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):
CARBON TAX
- 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
EMISSIONS CAP-and-TRADE
- 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.[0]
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 [1] and climate change sceptic Steve Fielding.
In February 2010, the Australian Greens proposed an interim carbon tax of $A23 a tonne for two years.[2] 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.[3]
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.[4] 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.[5]
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.[6] 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.
Brave New Climate 
350 replies on “Carbon tax in Australia in 2011”
Huon,
True. Even Treasury admits that.
Treasury states:
That is, without coordinated global action, Australia’s actions are futile.
It strains credulity to believe Australia’s CO2 price will reduce world emissions, change the climate, change sea level, change the ecology of Kakadu or the Great Barrier Reef or change the rainfall in the Murray Darling Basin.
There is no demonstrated benefit in the absence of an economically efficient, international emissions trading system.
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The Australian government deserves much praise for seriously taking on the problem of climate change. But they have missed a great opportunity.
If they had proposed a plan that was simple, non-bureaucratic, popular, and cheap, then even if the rest of the world did not follow suit immediately, Australia would not have been much disadvantaged economically, and would probably have come out ahead. “First do no harm.”
In addition, such a plan, being a better mousetrap, might have served as a guide for other countries, catalyzing an international system, and resulting in great climate benefits for Australia and for all.
But as it is, unnecessarily high economic pain may yield unnecessarily low climate gain.
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Huon,
I agree.
Given where we are at, I advocate:
Australia should not implement carbon pricing until two conditions are met:
1. Australia has removed all the impediments to low-cost nuclear energy and has moved to accept and fully endorse the move to low-cost nuclear energy; and
2. The countries that emit as much as or more CO2e than Australia have agreed a legally binding, international, economically efficient emissions trading system.
I recommend Australia establish a policy (with legislation and funding) to implement low-cost nuclear energy with the objective of it providing in the order of 80% of our electricity generation within three to four decades from now.
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Peter Lang, on 22 September 2011 at 2:29 PM — I estimate you’ll need 40 of the 1 GW Atmea1 NPPs, building say one per year.
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David B Benson,
I am not sure how you derived the number of 40. But I’ll run with that.
We have three larger states and two smaller states (and and island state that won’t need nuclear – besides, they have Greens Leader Bob Brown to protect them from development).
So two multi-unit power stations in each of the larger states and one in each of the smaller states makes a total of eight power station in five states. So we’d need one new unit per power station every 5 years. Seems entirely reasonable to me, at 40 1GW units by 2050. Take into account that, as time progresses, the power stations will become quicker to build, smaller and more powerful, and cheaper. The current generation are already being built in Asia in around 3 1/2 years.
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I made a submission to the “Joint select committee on Australia’s clean energy future legislation” and an addendum. They use a lot of material from BNC posts and comments. I include them below for those interested. Only the foot notes are missing
Submission to:
Joint Select Committee on Australia’s Clean Energy Future Legislation
“Inquiry into Australia’s Clean Energy Future”
Date: 19 September 2011
Submitted by:
Peter Lang
Peter Lang 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.
Submission
The government has been unable or unwilling to answer my questions. Until the government can answer these questions it should not proceed with the Clean Energy Future Legislation. To proceed without being able to answer these questions would be incompetent and negligent.
My questions are listed in Attachment 1. They can be summarised as:
1. What is the benefit?
2. What is the cost?
3. Has due diligence been done?
4. What is the risk management strategy? (to minimise the cost to the taxpayer if the legislation has to be amended or repealed in the future?)
Below I expand on these questions and provide partial answers that the government has been unable or unwilling to provide. Some key issues are listed in Attachment 3.
What is the cost?
Treasury modelling has used optimistic assumptions. They are not realistic. So Treasury’s cost projections cannot be trusted.
Unrealistic assumptions are:
1. The world will quickly adopt an international CO2 emissions trading scheme
2. Australia’s ETS will integrate successfully with whatever international scheme is adopted.
3. Australia can set an example to the world and other countries will follow our example.
4. International emissions permits purchased by Australia will be cheap, free of fraud and will be effective at cutting world emissions.
5. Cutting world CO2 emissions will produce the benefits assumed.
6. The assumed benefits can be achieved more cheaply by cutting CO2 emissions than by adapting to climate change, whatever the climate changes may be.
In the absence of international trade in emissions permits and the absence of an economically viable alternative to fossil fuels, a simple calculation shows that GDP per capita growth would have to fall to -1.7% per annum, average for 8 years, to achieve the governments unconditional 2020 emissions targets (see Attachment 2).
What is the benefit?
There is no demonstrated benefit in the absence of an economically efficient, international emissions trading system.
Treasury states:
http://www.treasury.gov.au/carbonpricemodelling/content/overview/page16.asp
That is, without coordinated global action, Australia’s actions are futile.
It strains credulity to believe Australia’s CO2 price will reduce world emissions, change the climate, change sea level, change the ecology of Kakadu or the Great Barrier Reef or change the rainfall in the Murray Darling Basin.
Has due diligence been done?
No.
The following email sent to the Prime Minister explains what is due diligence and why it should be done before we commit to a very costly policy, especially one with doubtful benefits.
http://joannenova.com.au/2011/07/spending-billions-why-not-do-a-due-diligence-study/
What is the risk management strategy?
What is being done to ensure that, if the CO2 pricing legislation needs to be amended or repealed in the future, the cost of doing so is as low as possible?
“Labor plants poison pills in carbon tax” http://www.theaustralian.com.au/national-affairs/opinion/labor-plants-poison-pills-in-carbon-tax/story-e6frgd0x-1226138227483 suggests the government has not addressed appropriate risk management. In fact it suggests the government is intent on maximising the cost to the tax payer if the legislation needs to be amended or repealed.
Recommendations:
I recommend and request the government does not proceed with the proposed legislation until:
1. The government can answer my questions and can convince the Australian public that the policy is what Australia needs.
2. The policy is put to the voters at an election.
3. It is clear that Australia’s policies are aligned with the policies of the major CO2 emitting nations, especially our trading partners and competitors.
4. We are not having our future dictated by Europe for Europe’s economic advantage.
5. Proper due diligence has been done in accordance with accepted business practice for an investment of many trillions of dollars.
6. Proper risk management is incorporated in the legislation so that the legislation can be amended or repealed at minimum cost to the taxpayer if that is the decision of a future elected government.
Attachment 1 – Unanswered questions
1. Will the CO2 price, applied in Australia, change the climate? If so, by how much?
2. Will a CO2 price, applied in Australia, reduce world emissions? If so, by how much?
3. Will the CO2 price have an effect on the ecology of Kakadu and the Great Barrier Reef? If so, by how much?
4. Will the CO2 price change the rainfall in the Murray Darling Basin? If so, by how much?
5. Will the CO2 price have an effect on sea level? If so, by how much
6. What will be the total cost of administering and complying with the scheme?
7. How will the emissions avoided (e.g. by wind farms) be measured given we have no way of measuring the emissions avoided by wind farms. (Australia does not measure CO2 emissions from power stations)
8. 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 have us believe.
9. How much fraud will there be with CO2 trading in Australia? Who is the ultimate victim of the cost of such fraud?
10. How much fraud will there be with our purchasing of international carbon permits? Who is the ultimate victim of the cost of such fraud?
11. 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?
12. What is the benefit? What is the cost?
13. Is the Carbon pricing scheme simply “Socialism dressed up as environmentalism”?
14. Do we really want to go down the path of economic destruction that the EU has pursued?
Attachment 2 – What’s the cost?
Without economically viable 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 emissions intensive 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 an 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
• Population
• GDP per capita
• Energy Intensity (GJ per GDP)
• Carbon Intensity (t CO2/GJ)
Ref.: “An evaluation of the targets and timetables of proposed Australian emissions reductions policies” http://sciencepolicy.colorado.edu/admin/publication_files/2010.36.pdf
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?
Case 2 – No nuclear, no international emissions trade, energy and carbon intensity is elastic
Population growth rate will not be changed by the carbon tax.
The rate of improvement in Energy Intensity will not change much – unless we shift energy intensive industries off shore (e.g. we can’t replace buildings with more energy efficient buildings in 8 years, and we cannot substantially increase the rate of improving the efficiency of the vehicle fleet)
We cannot significantly reduce the Carbon Intensity while we do not allow viable alternatives to fossil fuels. Gas replacing coal for electricity generation will reduce emissions a small amount (e.g. save at most 12 Mt/a by replacing Hazelwood brown coal power station). But there will be unintended consequences, most of which we have no idea about. One that can be seen is that people will move from electricity to gas for heating and hot water. That is a short term effect. Once we do move to low emission electricity we will want all gas users to move from gas to electricity. It seems the more we stuff around, interfering and trying to direct what we think is best, the worse we make things.
In short, we cannot reduce emissions much in Australia without a viable alternative to fossil fuels. Therefore, a carbon price would have to be high enough to severely slow the economy if we are to achieve the 2020 targets without a viable alternative to fossil fuels.
Attachment 3 – Issues
1. An Australian CO2 price, in the absence of an economically efficient international trading scheme, will not reduce world emissions. It may increase them.
2. An Australian CO2 price will seriously damage our economy if it is forced 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 of 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 too 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, and Europe, rather than of low-cost nuclear.
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) for transport. 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.
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Addendum to
Submission to:
Joint Select Committee on Australia’s Clean Energy Future Legislation
“Inquiry into Australia’s Clean Energy Future”
Date: 22 September 2011
Submitted by:
Peter Lang
Further to my submission of 19 September 2011, I would like to add the following.
I refer you to “Attachment 3 – Issues” points 6, 7 and 8; and to Recommendation number 3.
Extract From “Attachment 3 – Issues”
Extract from “Recommendations”:
Addendum
I expand on Recommendation 3 as follows:
Australia should not implement carbon pricing until two conditions are met:
1. Australia has removed all the impediments to low-cost nuclear energy and has moved to accept and fully endorse the move to low-cost nuclear energy; and
2. The countries that emit as much as or more CO2e than Australia have implemented a legally binding, international, economically efficient emissions trading system.
I recommend Australia needs to establish a policy to implement low-cost nuclear energy with the objective of it providing in the order of 80% of our electricity generation within three to four decades from now.
To support this I provide the information below:
France has done this and its electricity generators emit just 8% of the CO2 emissions that Australia’s electricity generators emit. And France has near the lowest cost electricity in Europe.
