; short term survival becomes the priority
5. Imposing an ETS is not a market mechanism. It is a government imposed market forced on us by government intervention. It is another constraint on efficient markets and business
6. The real issue is that we have imposed high costs on nuclear and made it to expensive. That was done by government interventions. We need to remove those impediments to nuclear before we consider a carbon price. If we do that fully and properly, nuclear will be able to provide the least cost electricity generation alternative. That is what our priority should be.
7. If we impose the carbon price before we face up to the real problem – impediments to low cost nuclear – we will not face up to the real problem. We’ll just sweep it under the carpet.
8. From then on, any consideration of nuclear will be of high-cost nuclear like in USA, Canada, UK, Europe.
9. Raising the price of energy is bad policy. Energy is a fundamental input to all we have. It makes society better. It improves health and well-being of everyone. We should always do all we can to reduce the cost of energy, not raise it.
10. If we raise the cost of electricity in Australia, then we will slow the switch from gas to electricity for heat and from oil to electricity (or fuels produced by electricity). This means emissions will stay higher for longer.
11. If we raise the cost of electricity generation in Australia it will cause us to be less able to help the developing nations to adopt low cost low emission electricity generation. This means the developing nations will build coal generation rather than low emission generation. Since the developing world is projected to contribute about 80% of the emissions growth in the decades ahead, clearly anything we do to increase the cost of electricity generation in the Developed countries will increase, not decrease the problem of world emissions to 2050 and beyond.
12. The reason we are having this argument is that there is a reluctance to tackle the real issue and a reluctance to confront those who are causing it now and have been for the past 50 years.
13. This is avoidance. We should confront the real problem, not try to paper over it with another bad policy.
14. That’s a quick brain dump. Enough for now.
There are also the issue of fraud both in Australia and especially in international permit trading. The current proposal is banking on low cost international permits to provide 66% of the emissions reduction. Anyone can see where that is going to lead.
And the compliance cost. This will be very high. Much higher than is being admitted now.
This scheme is seriously bad policy. There has been no consideration or analysis of the alternative. That is seriously irresponsible and incompetent. Discussion of the alternative is prohibited in the Australian bureaucracy, just as it was in the 1990’s.
I totally agree with Peter Lang. The CO2 tax is a really bad idea. It will damage the Australian economy, no other country is going to follow our lead.
There is no need for it. Just regulate that power plants produce no more than x tonnes of CO2 per GWh.
There will be no alternative to nuclear if the x is set low enough, and the coal using energy companies will have to follow.
No one commented when I mentioned the UK’s Clean Air Act. But maybe something along those lines would be the answer..
Kevin Bennewith, I think you’re referring to the UK emission performance standard. IMO emission performance standards are favoured by engineers because they address the core issue directly without impinging unduly on the rest of the economy. But the economists, social scientists and bankers who have driven carbon pricing want to use financial instruments to drive change because this is what they understand and profit from. Adopting emission performance standards and simply getting on with the obvious engineering solutions would largely cut out many of the career greenhouse professionals.
Click to access 2179-eps-impact-assessment-emr-wp.pdf
Alan Kohler suggests there will be a kerfuffle about buying foreign offsets in 2015
I’m bloody sure of it. The Australian public will be outraged if hundreds of millions of dollars are spent on dodgy offsets. Aren’t our sustainable basket weaving projects good enough? However a lot of other things will have happened by 2015 including I suggest
– giving ‘efficiency’ a red hot go, but finding it wanting
– public awareness of gas/renewables co-dependence
– one or more oil price shocks
– some disturbing weather
– failure to replace nontrivial amounts of brown coal with gas
– nuclear rethink rethinks by Germany and Japan.
The false prophets of efficiency and renewables need to be discredited in the public’s mind. That won’t happen with direct action because the true believers will say we coulda run that aluminium smelter on solar panels, or whatever. Therefore I think the path we are on is not necessarily bad.
Graham Palmer and Peter Lang,
For what it’s worth, challenged by your excellent comments from Sep. 13 at 8:10 PM and 9:03 PM, I did a little more research. I found out that in 2020 the carbon price of the ETS will float, so that apparently there will no longer be a price floor that business can count on. For me that was the last straw.
Before I had been ambivalent about Australia’s carbon tax and ETS, but had been willing to give it the benefit of the doubt because the problem of climate change is so serious. As a US citizen I will still not presume to tell Australians what they should do. But I am prepared to say that if the same formulation of a carbon tax were proposed for the US I would oppose it.
I remain committed to the idea of a carbon tax, especially one such as you, GP, outline in the second half of your comment. And I will continue to evaluate all points of view. But for now, this tax deviates too much for me.
(PL, I, too, may take a break.)
“poison pills in carbon tax”
Do we really want our government to pass legislation with poison pills so future governments cannot amend or appeal bad legislation? Do we want to implement legislation that prevents us adapting to changing knowledge and changing international conbditions? Is this government so arrogant it thinks it knows what is best about the future – forever – so it feels it must prevent future governments from being able to change its legislation? Surely, good government and good management is to make the best policy based on the knowledge and situation at the time but also be sure to minimise the cost of later changes. The carbon pricing legislation is doing the opposite.
A very interesting article; thanks for providing the link. In addition to its coverage of the poison pills, the article made some good points about the legislation’s potential cost. Here’s a sample:
“Unless major emitters engage [in] comprehensive abatement efforts, action by Australia would not only be futile but also extraordinarily expensive.”