This excellent graphic http://www.rte-france.com/fr/developpement-durable/maitriser-sa-consommation-electrique/eco2mix-consommation-production-et-contenu-co2-de-l-electricite-francaise shows France’s electricity demand, the proportion generated by each fuel type and the CO2 emissions per hour on a real time basis. This was the situation at 2 pm in France on 21 September 2011:
We could be doing that too if it hadn’t been for 50 years of anti-nuclear activism.
France commissioned most of its nuclear power capacity over a period of two decades. Australia could too. We’d need about half the nuclear capacity France has built. This would reduce our emissions from electricity generation by 90%. If we keep the cost of electricity low, electricity will displace (over time) gas for heating and oil for transport (with electric vehicles and/or with liquid fuels produced using electricity). Low cost, plentiful electricity will also allow for cheaper desalination without CO2 emissions and maintain Australia’s natural competitive advantage of low cost energy. This would allow Australia’s emissions to be reduced by 50% by 2050 from energy alone. But achieving it requires low-cost, not high-cost, electricity generation.
Nuclear cheaper than coal in Australia. How?
Refer to Addendum Attachment 1
Why low cost-nuclear must be accepted before CO2 pricing.
Refer to Addendum Attachment 2
Addendum Attachment 1
Nuclear cheaper than coal in Australia. How?
Here is rough, ‘back of an envelope’ calculation.
I have argued here https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-105862 why the peoples of the world need low-cost electricity, and why low-cost, clean electricity will reduce the world’s emissions faster than higher cost, clean electricity.
Below I argue why I believe nuclear can be the least cost way to generate electricity in Australia in the future without resorting to a Carbon Tax or Emissions Trading Scheme (ETS).
How?
Adding a carbon tax or ETS will add more government imposed regulatory burdens on industry, without removing any of the mass of state and Federal government imposed conflicting regulations, tax breaks, subsidies and other incentives and disincentives that exist now. Rather than adding to this mass of regulations that is inflating prices we should remove all that are unnecessary or distorting the market. That requires removing all the incentives and disincentives that favour one technology over another.
We will also have to pass legislation that sends a clear message to investors that the rules for new power stations have changed, and the change is permanent. We must convince investors that their investment will be secure and future governments will not renege. By sending this clear message the investor risk premium will move from nuclear to coal, over time.
To do this we will have to invest in (i.e. subsidise) the first nuclear power plants.
There are several parts to my argument:
1 Assume, as a starting price, the latest contracted price for new nuclear in a country building its first nuclear power plants, United Arab Emirates (UAE) .
2 Assume the initial price will decrease as a country develops the expertise and as world prices for nuclear come down over time.
3 Assume the government can move the investor risk premium from nuclear to fossil fuels by the legislation it enacts and the messages this sends to investors.
4 Assume the community is prepared to contribute (subsidise) the first plants, for the following reasons:
a. the long term benefits of lower cost, cleaner electricity,
b. energy security,
c. because the higher cost now is recognised as correcting the bad policy decisions in the past (anti-nuclear) and we have to bear a cost to correct those mistakes, and
d. the precedent has been well established by the subsidies for renewable energy and by nationalising the Australian communications network.
5 The community is prepared to invest in the first nuclear plants as a means to demonstrate to the investors that the community has a substantial financial investment in these plants. This is necessary to send the message to the investors that their investment is relatively secure against the government changing its mind and reneging on deals. (This is important because of the messages often sent by people who believe it is acceptable for the community to renege on deals with investors, as has happened frequently in the past).
6 The government will remove all the impediments to a level playing field for electricity generators. (I recognise the conflict with the previous points – needs to be nuanced)
Assumptions:
1. New coal power plants would cost $2,100/kW in 2015 under the assumptions used in the analysis (ACIL-Tasman, Table 35, p58)
2. New nuclear plants would cost $5,050/kW in 2015 in Australia under the assumptions used in the analysis (ACIL-Tasman, Table 35, p58)
3. The capital cost of nuclear will decrease by 15% in the five years following the commissioning of the first unit and cost reductions will continue at a declining rate (ACIL Tasman, Table 35, p58, Nuclear 2024-25 to 2028-29)
4. A better current estimate for capital cost for the first nuclear power station in a new country (instead of the ACIL-Tasman estimate) is the recently contracted price for the UAE nuclear power station. For this assumption to be valid we would also have to assume that Australia will adopt a regulatory environment that is no more onerous than UAE’s and we will address the investment risk so that the investment environment for nuclear in Australia will be as attractive as it is for nuclear in the UAE.
5. The UAE plant is 4 units of 1350MW for a total capacity of 5400 MW. The capital cost of the UAE plant, including initial fuel load and technology transfer is US$20.4 billion , or $3,800/kW
6. Investor risk premium in the USA for nuclear compared with coal is 26% (MIT, 2009).
7. We could expect the investor risk premium to be higher in Australia given that we have no nuclear industry and given the strong anti-nuclear sentiment in Australia.
8. I assume we will remove the impediments to nuclear and remove the incentives for fossil fuel and renewables so we can develop a ‘level playing field’ for all technologies. There are many regulations, hidden subsidies and other buried incentives that advantage fossil fuels and renewable energy in Australia. Here is a list of some examples: https://bravenewclimate.com/2010/01/31/alternative-to-cprs/#comment-86256 And here is a list of some of the government subsidies for different generation types for the USA, Texas: http://www.window.state.tx.us/specialrpt/energy/subsidies/index.php . This does not include the major component of the subsidies for renewables such as feed-in-tariffs, Renewable Energy Certificates, and the higher price renewables receive because the power generated by renewables is mandated, or as often referred to in the industry, ‘must take’.
9. I assume the community will accept that we need to provide a business and political climate for investors such that we minimise the investor risk premium for nuclear.
Effect of the policy on Capital Cost on Nuclear and Coal
Based on the above assumptions I calculate the capital costs of nuclear and coal power stations in 10 years from award of the first contract for NPP in Australia as follows (in 2009 $):
Nuclear:
Starting price for nuclear = $3,800/kW
Reduce by 15% over 5 years (say 25% over 10 years) = $2,850/kW
Remove the investor risk premium of say 25% = $2,300/kW
Coal:
Starting price for new coal = $2,100/kW
Reduce cost by 1.5% over 10 years = $$2,070/kW (ACIL-Tasman for 2025)
Add investor risk premium to coal (of say 25%) = $2,600/kW
How much subsidy would be needed to get nuclear started?
Starting price for nuclear = $3,800/kW
Starting price for new coal = $2,100/kW
Difference = $1,700/kW
However, nuclear has lower fuel and operating costs than coal, so allow (rough guess) $300/kW.
Therefore, the subsidy needed for the first plants would be $1700-$300 = $1,400/kW.
This would reduce to zero by say the 8th reactor, so the average would be $1,400/kW for the first 4 reactors and $700/kW for the next 4 reactors.
Subsidy for 5400MW @ $1,400/kW = $7.56 billion
Subsidy for 5400MW @ $700/kW = $3.78 billion
Subsidy for the first 10,800 MW = $11.34 billion
References:
ACIL Tasman (2009) “Fuel resource, new entry and generation costs in the NEM.”
Click to access 419-0035.pdf
MIT (2009) “The future of nuclear power”, 2009 update.
http://web.mit.edu/nuclearpower/
Further Reading
Some impediments to low-cost nuclear
Subsidies that encourage fossil fuel use in Australia.
Click to access CR_2003_paper.pdf
Impediments to low-cost nuclear – Industrial Relations
The excessive cost due to regulatory ratcheting
http://www.phyast.pitt.edu/~blc/book/chapter9.html
Suggested Terms of Reference for a “Productivity Commission” Investigation into the impediments to low-cost nuclear
How to remove investor risk premium:
Emissions monitoring – the cost. Is this the best way?
A list of some key comments on the “Alternative to Carbon Pricing” thread:
Addendum Attachment 2
Which first? Nuclear power or carbon pricing?
Many argue we should impose a carbon price first and then, as energy prices increase as a result, people will be more receptive to nuclear power.
I find this argument unconvincing. My reasons for rejecting this argument are:
1. Past experiences suggest that once the public feels an issue has been resolved they switch off and don’t want any more to do with it. Examples are:
a. The Petroleum Resource Rent Tax (PRRT) in the early 1990s. Once it was implemented, some changes were needed but no one wanted to open it up again.
b. Australian Republic – once the referendum was held it is off the agenda for a decade at least.
c. Several other examples that have slipped my mind for now.
2. If we put a price on carbon the public will feel Climate Change has been resolved and there will be a reluctance for a long time to consider nuclear.
3. New gas generators will be the easy answer for a decade at least. The public will not want to consider nuclear when they have been led to believe a carbon price, energy efficiency, gas generators and renewables will solve the problem.
4. The time to tackle the opposition to low-cost nuclear is now! The main opponents are the Greens, the ‘environmental NGO’s, Labor Party and its supporters, the gas industry, renewable industry, those who will gain from carbon trading and all those thousands of climate change and renewable energy researchers who are on the public payroll and whose careers depend on government funding.
5. Once a tax is imposed it is seldom removed. Many ‘temporary’ taxes have been imposed, but getting rid of them is nearly impossible.
6. A carbon tax is a case of picking winners. It is the flavour of the decade as to what we should tax now (mining, carbon, alcopops, flood levy), and which environmental problem is considered the most important at the moment. Next decade it will be something else.
7. The Green-Labor advocacy for a carbon tax is another symbolic gesture as opposed to good, substantial policy.
8. Carbon price is part of a more important Green-Labor agendas such as wealth redistribution (we have a whole tax system for that)
9. The people who advocate a carbon pricing scheme, while also opposing low cost nuclear, seem to not recognise the economic consequences of the policies they propose.
10. The argument being put for a carbon price is being put by various groups including those who want
a. gas
b. renewables
c. carbon trading
d. another symbolic gesture to show they’ve achieved something
e. any alternative rather than look seriously at what needs to be done to allow nuclear to be cheaper than coal in Australia
This last point (anything other then remove the mass of legislated, regulatory and policy impediments to low-cost nuclear) is the ‘elephant in the room’. It is the unmentionable issue. The one issue no one wants to discuss in any depth
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Excellent work Mr Lang!!
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As noted by Mr Lang, France now has the lowest carbon footprint in Europe, all without any need for a “price on carbon” or ETS’s. Why can we not do the same here?
NB Thanks to Graham Palmer for his response to my post on 14 September 2011 at 1:23 PM. and the interesting document he linked to.
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Since we have discussed Australia’s proposed ETS (it’s not really a carbon tax) at some length, it may be helpful to review what an ideal carbon tax would look like. Or, in concrete terms, how should a US carbon tax be structured?
Here are some underpinnings, presented by one of my nation’s most influential economists, Greg Mankiw of Harvard University:
(“Cap-and-trade” is the name in the US for an ETS)
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Kevin Bennewith,
Thank you for the supportive comments.
Huon, Thank you. I’ll read that link with interest. The USA, China, India and EU have too lead the way to implement an international agreement as the IPCC pointed out in AR4.
The addendum to my submission to the Joint Select Committee on Australia’s Clean Energy Future Legislation
https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136436 says:
And then goes on to provide the supporting information and argument.
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Treasury admits misleading the Senate Select Committee on the assumptions used in the Carbon Price modelling:
http://www.theaustralian.com.au/national-affairs/treasury-caught-out-on-carbon-premise/story-fn59niix-1226146309239
The Carbon Pricing legislation shifts the risk to the taxpayer. If the legislation is as bad as this says, http://www.theaustralian.com.au/news/opinion/lies-deception-and-carbon-tax/story-fn7078da-1226146005701
then we should be really worried:
The above two articles further explain unrealistic Treasury Assumption
and
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The article in the Australian itself has questionable assumptions. Carbon permits are not like flexible irrigation licences; from the word go the intention is the number will be steadily reduced. From 2015 they will be bought not issued. Like musical chairs from then on there will be competition for the dwindling number so there is no case for compensating emitters for any presumed ongoing entitlement.
I agree the Treasury modelling may be suspect. For example the wind industry said it wanted $40 carbon tax so the modelling may assume $23 delivers a little over half of that wind build. Don’t think so it means the wind build stops dead without continued quotas and subsidies. That’s undoubtedly why the advice of Garnaut and the Productivity Commission to discontinue the MRET post c.t. was ignored.
I also agree that barring recession we won’t meet the interim target without some jiggery pokery like foreign offsets. That could sharpen everybody’s thinking. Think of it as a boil that will come to a head.
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John Newlands,
Thank you for your comments. I assume they are based on having read the Submissions to the Joint Select Committee on Australia’s Clean Energy Future Legislation, yes? If not the original submissions is here https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136435 and the Addendum is in the following comment.
I agree with your comments that the carbon tax cannot make wind and solar viable and they are dependent, entirely, on being mandated by the RET. This is bad policy as Garnaut and the Productivity Commissions made clear.
I agree that we cannot achieve the 2020 emissions targets without ‘jiggery poky’. However, I sense you are underplaying just how serious this ‘jiggery pokery’ would have to be to achieve the targets – and how serious the consequences would be for the economy (see “What is the Cost” section in the submissions). Let’s face it, it’s now too late for nuclear to have any input to cutting emissions by 2020. So the target of 5% cut by 2020 is no longer achievable (being realistic). What we need to do is to focus on implementing nuclear asap so we can implement policy that can cut emissions, from energy alone, by 50% by 2050.
The Treasury modelling is worse than suspect. The assumptions are highly optimistic:
However, I think you may have misunderstood the really important point in Henry Ergas’s article. You say:
But this is not the issue. The issue is the legislation locks in future governments, of whatever stripe, to incur massive cost to amend or repeal the legislation. That is clearly the intention of the Greens and the government. But is it based on an arrogant belief that they know what is best for the future forever more? That is extremely bad risk management, especially so given where the world is heading at the moment.
Henry Ergas explains it much more clearly than I can. I’d urge you to re-read his article. This is really important for Australia’s future.
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Compliance Cost of Carbon Pricing
You can’t have carbon pricing and regulations without high compliance costs. First, there is the cost of the bureaucracies (DCCEE, Treasury, ATO, DRET, DFAT, ABS, ABARE, Australian Federal Police, etc). Second, there is the cost to the companies involved – monitoring, calibrating, reporting, auditing, responding to requests for more information and defending their position in court. Third, there is the accounting, legal and litigation costs. Then there is the cost of fraud. Who pays all those costs in the end? The consumer of course.
If you don’t implement proper compliance systems, then the fraud increases, until the whole system fails or has to be changed. The cost is huge.
To give this some perspective, the USA EPA has admitted in a court submission that the cost for the EPA to implement the US regulations, that currently exist, to monitor CO2 emissions, would require them to hire 230,000 extra full time staff (up from 17,000 now to 250,000), and the cost would be $21 billion per year.
http://www.eenews.net/assets/2011/09/16/document_pm_02.pdf#page=48
That’s just the cost for one government department. The cost to business would be at least 10 times more.
Assume the cost in Australia is 1/10th the cost in the USA. The cost to the government would be $2.1 billion per year and $21 billion to business. That’s 23 billion of totally unproductive money sucked out of the economy.
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Compliance cost for Carbon tax and ETS – what could we do with that money
Further to Compliance cost of Carbon pricing https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-137218 think what we could do with $23 billion per annum if we weren’t wasting it on totally unproductive uses – compliance with a carbon pricing scheme that will have next to no benefits (refer: https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136435 )
Well, one thing we could do with $23 billion per year would be to build four to five nuclear power stations per year initially and increasing to about ten per year. We could have enough to meet Australia’s electricity in a decade or so from start of first construction (I am considering funding constraints only here, not the logistics and other constraints).
I recognise many will not agree with the $23 billion per year compliance cost figure nor that what is avoided in compliance with the Carbon Tax and ETS can be converted to building nuclear power stations. But this does give a perspective on the waste the carbon tax and ETS will cause.
For those who disagree with the figure, please give a better figure and justify it.
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I expect people are watching and reading the posts on this thread, but don’t want to debate this subject, the key policy issue of the time because the arguments against the government’s proposed carbon pricing legislation are becoming so ovewhelming.
The more I think about the cost of compliance (whatever it turns out to be it will be far more than the government would recognise at this time) the more it makes “direct action” to cut emissions look like the better alternative. Direct action to remove the impediments to nuclear as a first step and, if necessary, mandate electricity generation that cuts emisisons from electricity at least cost ($/tonne CO2e avoided).
Sure, we can follow with CO2 tax and/or ETS later. But, until there is an international system, any international trading will be enormously costly (compliance costs) and fraught with fraud. So how much can the CO2 tax and ETS achieve in Australia without causing a deep, long recession. Not much. In the absence of an economically viable alternative to fossil fuels, the carbon tax cannot achieve much. But it will cost us a fortune.
For anyone catching up and who has missed the recent comments and background to this comment, start here:
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Peter Lang, on 30 September 2011 at 10:16 AM
Assume the cost in Australia is 1/10th the cost in the USA. The cost to the government would be $2.1 billion per year and $21 billion to business.
Only 500 businesses are going to be monitored and I dont think CO2 emissions are being measured, but instead oil, gas and coal consumption. Methane emissions from coal mines will be measured.
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I doubt that compliance costs in dollar terms will be a problem. I think c.t. will be beset with political problems due to glaring anomalies. For example the cushy treatment given to supposedly trade exposed industries while small local manufacturers struggle to pass on higher costs. Another anomaly will be selling coal and LNG to other countries with no intention of practising emissions restraint. There will be a justified outcry over the purchase of bodgie foreign offsets when we fail to meet interim targets.
However all of this is bringing matters to a head earlier rather than later. A period of somewhat ineffectual carbon pricing should silence critics who say we haven’t given efficiency and renewables a good go. At the same time the public will observe climate change and stumbles at nuclear phaseouts. Under the circumstances (Fukushima etc) things could be worse.
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Neil Howes @ 2 October 2011 at 6:32 AM
It is true the government claims only 500 business will be monitored, initially, and emissions are not being measured in Australia – yet.
However:
Firstly, that won’t last. If the USA and EU are monitoring emissions (as they are attempting to do) we will have to also. It is clear from the USA and Irish CO2 emissions monitoring from electricity generation, that the emissions monitoring is improving but not yet good enough to be able to establish how much emissions are avoided by wind generation. Clearly, to improve our ability to make such assessments (for fact based decision making), regulations will be tightened over time and emissions measurement will be required.
Secondly, we are starting with 500 businesses being monitored. This will extend to tens of thousands eventually as the scope of emissions trading is extended to more business and industries – such as agriculture, biochar, etc (if the world goes down the trading route).
Thirdly, if we don’t measure emissions, how can we tax or trade emissions?
Fourthly, if the compliance cost for the US EPA would be $21 billion per year if it applied the currently existing regulations, imagine what the cost will be as the regulations are tightened over time and extended to more businesses and industries. Furthermore, add the cost for the other departments. Departments that would be involved in Australia (of the top of my head) are:
• Department of Climate Change and Energy Efficiency (DCCEE)
• Department of Foreign Affairs and Trade
• Australian Taxation Office
• Department of Finance
• Treasury
• Department of Resources, Energy and Tourism
• Australian Federal Police (Carbon Cops and fraud)
• Australian Bureau of Statistics
• ABARES
• CentreLink
• Solicitor General
• Courts
• Australian State Government departments.
Fifthly, there is the compliance cost to the businesses that have to comply. The compliance cost for each business – of which there will be 500 initially and extending to many thousands later – will be orders of magnitude more than the cost to the departments (per submission). Businesses have to:
• Establish the monitoring system for their business [1]
• Procure and install the system
• Take reading every 15 minutes, calibrate the instruments for every reading, summarise hourly and report the hourly readings, summarised to various levels [1]
• Maintain the system [1]
• Update the system, including all the IT systems, each time the regulations change (this has been happening every 3 to 5 years since 1993 for monitoring of the other gases covered in the same regulations [2]
• Modify the system when their business changes, (including when it merges with other companies, gets bought etc).
Has anyone who is competent and impartial – i.e. other than the CO2 Tax and ETS proponents – done a proper estimate of the economic cost of compliance?
The US EPA has, for just one department, and it is $21 billion per year! The total economic cost to the country would have to be at least 10 times that cost – more than $210 billion per year. Compliance costs are a totally unproductive use of the country’s capacity. Surely, “direct action” to cause roll out of nuclear power would be a far more cost effective way to reduce emissions, yes? (Just the EPA’s component of $21 billion per year would pay for about 5 GW of new nuclear capacity per year!)
References:
[1] US EPA ECMPS Reporting Instructions Emissions
Click to access ECMPSEMRI2009Q2.pdf
[2] US EPA Plain English Guide to the Part 75 Rule
Click to access plain_english_guide_par75_final_rule.pdf
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John Newlands,
Your argument is highly irresponsible. You are arguing to seriously damage the economy to prove a point. You argue we should damage the economy to prove a point (which in effect is renewables are not viable, we must implement nuclear, and CO2 Tax and ETS cannot be effective without an economically efficient, international trading scheme).
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Peter by ‘ineffectual’ I mean neither good nor bad. The compliance cost should be a lot less than the GST by that I include CO2 monitoring of a few hundred companies, revenue adjustment and so on. What we don’t know yet is if the ‘carbon cops’ have the cojones to shut down a business that didn’t pay its carbon tax.
One standoff I’m expecting is with brown coal in Victoria. The Vics don’t appear to have any real intention of going low carbon so the TV reporters will show the Melbourne single mums who can’t pay the power bill and the Latrobe Valley football teams whose very existence is threatened. This time next year it will be prime time TV.
If Australia doesn’t have leverage to influence international carbon flows I don’t know who does;
– we are the OECD’s biggest per capita emitter
– we will be badly affected by climate change
– we are the biggest coal exporter
– we will become the biggest LNG exporter
– we have the most uranium and thorium.
Therefore the line ‘not our problem’ doesn’t wash with me.
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John Newlands,
You seem to be dodging the key points and making up points you’d prefer discuss. Most of your last comment seems to have come out of the blue. What are you responding to, or are you just making stuff up to divert the discussion.
The key point above is that the USA EPA has estimated its compliance cost at $21 billion per year if the current regulations were followed. We do not have any better estimate. It highlights the enormous amount of work, and the number of full time staff that EPA would need to handle it. Your unsubstantiated opinion is just that.
Can I suggest you address the issues I’ve raised in the posts above and please quote the specific section you are responding to.
Comparing the compliance cost for CO2 emisisons trading with the GST is not valid. We already had an accounting system in place that just had to be modified for the GST. We can’t even measure CO2 emissions. The point is, if the EPA has estimated $21 billion for its small share of the compliance cost, then the total cost huge. And it will keep getting bigger.
The more you look at the governments CO2 Tax and ETS proposals the more obvious it becomes that direct action (e.g. do whatever is required to roll out nuclear) is the better way to cut emissions, fastest and at least cost. The CO2 Tax and ETS are aimed at improving efficiency, but this can have only a second order effect.
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John Newlands
I am not sure what your comment is in response to. I didn’t say any such thing. What I’ve been arguing is that the CO2 tax and ETS will not change world emissions, nor change the climate, nor achieve any benefits, but will seriously damage Australia’s economy. Therefore the proposed CO2 Tax and ETS are bad policy and should be dropped. I think this is now widely recognised. I’ve summarised the argument here:
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From time to time it may be helpful to review the gold standard of a carbon tax, as proposed by James Hansen–see the section entitled “The Real Solution”:
Here’s what I think the US should do: 1) Implement a moderate, steadily rising carbon fee applied at the mine, well or port. 2) Give full refunds to poor and middle class, on an equal, per capita basis. 3) Use the revenue from the wealthy and corporations to lower taxes on capital gains and corporate income.
Substituting a consumption tax (the carbon fee) for highly distortionary taxes on capital should increase economic efficiency.
So this approach should not harm the economy, and would probably help it, even apart from the climate benefit. It’s a no-regrets policy for both the right and the left.
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Huon,
James Hansen is not an economist. He is a layman when it comes to discussing financial and economic matters. His view is certainly not “the gold standard of a carbon tax”.
The important issue that has been highlighted by the US EPA is that carbon tax or trading requires a high compliance cost. You did not address that in you comment.
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PL,
A carbon tax and an ETS are different beasts.
“An upstream carbon tax would be relatively straightforward to administer with a small number of filers responsible for remitting tax revenues to the government. Ease in administration would help keep administrative and compliance costs down.
Click to access Brookings-WRI_GreenTaxSwap.pdf
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The compliance cost for CO2 tax and emissions trading schemes would be very high as recently revealed by the US EPA. The EPA has stated in a court submission that the cost of complying with the existing US regulations for CO2 measurement would be $21 billion per year. That’s just EPA’s cost. I’d expect the cost to industry would be at least 10 times the EPA’s cost.
Now, imagine the cost to try to roll out such schemes across all countries.
It is clear the scheme is not viable.
Far better would be to save all the costs of trading, compliance and fraud by going straight to direct action. Direct action to get the world’s electricity generation to 75% nuclear (Like France is now and has been for about 30 years, but using small nuclear power plants built in factories and shipped to site).
10MW: http://www.nrc.gov/reactors/advanced/4s.html
25 MW: http://www.nrc.gov/reactors/advanced/prism.html
300MW: http://www.nrc.gov/reactors/advanced/prism.html
If the money that would be needed for compliance monitoring was spent on nuclear instead, USA electricity generation could be near emissions free within 20 years (from a purely financial perspective; logistics and other constraints ignored).
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Huon,
The “Green Employment Tax Swap” is not one of the alternatives being seriously considered or offered. Nor are many others that have some arguments in favour of them, such as this: http://www.aph.gov.au/house/committee/jscacefl/subs/sub031ProfStanford.pdf
The alternatives being offered are: CO2 Tax, Emissions Trading Scheme, or “Direct Action”.
The key issue is: you can’t tax or trade something if you can’t measure it. Therefore, we need to measure CO2e emissions. You can’t expect to establish international systems to price CO2e emissions if you can’t measure the emissions.
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Peter Lang, on 3 October 2011 at 11:52 AM
I very much like the link you provided:
“Today, I will concentrate on the major issue of today–the form of economic push that is most likely to succeed. I will maintain the minority opinion that carbon taxes are better than carbon trading and that a particular form of it is vastly superior as an effective, credible, long term form of economic push.”
As for measuring CO2 emissions, a carbon tax should be applied upstream to all fossil fuels–a relatively simple affair. No one has to measure, record or report actual emissions downstream.
Internationally: “A global carbon tax would be easier to negotiate. All governments require revenue for public purposes. The world’s nations could agree to use a carbon tax as one instrument to raise some of that revenue. No money needs to change hands across national borders. Each government could keep the revenue from its tax and use it to finance spending or whatever form of tax relief it considered best.” N. Gregory Mankiw, “One Answer to Global Warming: A New Tax”
This is what most nations should do, and what I think the US, in the end, will do.
I try to focus my discussion on an ideal carbon tax, and the proper course of action for the US, my country. But I hope this discussion has some relevancy for Australia, too.
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While I agree with carbon tax and the ETS some key aspects need fixing. One is the use of carbon credits or offsets that are potentially fraudulent. When Treasury say carbon pricing works out cheaper than direct action I think that assumes there will be plenty of cheap offsets on the market. This was discussed on ABC Lateline
http://www.abc.net.au/lateline/content/2011/s3331367.htm
as well as carbon credits for conserving the Amazon rainforest. If it’s true that Tasmanian forests actually store more carbon per hectare this time we have a sense of ecological inferiority, not the more usual cultural inferiority. Maybe the fact distant forests are harder to see up close helps the mystery, a bit like an internet chatroom.
Most claimed offsets fail simple criteria
– the emissions cut should be globally new
– they should be measurably permanent
– the cut must be from a flat, not growing baseline.
Thus a synthetic tree that turned sunlight and CO2 into graphite might qualify as a carbon credit. However real tree planting, tree non cutting down, new wind and solar, CFC switching, methane flaring and so on all fail one or more criteria.
Thus I believe trading in carbon credits is not only a delusion but a massive scam.
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John Newlands,
I think most people have come around to agree with you on this.
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Huon,
You seem to have missed the point of my comment. The point is that neither your Green Employment Tax Swap, nor Hansen’s proposal, nor many others that have some advantages are the options being seriously considered by governments. The options are CO2 Tax transitioning to an ETS (with 66% of permits bought overseas) or direct action.
It is becoming clear that direct action is the best alternative. In fact, I suspect, deep-down, most here recognise it is the best way to cut emissions significantly. By direct action I am referring to doing whatever is necessary to allow us to have low-cost, low-emissions electricity generation with currently available technology. To me that means do as I explained here https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136436 Others will have other ways they believe is the best way to implement direct action. But direct action is the way to go, not Carbon Tax or ETS, at least not yet.
The international trade in emissions is simply not viable at the moment. The fraud will be enormous and totally uncontrollable. It is already significant. It was reported a few days ago that Norway had paid Indonesia not to cut down forests. The Indonesian’s took the money, cut down the forests and mined the area for coal (it has been reported). There’s been billions of Euro fraud in the EU trading scheme. And today there are reports of mass killings in Honduras [1] and “Armed troops acting on behalf of a British carbon trading company backed by the World Bank burned houses to the ground and killed children to evict Ugandans from their homes in the name of seizing land to protect against “global warming,” [2]. Whatever the truth of these stories, they are just the beginning of what will happen with international permit trading. It is totally impracticable at this time.
[1] http://www.euractiv.com/climate-environment/carbon-credits-tarnished-human-rights-disgrace-news-508068
[2] http://www.prisonplanet.com/armed-troops-burn-down-homes-kill-children-to-evict-ugandans-in-name-of-global-warming.html
So we are in agreement that the ETS (Cap and Trade) is bad policy. However, that is what our government is intent on legislating. The legislation is in the process of passing through parliament now.
I don’t agree with the carbon tax either, at this stage. Not until we removed the impediments to low-cost nuclear and there is an international agreement on how to cut emissions. In the meantime I am persuaded the best option is to follow the “Direct Action” approach. I laid out a plan with a program here https://bravenewclimate.com/2010/01/31/alternative-to-cprs/ . I maintain that is still what we should do.
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Another excellent opinion piece by Ziggy Switkowski:
http://www.theaustralian.com.au/national-affairs/opinion/better-things-to-buy-than-offsets/story-e6frgd0x-1226157559595
Ziggy points out “Australia’s purchases of carbon credits on the international market [would have] a cumulative cost of more than $600 billion (at constant 2011 dollars)” by 2050.
In other words: “Direct Action” is the best way to reduce emissions.
We could have 30 GW of nuclear, enough to supply the NEM’s current average demand, for about $120 billion (in 2011 dollars). So there would be a lot of change out of $600 billion.
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Peter Lang,
Thanks for your thoughtful response to my post. As for desirability of simultaneously removing impediments to nuclear and implementing a well-designed carbon tax, I second the thoughts of Barry Brook:
It could well be that a path to nuclear via a carbon tax, though indirect, is the quickest.
(Also, I liked the Switkowski column.)
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Occasionally people express the view that Australia is a hypocrite with its ongoing fossil fuel exports in the face of a domestic carbon tax. I think that’s far too polite… we’re A-grade bullshitters. The news is that exports of thermal coal, coking coal and LNG are back to record levels.
http://www.smh.com.au/business/exports-soar-second-biggest-trade-surplus-20111004-1l68o.html
By 2020 we’re trying to get down to under 500 Mt net CO2e from all sources. Our exported fuels will produce over 700 Mt of CO2 in 2011 alone. Something to think about when you turn off that extravagant second fluoro light.
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John Newlands,
Great comment–really clears out the sinuses.
I expressed this idea on another thread, but it’s more appropriate here. Once Australia has a carbon tax in place, it can ask its exporting competitors like Indonesia and South Africa to cooperate in placing a carbon charge on exports, up to Australia’s domestic rate. The competitors will have an incentive to do so because they will make more money.
Once this is done, importers such as China will have an incentive to start their own domestic carbon tax to get the carbon revenue for themselves.
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Huon, @ 4 October 2011 at 12:54 PM
You suggest the carbon tax could be the quickest way to get nuclear started in Australia. That’s been addressed and debunked repeatedly on the “Alternative to Carbon Price” thread, and also on this thread. Some links are in the “Attachment 1”
You linked to Barry Brook’s comment of 1 Feb 2010 which supports the Hanson proposal:
I’ve already answered that in my comment @ 4 October 2011 at 8:43 AM. Reasons:
1. it is not one of the options being seriously considered, so “it has no legs” to get up as a policy supported by either of the major parties.
2. Energy efficiency improvements can have little impact in the absence of a zero emissions substitute for fossil fuels.
3. Tax on imports is the opposite of what we should be doing (unless it is a tax on consumption of embodied emissions, which is not practicable anyway) and is probably a breach of WTO agreements.
4. Impracticable to determine “an equivalent price” on imports from other countries. The CO2e accounting systems would be impossible in any country, let alone the developing countries.
5. The main emissions are from burning of our exports, some of which comes back as imported embodied emissions. If anything, we should be taxing consumption of embodied emissions rather then production. But that is impossible. Australia is ranked 9th in the OECD, not first, on the basis of CO2e consumption: http://www.ipa.org.au/news/2364/we-emit-less-co2-than-combet-gives-us-credit-for
6. There is much more on this in comments up thread, and particularly in links under “Further Reading” in “Attachment 1” in this comment: https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136436
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John Newlands,
Well, I’d agree “we’re A-grade bullshitters”. On many matters. But not necessarily those you think.
You have brought up the issue of taxing or restricting our coal exports many times before. Each time it has been refuted. But then you say it again. It is hard to make progress under such a situation. It is an impracticable suggestions for many reasons:
1. The coal would be bought from other countries, so would not make any difference to the amount of coal burnt. But it would severely damage our economy (that means fatalities in the population to make this absolutely clear), for no benefit.
2. If we unilaterally stop or restrict exporting coal, someone will come and take it. Blocking energy causes wars (Japan entered the world war because their oil supply was cut off).
3. At an earlier stage, if we block energy exports there would be trade repercussions. It would be a downward spiral from there.
4. We’re not going to unilaterally cut back on $13 billion per year export income without it being absolutely clear it is to our benefit to do so. Most people realise it is not. There is much more at stake than just CO2.
5. For the other reasons, look back the answers to the other comments where you’ve raised this point.
Cutting off energy supply is not the right solution. The right solution is to allow a low cost alternative to fossil fules. We have the solution (nuclear) but it is banned in Australia and expensive in western democracies due to politics and 50 years of anti-nuke activism by the same groups who want to lead us into more bad policies.
I’d also remind you that Australia is not the worst emitter on a per capita basis, we are about 9th in the OECD on a CO2 consumption per capita basis:
http://www.ipa.org.au/news/2364/we-emit-less-co2-than-combet-gives-us-credit-for
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Huon,
It is naive to believe that Australia can set an example that the world will follow. International trade and diplomacy don’t work like that. Each country is looking after its own interests and will grab any advantage it can get. The main reason EU was so keen on the ETS was to try to get an economic advantage over the USA. USA is not so dumb to fall for that – luckily for all of us.
If neither USA nor EU can get their way, what gives you the idea Australia could?
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Peter Lang,
“Faithful are the wounds of a friend.” Proverbs 27.06
I’ll make a few quick points, then let you have the last word for a while.
A carbon tax/ETS is being seriously considered, and will make nuclear relatively more attractive compared to coal. This is true even for the flawed policy being proposed.
What you propose–direct action to introduce nuclear–is not being seriously considered, so far as I know.
Moreover, direct action has a fundamental flaw. According to economic theory, it is in fact the worst kind of policy to adopt.
Even thirty years ago, Milton and Rose Friedman wrote, “Most economists agree that a far better way to control pollution than the present method of specific regulation and supervision is to introduce market discipline by imposing effluent charges.” Free to Choose, 1980, p. 217.
I hope that eventually you will support both a reasonable carbon tax and the removal of impediments to nuclear, as these steps are synergistic. But for now I wish you the best of luck pursuing the latter.
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Peter I think it’s a bit disingenuous to suggest emissions created to make exports like aluminium are not our responsibility. We all benefit so we all have to take some blame. I’d need to see how IPA’s alternative averages are derived to make sure they are consistent. Their conclusion sounds too convenient. They might conclude Saudi Arabia has a low carbon economy since they export so much.
The notion that sellers take some blame for harm caused to or by the customer is why it is illegal to sell alcohol to minors. Australia is peddling a harmful product, namely fossil fuel, to irresponsible buyers. Asian steel mills would probably have to go Africa for coking coal. We’re right on their doorstep with a number of loading ports, and building more. To back it up I’d carbon tax finished goods like steel on import. If Australia clubbed together with Europe and Scandinavia to do this we could make a substantial difference to world carbon trade.
All of this seems a bit abstract now but will reach a crescendo in 2015 when we move to a CO2 cap. If we have to cut CO2 by x% at home the rest of the world is supposed to cut x% as well. To me that means that coal and LNG industries must then start declining ie negative growth after 2015. Even Tony Abbott acknowledges this.
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Huon,
Thank you for the comments. I mentioned to you in an earlier comment, you do not need to explain the theory. I’ve been involved and following it since 1991.
Your “new” points have all been addressed up thread. Please read the comments that have already been made on this and the “Alternative to Carbon Pricing” thread.
That is due to politics. Politics makes policy. So it is the politics we need to address, not put more plaster on top of already infested wounds. It is the political parties, and their supporters, that oppose nuclear that are causing the delay, and have been for 50 years. A CO2 Tax won’t change this. It will favour renewables and gas. You have to deal with the real issue, not another symbolic gesture.
The Opposition supports nuclear, but they cannot take the lead from opposition. UK is taking direct action to implement nuclear.
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John Newlands,
I don’t understand what your comments refer to because you don’t quote what you are responding to.
You said: “
Are you referring to alumimium made in Australia, or aluminium made overseas with electricity made, in part, from our coal? If you mean aluminium made in Australia, who said the emisisons are not included? Are you referring to the emisisons being not included in Australia when CO2 emissons are accounted under a production or a consumption scheme? If so that is correct. You need to make clear what you are referring to.
This comment applies equally to the rest of your post. I can’t guess what you are thinking.
Peoople who have been looking at consumption based schemes, like Warwick McKibbin, have explained repeatedly that it would be the better way to go from a technical perspective, and in that case, Australia would not be the highest emitter per capita. On a consumption basis we are not the highest emitter. I am surprised this is the first time you’ve come across this. It shows how a continuous flow of BS and spin baffles brains.
That’s your opinion, not theirs. It’s also not mine. Fossil fuels are an excellent product for humanity in the absence of something that can provide electricity more cheaply. We need to get that straigth from the get go. Idealism is not helpful. It prevents progress, as the idealism that has block nuclear nuclear and promoted renewable energy clearly demonstrates.
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John Newlands,
Could you please let me know if you’ve read this:
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Peter the flaw in that submission is this; our leaders seriously believe that efficiency and renewables will replace fossil fuel. They will have to see this is not the case with their own eyes, Therefore Clean Energy Futures represents the learning experience we have to have, to borrow from Keating. When it disappoints after a couple of years they may be receptive to a submission along those lines.
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John Newlands,
That is an ridiculous argument. You are arguing we should, promote, encourage and endorse bad policy just so we can show how bad it is.
On that basis, why are you arguing for nuclear? In fact, why are you arguing to cut CO2 emissions? Why not just keep going indefinitely making the worst possible policies so we can prove they were wrong?
Can you not see how ridiculous that argument is? You’re really clutching at straws if that is what you are left with as arguments to support your side of the debate.
I’ve pulled together in the submission https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136435 most of the most important arguments (other than the compliance cost, which I forgot about when I was rushing to write and submit it) *. I’ve added comments on compliance cost on this thread since.
But, there is no substantial rebuttal of any of it. Just repetition of beliefs for the government’s proposal. Most people would have to wonder why the stubborn refusal to acknowledge the substance of the case against proceeding with legislating the government’s CO2 Tax and ETS.
The key points the submission (including the Addendum) cover are:
* By the way, Barry and others had asked me repeatedly to summarise the arguments I’d posted in the “Alternative to Carbon Pricing” thread because the thread became too long and too disjointed to follow. The submission does that. It doesn’t cover all points, but it does summarise many of the important points and included links to others and to back up for the statements made.
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Over 4000 submissions were made to the “Inquiry into Australia’s Clean Energy Future”.
Only 69 were classified as “submissions” and published. It is claimed the remainder were classified as “correspondence” rather than submissions.
It’s hard to believe over 4000 people got it wrong and only 69 got it right. Especially when you look at some of the 69 submissions that were accepted as “submissions” and published:
http://www.aph.gov.au/house/committee/jscacefl/subs.htm
(deleted personal comment)
My submission is here https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136435 . I believe it addresses the requirements for a “submission” better than some of those that have been accepted.
It wonder if they looked for a few short submissions so they could say they’d taken a sample.
But the criteria for selection and rejection should have been made clear when they called for submissions, not after.
This is another example of why so many people distrust the whole process that has got us to this point.
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Peter I think the disappointments in store with the carbon tax must bring clarity sooner than later. I thought this article was spot on
http://blogs.crikey.com.au/rooted/2011/10/06/australias-carbon-tax-battle-where-it-fits-into-the-global-war/
They make the point c.t. is too low to make much difference. It gets worse when the ETS arrives since offsets are largely illusory therefore fraudulent. Yet that seems to be the linchpin of Treasury’s least cost adjustment modelling. At least we’re making an effort unlike the US.
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I had dinner with Michael Shellenberger and Ted Nordhaus, the authors of the article JN cites, last night. Tom Wigley was also there. Needless to say, it was a great conversation!
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A very refreshing article. The gentlemen are correct that climate change is best solved from the center. Here is a good, centrist proposal for a carbon tax:
http://www.roanoke.com/editorials/commentary/wb/298749
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John Newlands,
A few comments on your comment:
I certainly hope it is sooner rather than later; i.e., before we pass the legislation. As my submission states, and as many other people are pointing out, the cost to undo this legislation will be very high, very wasteful and very poor risk management practice. Here is one of the few of the 69 submissions, out of over 4000, that does not support the orthodoxy http://www.aph.gov.au/house/committee/jscacefl/subs/Sub048Barry.pdf . Dr Barry Golding makes the point in the last paragraph:
It won’t make much difference to emissions. But it certainly will make a big difference to the economy as it is ramped up, which inevitably it will be. That is addressed in my submission (see up-thread) and in some of the other of the 69 accepted submissions. As this http://www.exeloncorp.com/assets/newsroom/speeches/docs/spch_Rowe_ANS_110815.pdf excellent presentation points out, the CEO of Exelon believes nuclear would need a CO2 price of $100/t to make new nuclear competitive in the USA now.
Dead right on that. This will be massive. So why are you still supporting it.
Wrong! We are making the wrong “effort”. It is bad policy, very bad. It will do serious damage for no benefit. The best policy is to not lock ourselves into a Carbon price yet. Travel with the big players and allow ourselves plenty of room to manoeuvre. One submission, Exigency, points out that it is the BRIC countries that are doing 70% of the C trade. EU is third.
Exigency: (Carbon market advisory firm) http://www.aph.gov.au/house/committee/jscacefl/subs/Sub043Exigency.pdf Prefer “incentive” over “penalty” schemes. NSWGGAS scheme is an example of an incentive scheme. BRIC economies dominate CO2 emissions trade with the incentive based CDM scheme. EU penalty ETS is out of step with international directions.
The EU, and the proposed Australian systems are a penalty systems. It could well be the world will not adopt the penalty approach but will adopt the incentive approach.
By “direct action” I mean remove the impediments to low cost nuclear. Establish the education facilities. Set up the regulatory regime. Instruct the Productivity Commissions to find the impediments to low cost nuclear, prioritise them in terms of their effect on the economy and their effect at preventing nuclear energy, and suggest the best way to remove all those that we should remove.
Fancy promoting another tax to fund more renewable energy research. How ridiculous. We’ve been doing that for well over 20 years. It’s time to stop all that nonsense. Adopt direct action. I do agree with this bit though (but not the following sentences):
There is a better way. Instead of trying to make fossil energy more expensive, Australia should work to make clean energy cheap.
That’s what I’ve been saying consistently for 20 years. But few seem to be prepared to accept it and almost none on BNC.
I have to comment on your referencing “Crikey”. You made a remark a few days ago dispraging “The Australian”, our only national newspaper and the only paper doing thorough investigative journalism. And yet you quote from “Crikey”.
The case could not be stronger that the proposed legislation is seriously bad policy. It will cost a bomb and damage the economy and all for no benefit.
I’d urge John, Barry and others who have been strongly supportive of carbon pricing to move your position on this. I’d suggest you move to supporting direct action along the lines I’ve been promoting for 2 years on BNC. The CO2 Tax/ETS is toxic and and needs to be recognised as such. We should do all we can to persuade the government to find a way to back down on this one.
BNC comments policy says one of the main aims of BNC is to work towards realistic solutions to cutting world GHG emisisons.
[Deleted personal inferences]
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Huon,
Why do you say the article you linked to is “centrist”.
No. If you want to level the playing field, you remove the distortions, you don’t add more distortions. You remove distorting regulations and imposts, you don’t add more.
What’s a revenue neutral tax? There is no such thing because of the compliance costs.
(Deleted personal inferences)
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“Joint Select Committee on Australia’s Clean Energy Future Legislation” rejected 98% of submissions.
The Joint Select Committee on Australia’s Clean Energy Future Legislation called for submissions on 15 September 2011 with closing date for submissions on 22 September 2011 [1] http://www.aph.gov.au/house/committee/jscacefl/index.htm
Over 4500 submissions were received. However, the Committee has the power to decide which are “submissions” and which are “correspondence”. They decided only 70 were “submissions” and the rest were “correspondence”. Only those the committee deems to be “submissions” are published (and in reality only those will be considered).
Could that many Australians get it wrong? Clearly they were intending to make submissions to the enquiry – they were making submissions that they understood would be properly considered by the committee.
With that high a proportion getting it wrong, is it more likely that the committee’s selection criteria and selection process was not made clear beforehand.
Below is the general instruction which describes “What should be in a submission” http://www.aph.gov.au/house/committee/documnts/howsub.htm#what
What was the selection process? Was it transparent?
Were all the submissions reviewed and compared against selection criteria?
Who actually made the decision about which to select and which to reject? Was it the committee or the secretariat?
Is the process that was followed in this case what open and honest government means?
Some of the 70 that were accepted as “submissions” do not appear to meet the requirements for a submission any better than mine does. For example, some were dated after the closing date for submissions. Many did not even mention any of the Bills.
It should also be noted that the Committee Chair Person is Labor and the Deputy Chair is a Green (Senator Milne). Normally, the Deputy Chair would be from the Opposition.
Can we have any confidence in the output of this committee?
The report has just been released and the Introduction now defines the “Terms of Reference”. These are an after thought. These were not provided before over 4500 Australians wrote their submissions.
The Introduction, paragraph 1.28, says:
This is not true. At least 10 of the 70 accepted submissions did not mention the legislation.
Furthermore, at least six were submitted after the closing date, including the first two listed on the website.
http://www.aph.gov.au/house/committee/jscacefl/subs.htm
My submission is here: https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136435 and the addendum is here: https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136436
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An ETS is a dead end as environmental policy because, in my view, the world will eventually go with a straight, moderate carbon tax. John Newlands is correct that some environmental good will probably come of enacting an ETS. But Peter Lang is correct that the price economically (and politically) will be unnecessarily high.
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I see an international CO2 cap as the only way to stop the growth of Australia’s coal industry until depletion starts to bite 20-30 years from now. The question is whether emitters actively undermine an ETS or the government is a weak umpire, A bit of both.
The correct CO2 price is that which puts us on the least worst path. As we shall see a carbon tax with renewables quotas won’t really change anything, particularly if nuclear is forbidden. Hopefully we won’t waste too many years on this approach.
I’d prefer a tough ETS with no freebies (e.g. bogus offsets, special exemptions) or renewables targets. CO2 permits should be auctioned up to the cap with the players fighting out between themselves for a share of the right to pollute. If they pay too much or too little that gets sorted out by trading. We’ll also find out how much commercial solar and wind power should go in the mix when there are no subsidies or mandates.
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John,
The prescription you offer is not bad: If the CO2 permits are all auctioned off, the ETS becomes a variable carbon tax. You might be interested in James Hansen’s take on a tax vs. an ETS, especially, their relative acceptability at the global level:
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Try #2:
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I received an email from the Joint Select Committee on Australia’s Clean Energy Future Legislation which states:
Their excuse for rejecting 98.5% of submissions (“only those documents that went to specific detail about the Bills were published as submissions”) is not correct as is shown by a quick review of the 70 accepted “submissions”.
I prepared a summary table of the 70 accepted “submissions”.
• Submitted by
• Date submitted: (at least 7 were dated after the closing date)
• Supports an economically efficient scheme: Y=43; N=7; ?=20
• Supports the proposed legislation: Y=21; N=37; ?=12
• Contains a Summary: Y=20; N=11; ?=39
• Contains specific references to legislation: Y=18; N=16; ?=36
• Comments/key point of the submission.
• Number of Pages: (range from 1 to 41)
The “?” means “don’t know” or I didn’t record it; (I was rushing)
From my quick look at the 70 submissions, only about 18 “went to specific detail about the bills”.
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This four page submissions by an economist is one of the 70 that were accepted.
Click to access Sub048Barry.pdf
I agree with all of it except is proposed solution: CCS and reduce world population. Most BNC followers know what my proposed solutions are.
His last two sentences are spot on.
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Click to access Sub048Barry.pdf
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PL – not good. I’ve seen submissions accepted for a range of other inquiries that are written by concerned people, simply expressing a view, without any reference to formal guidelines or possessing professional qualifications or expertise. Isn’t this democracy?
Yet, curiously, some are simply opinion pieces like this one from Richard Davis:
Click to access Sub019Richard.pdf
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Graham Palmer,
It makes me wonder what was the process they follwed for selecting which submissions are “submissions” and which are “correspondence”.
I wonder if they selected some of the worst of those against the CO2 Tax/ETS to try to help their case.
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Who thinks carbon tax and ETS won’t be manipulated by future governments for revenue raising (as opposed to its stated purpose of controlling the climate)?
http://www.bloomberg.com/news/2011-10-09/green-europe-imperiled-as-debt-crisis-triggers-46-carbon-market-collapse.html
A while ago Ireland admitted it was doing the same thing and raising its carbon tax to earn more revenue to attempt to stall its own default.
Of course, the same will happen in Australia at some time.
Who still believes the government’s spin?
Not very many apparently. The Newspolll taken last weekend http://www.newspoll.com.au/cgi-bin/polling/display_poll_data.pl?url_caller=latest&state=Any&mode=file&page=Search shows that people now think the Coalition is better able to handle climate change than Labor or Greens.
Coalition = 31%
Labor = 28%
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To put that in to perspective:
“WHICH ONE OF THE (LABOR PARTY, LIBERAL AND NATIONALS COALITION OR SOMEONE ELSE) DO YOU THINK WOULD BEST HANDLE EACH OF THE FOLLOWING ISSUES?”
Coalition = 31%
Labor = 28%
Neither = 41%
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http://www.bloomberg.com/news/2011-10-09/green-europe-imperiled-as-debt-crisis-triggers-46-carbon-market-collapse.html
And still we blunder on.
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Exigency is a carbon market advisory firm. http://www.aph.gov.au/house/committee/jscacefl/subs/Sub043Exigency.pdf . You’d expect them to be amongst the supporters of the Australian ETS proposal. But they are not.
Their submission is interesting. It says the EU and Australia ETS schemes are out of step with where the major carbon markets are heading. If this is true, we need flexibility to be able change our scheme in the future. But flexibility is something the government is trying to avoid. The government is doing its best to lock us into their scheme and to maximise the cost of changing it. They seem to think they know what is best forever, (deleted personal inference)
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Paul Kelly, Editor-at-large for The Australian, had an opinion piece on Oct. 15 entitled “Carbon tax triumph divides a nation”. Much of it focuses on politics, but I’ll present a couple of points he makes about policy here.
“…pricing carbon remains the best model for limiting greenhouse gas emissions.”
“[But]…this scheme is a flawed exercise in carbon pricing. It represents compromise piled on compromise. It is a hybrid of market forces and government intervention riddled with contradiction. It will almost certainly require revision….”
A fair assessment, in my book. But flawed as it is, Australia’s carbon price should start to have positive effects, including an intensified re-evaluation of nuclear. Martin Nicholson’s recent post may show that this process is already beginning:
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Huon I agree with the general sentiment that c.t. is a step in the right direction. The alternative seems to be no step and no direction.
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John Newlands, You have posted repeatedly that you believe a ct is a step in the right direction but have generally failed to provide any substantiation for your personal opinion. You have repeated your unsubstantiated personal opinion in numerous comments (most of your comments) on this thread.Perhaps you would like to read and address the substance of this: https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-136435 and the following comments.
If you think the CT is a step in the right direction you need to explain what are the costs and benefits. You need to be able to answer these questions about the benefits quantitatively, not just with airy-fairy unsubstantiated personal beliefs:
1. Will the CO2 price, applied in Australia, change the climate? If so, by how much?
2. Will a CO2 price, applied in Australia, reduce world emissions? If so, by how much?
3. Will the CO2 price have an effect on the ecology of Kakadu and the Great Barrier Reef? If so, by how much?
4. Will the CO2 price change the rainfall in the Murray Darling Basin? If so, by how much?
5. Will the CO2 price have an effect on sea level? If so, by how much
6. What will be the total cost of administering and complying with the scheme?
7. How will the emissions avoided (e.g. by wind farms) be measured given we have no way of measuring the emissions avoided by wind farms. (Australia does not measure CO2 emissions from power stations)
8. 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 have us believe.
9. How much fraud will there be with CO2 trading in Australia? Who is the ultimate victim of the cost of such fraud?
10. How much fraud will there be with our purchasing of international carbon permits? Who is the ultimate victim of the cost of such fraud?
11. 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?
12. What is the benefit? What is the cost?
13. Is the Carbon pricing scheme simply “Socialism dressed up as environmentalism”?
14. Do we really want to go down the path of economic destruction that the EU has pursued?
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Huon,
Yes. That is one article supporting the Carbon Taa. There are many others that show it is very bad policy. Paul Kelly is a strong advocate for Labor, so I’d read that article with that perspective in mind.
You said:
If you think it will have positive effects I’d suggest you need to be able to say why and quantify your answers. Perhaps you’d like to respond to the questions in my comment to John Newlands above about the commonly stated benefits.
Regarding the overall benefits to society and to CO2 emisisons that would result from implementing high-cost nuclear, did you see these two comments on Martin Nicholsons’ article:
They remain unanswered.
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Peter Lang,
Thank you for the heads-up about Paul Kelly. I’m from the US, so you should know better than I about these things. But Mr. Kelly sounds awfully even-handed–even conservative–to me.
Anyway, I’ll quote a straight editorial from The Australian on Oct. 13 entitled “Carbon tax uncertainty now certain to continue”:
“As we have consistently made clear, The Australian supports a price on carbon as a mechanism to reduce greenhouse emissions.”
But back to Kelly’s opinion piece:
“Australia is not getting the lowest cost scheme. Indeed the mishmash of flawed carbon pricing and government intervention will leave significant uncertainty.”
So I hope that the US will also implement a carbon tax, but in a more pure form.
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Huon,
You are quoting opinion pieces selectively. We all know that the Australian has supported a carbon price all the way. We also know they have published both sides of the argument. The arguments against an Australian carbon price in the absence of an international agreement are overwhelming.
My comment at 22 September 2011 at 10:51 PM shows why an Australian carbon is really bad policy in the absence of an international agreement and before we remove the impediments to low cost nuclear. You appear to have not digested that comemtn in full, and certainly have not attempted to refute it. Nor has anyone else.
Before a competent government would propose legislation that will have massvie costs for Australia and Australians it should be able to answer these questions in an appropriately competent and quantitative way”
1. What is the benefit?
2. What is the cost?
3. Has due diligence been done?
4. What is the risk management strategy? (to minimise the cost to the taxpayer if the legislation has to be amended or repealed in the future?)
I’ve addressed these @ 22 September 2011 at 10:51 PM .
To date there has been no serious discussion of that let alone been been refuted. Perhaps you would like to take the whole comment (and the Addendum in the following comment) as one and argue why it is wrong.
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Peter Lang,
It isn’t necessary to answer all your questions to arrive at a common-sense view of carbon taxes.
The majority of climate scientists agree that global warming is a serious threat. (It is also a given for BNC discussion.) And most economists agree that a carbon tax is a cost-effective way to control the threat.
The Australian agrees in their editorial stance: “As we have consistently made clear, The Australian supports a price on carbon as a mechanism to reduce greenhouse emissions. Ms. Gillard’s package broadly acceptable in that it seeks to minimise the impact on industry, and neatly compensates consumers through innovative changes to the income tax system. The scheme’s weaknesses are those imposed by the Greens: the focus on picking winners through the $10 billion renewable energy fund; and the requirement to fund industry compensation and clean coal research from the budget rather than carbon tax revenue.” Oct. 13, 2011 “Carbon tax uncertainty now certain to continue.”
Australia’s carbon tax is, most agree, flawed, and perhaps Australians will decide to chuck it. But the ideal of a carbon tax is harder to argue against.
Again, I’ll let you have the last word for a while, should you choose to comment.
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Huon,
Thank you for offering a right of reply to your comment. I shall accept your kind offer :)
Proponents of CO2 pricing do need to be able to answer the questions (@ 16 October 2011 at 10:48 AM). No competent government would implement a policy that will have massive economic repercussions (even Greens and Labor admit that) without being able to answer, convincingly, that the benefit exceeds the cost. The fact that no one here is prepared to try to answer these questions, seriously and quantitatively, is ample evidence that the claimed benefits do not exist. They are a fiction. You can realise that just by scrolling down the list of claimed benefits. I presume you did just that but like everyone else, preferred to not try to answer them.
The key point to recognise is that, in the absence of an international agreement, an Australian CO2 tax/ETS will not reduce world emissions, and will make no difference to the climate. Therefore, there is no benefit, but there is a very high cost. That should be abundantly clear by now; however, the CO2 price advocates are not yet ready to admit it. If I was wrong, the BNCers would have been out in force trying to dismantle the argument I’ve put repeatedly over the past 2 years. But it has been mostly avoided, and certainly not refuted.
As an aside, regarding op-eds from the Australian here http://www.theaustralian.com.au/business/economics/b-no-way-of-counting-carbon/story-e6frg926-1226169137559
is one in today’s Australian. It explains clearly why carbon pricing cannot work. It will fail.
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Huon,
If the CO2 Tax/ETS advocates cannot answer the questions (@ 16 October 2011 at 10:48 AM) about the benfits, how do you, and they, expect to be able to convince a cautious population?
Avoiding questions you do not like will only persuade people that you do not have the answers. That convinces people that you haven’t a clue what you are doing and you do not realise the consequences of what you propose.
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(Deleted violation of the citation policy/ inflammatory personal statement.)
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(The comment to which you refer has been deleted.)
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(The comment to which you refer has been deleted.)
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John Newlands, @ 28 October 2011 at 10:17 AM:
We’ve covered all this before, many times, on this thread and other threads. So I’ll summarise and will provide references to back up my statements if you ask for them.
Yes, but:
1. we should not implement policies or legislation WILL NOT achieve the stated objective but WILL damage the economy. Damaging the economy reduces people well being and makes us less able to take the correct actions. So it is immoral to do so IMO.
2.Doing something for the sake of just doing something, even when it is damaging and has no benefit, is silly. If it is doing damage as well, as the CO2 Tax and ETS will, is worse than silly. It is irresponsible.
Too many unstated assumptions in this:
1 “There will be a leverage effect”. Can you demonstrate that, quantitatively?. I say this statement is complete nonsense. It is naïve.
2 “The CO2 tax will lead to a serious effort to decarbonise”. Can you demonstrate this assumption is valid?
3 “The CO2 Tax is the best way to decarbonise”. Can you demonstrate this assumption is valid?
John, you’ve repeated that statement a dozen times or more over the past two years. It is wrong. If you stop other countries having access to energy to meet their needs, they’ll come and take it. It’s happened before and it would happen again. Trade barriers are also against the WTO rules. The world is trying to remove barriers not increase them. If we want to ever get an economically-efficient, international GHG emissions trading scheme, we need to be working to remove all trade barriers, not increase them as you are proposing. The world needs to move towards free trade, not protectionism for many reasons – not least of which is to assist the developing world to develop faster and as a result, reduce its population growth rates.
Don’t you think the USA would retaliate and slap quotas on our exports to them that would hurt us a lot more than it hurts them? Same for all countries. Suggesting trade barriers is nonsense (IMHO!!!, as well as in the informed opinion of Craig Emerson, Hawke, Keating and anyone who has any understanding of this subject).
I think you may have forgotten something. Firstly, do we import anything we need? What if the supply of that was cut off? (think of the most critical item, because that is what the retaliators will look for). Can we be totally self sufficient? Secondly, you failed to compare the capability of our military against the military of the countries that desperately need to import our energy for the health and well being of their peoples. How long would they (in fact should they) delay before coming and taking it if we don’t back down?
John, please try to think a bit more broadly about the international consequences of erecting trade barriers – by whatever means.
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Moderator edited my comment here https://bravenewclimate.com/2011/10/11/cutting-oz-carbon-abatement-costs-np/#comment-139752 to say:
The editing is fair. However, it is a pity the equivalent editing is not done consistently for the many, many personal opinions expressed by most BNC commenters.
The fact that no one has been prepared to answer these questions https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-138661 (I’ve been asking for over a year), including the government, Treasury or anyone else, makes it clear that the Australian CO2 Tax and ETS will not cut world emissions,
If anyone disputes this statement, please answer my questions quantitatively.
MODERATOR
Most commenters express their opinions as just that i.e.their own opinions.You tend to state your opinions as undeniable fact. Please keep that type of opinion to the Open Thread.
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I see Peter Lang’s quite justified complaint about the public submission and acceptance process for the Joint Select Committee on Australia’s Clean Energy Future Legislation has been picked up by at least one side of politics. From Keith Orchison’s recent Coolibah Commentary
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@ Mark Duffett
While woeful, it’s not at all surprising. Just look at what constitues public “consultation” in most cases where Government departments are involved, e.g. in the EIA process. Even if they’d accepted all 4,500 submissions, it’d still be tokenistic.
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Mark Duffett, @ 1 November 2011 at 10:13 AM
Thank you. It is good to see some other BNC contributors consider this matter is serious. (Deleted mistake)
Tom Keen, @ 1 November 2011 at 11:17 AM
That is not a valid excuse. They called submission then rejected 98% of them, presumably because the response did not say what they wanted to hear. This is a serious abuse of process. Implementing legislation that will damage productivity and damage the economy (that is not disputed) for no environmental gain is incompetent and unconscionable. [If there would be an environmental gain then you and others would be quick to reply to my questions up thread, but no one has made any serious attempt to answer them]. This is very serious. People should be up in arms. If such incompetence was committed by the previous government, imagine the outrage from the proponents of this legislation.
It is interesting to note what the Canadian Foreign Minister said on Monday:
Read the full article:
http://www.theaustralian.com.au/national-affairs/canada-blunts-carbon-tax-case/story-fnapmixa-1226180920686
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We should not be assuming the CO2 tax and ETS will survive. I believe it is inevitable they won’t. The Australian legislation depends on an international trading scheme for about 66% of the emissions reductions. But it seems there is next to no possibility of an international trading scheme. This article is an expansion the previous one. It seems clear that the international ETS is going nowhere; so the Australian CO2 Tax and ETS is doomed.
http://www.theaustralian.com.au/news/opinion/international-carbon-trading-halfway-between-fantasy-and-fraud/story-e6frg76f-1226183980448
It was wrong policy anyway. As I’ve said upthread, raising the price of electricity will do nothing to cut world emissions. The correct approach is direct action – including, direct action to remove the impediments to low cost nuclear.
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I don’t think that comment was deleted, Peter: https://bravenewclimate.com/2011/08/28/open-thread-18/#comment-138108
And to qualify, I don’t see it as an excuse at all. I just have very little faith in public submission or consultation processes. Apathy is probably the best word for it. The now approved Upper Spencer Gulf desalination plant (tied in with BHP Billiton’s EIS for the Olympic Dam expansion) comes to mind.
MODERATOR
Peter’s mistake was deleted.
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Woops. My mistake. And my apology about ‘deleted’ (not) comment.
Tom, Senate committees and Joint party committees are supposed to be the last stop to check out legislation before it is passed. They do an important job. This one was an abuse of process.
the committee for this important policy, which will have serious repercussions for Australia’s economy for the long term, was chaired by Labor and co-chaired by Greens. That is highly unusual. Normally the co chair would be a member of the Opposition. It is a demonstration that the whole process of getting this tax legislated has nothing to do with implementing good policy.
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Another producer claims to be disadvantaged by the carbon tax, in this case the commodity is gas-to-methanol
http://www.news.com.au/national/coogee-chemicals-says-carbon-tax-threatens-the-company-and-jobs/story-e6frfkvr-1226187256325
No doubt they want some of the trade exposed help given to industries like aluminium smelting.
This particular product is one I actually buy as I use it to make biodiesel. If biofuels are ever to be viable they must free themselves from fossil fuel inputs and so far this seems impossible. The company claim they can’t compete with coal-to-methanol made in China. Presumably biomass-to-methanol is out of the current price range. Instead of special giveaways to trade exposed industries I suggest we need a carbon tariff.
Goods imported from countries without carbon constraints should be levied a commensurate penalty. I’m not sure what this would be on coal derived methanol but on aluminium made from coal fired electricity it could be on as much as 15t CO2 per tonne of aluminium. None if made from hydroelectricity. Therein lies the practical problem of individual commodity assessments. A better approach might be if the country of origin ticks several boxes such as Kyoto compliant then its goods are landed free. If not they are hit with an arbitrary carbon tariff, say 20%. That will hurt India and China until they sign up.
I think the carbon tariff is inevitable which is why China fears it. It will take a core group of countries based on the EU to start the ball rolling. This issue will crop up again in the next few years before the big shouting match over foreign offsets in 2015. Bring it on I say.
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Patchy global action ‘turns carbon modelling on head’
Read more … http://www.theaustralian.com.au/national-affairs/patchy-global-action-turns-carbon-modelling-on-head/story-fn59niix-1226187146578
Despite the source of the comments, the content is convincing. I have more faith in this analysis than Treasury’s (given the assumptions Treasury must use are dictated by the government) .
Any way you look at it, the CO2 tax and ETS is a dog of a policy.
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BTW some of the people who support a carbon tariff on goods imported from high emitting countries include French Pres. Sarkozy, US economist Krugman and US energy secretary Chu.
The fatal flaw is that only a couple of countries (Iceland, France?) are likely to be low carbon enough to dictate terms. Let he who is without sin cast the first stone.
I think the Gladstone port development is likely to bring several key issues to the forefront regarding carbon leakage, resource security and short termism.
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This is unbelievable:
http://www.telegraph.co.uk/earth/energy/8608441/How-clean-energy-can-drive-economic-growth.html#disqus_thread
Chris Huhne, UK energy minister has not got a clue!
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Kevin – please be mindful that this type of comment violates the BNC Citation Rule which asks for more analysis of the given link. Please check the About page for more information as to why this rule exists.
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http://www.monbiot.com/2011/05/23/pass-the-parcel/
I’ve been saying this for yonks. It’s not until George Monbiot says it that anyone takes any notice.
Please tell the Senate before they pass the CO2 Tax and ETS legislation today!
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Congratulations to Australia for passing a carbon tax! But condolences that it will be more expensive and less effective than it might have been.
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Huon,
I’d suggest you might have “condolences” on passing a CO2 tax if youd understood the consequences. Many of the consequences are listed and described up thread and in links.
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Australia signed Kyoto just as the other countries were already recognising it was the wrong approach.
Today, Australia legislated its CO2 tax and ETS. But one gain Australia is out of step with the direction the rest of the world is heading. Today, Ireland decided to step back from the wrong headed policies the western world has been forced to implement by you know who.
Read the article in the Irish Times http://www.irishtimes.com/newspaper/frontpage/2011/1103/1224306980840.html
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Graham Palmer, @ 11 November 2011 at 5:36 AM on the CEDA thread
Your comment goes to the very core of the problem we need to address if we want to contribute to cutting global CO2 emissions, as opposed to cutting our own throat.
True. It will damage Australia’s economy for no global reduction in CO2 emissions, let alone any change in the climate. It is the wrong approach. But who gets it?
IMO, Professor Anthony Owen’s Chapter 2: “The economic viability of nuclear power” https://ceda.informz.net/ceda/data/images/nuclearfinal8nov.pdf is good, well balanced comment on the economics of nuclear for Australia in the present environment. He explains the reality, IMO.
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Now that Australia has acted on a carbon tax, the US should follow suit. But we should make a few modifications.
First, we should rely on a carbon tax and not an ETS (cap-and-trade): http://www.nytimes.com/2007/09/16/business/16view.html .
Second, we should raise the carbon price gradually: say, $4/yr for two years and $2/yr after that. So the price would be around $20 in 2020. This schedule would yield significant long-term environmental gain for minimal present economic and political pain.
Third, as Australia has done, the poor and middle class should be compensated to hold them harmless. But the bulk of the revenue should be used to lower the most distortionary taxes. For the US, this would be taxes on capital such as capital gains, corporate income, and estates. The economy would not be hurt much by this tax swap, and could well be helped.
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Huon tomorrow Obama visits Australia and apparently he is going to have Vegemite on toast for breakfast. If carbon tax in Australia goes OK and Obama gets re-elected you never know it could happen in the US.
In my opinion not much will happen either good or bad with carbon tax in Australia, maybe some belt tightening on power bills. In 2015 we are supposed to move to a CO2 cap with auctioned permits subject to a floor price. I’d prefer that but I fear that fraudulent offsets will undermine the ETS and renewables will still get unmerited subsidies. I think it means Australia and California will be able to swap CO2 permits.
I have a hunch the world will have 30% unemployment by 2030 due to population and pollution outstripping economic growth. Whether carbon taxation should be a key wealth transfer mechanism will be clearer as the time draws near.
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(Deleted repetitious tirade.)
MODERATOR
Peter – this entire thread has been about your opinion on the carbon tax. Please allow others to (mildly) state their opinion without constantly and repetitiously re-iterating yours.
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Peter, Gene, John, Huon etc. Please close this line of commenting, it is degrading quickly, and I will otherwise just have to blanket delete the last 10-20 comments to clean it up.
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(Comment deleted. See Barry’s instruction.)
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(Comment deleted. See Barry’s instruction.)
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