Ask your questions on emissions trading
Blog Post | Blog of Christine Milne
Thursday 14th January 2010, 2:10pm
by TimHollo in
If you're not entirely sure of what the Greens stand for on emissions trading, we have a new detailed feature piece on our website here.
It sets out clearly what we want to see in an emissions trading scheme, how we have attempted over many months to negotiate with the government around their CPRS only to be rebuffed every time, and exactly why we cannot support the CPRS in its current form.
Undoubtedly, many of you will have more questions. This blog post is to give you space to ask those questions which we may not have answered effectively in the feature. We will do our best to answer as many of them as we can as effectively as we can.
Ask away!
PDF version
Bookmark, email and share
Comments
Costings
Hi Christine and team,
When I speak to people and tell them about us wanting to insulate dwellings, etc they all assume it will cost them a fortune in extra tax. Have any costings been done on the Greens proposals and if so where can I find them. If not, I think it's something we really need to do.
Regards,
Michael.
EASI is self-funding
Hi Michael,
the EASI plan you are referring to is actually self-funding in its existing form. Householders would pay back the cost over a decade by paying the difference between old and new energy bills. So your bill wouldn't go down until you'd paid off the investment, but after that it would.
You can see all the details of that here:
http://christine-milne.greensmps.org.au/webfm_send/289
As we move forwards with these policies and the Safe Climate Bill, one of the things we aim to do is use revenue from emissions trading to offset some of the payback for EASI - certainly we'd use that revenue to provide it free for lower income households. Perhaps there would be enough revenue to reduce the cost for everyone. Depends on you priorities for allocating revenue.
But one thing is for sure - it would not come out of increased taxes.
Have EASI projections been affected by current Rudd Govt progs?
Hi Tim and team,
I've just read the EASI Briefing Note 289 from the link above and want firstly to commend you on the detail it provides. But I'm wondering whether implementation of any of the Rudd Government's programs - Green Loans etc - have triggered the need for any adjustment of the figures given in this briefing paper, ie. do you know how many of the houses which have been audited have taken up Green Loans to implement energy efficiency improvements and does that change significantly the number of houses which would be targeted under EASI? How many households have taken advantage of the insulation offer and does that change the economics of implementing further energy efficiency savings under a future EASI scheme? And given the debacle we're witnessing with implementation of the Rudd Government's home audit program, have the politics of the Greens also advocating a mass home assessment program changed at all?
And just a couple of other questions about the scheme itself - given that EASI is proposed as voluntary opt-in, how will it also 'target low-income households'? Will higher income households be turned away if demand is too high? Are there any plans for partnerships with state public housing authorities to upgrade public housing? Is it even possible or economic to upgrade all public housing, particularly the very old towers we have here in Victoria?
And finally, has any thought been given to incorporating simple water-saving measures into retrofits at the same time? Given that water is even cheaper than electricity, it is very hard to design household water-only retrofits in the same way as proposed here, as savings on water bills alone will never give you the paybacks you need. Water retrofits (which are often not very costly) therefore need to piggyback on energy retrofits to make them economic. See http://www.environmentvictoria.org.au/library/victoria-green-jobs-state-... for an example of a proposed retrofit program that combines the two.
Sorry for the huge list of questions! Looking forward to your reply
Anne
Industry Compensation
The subject of industry compensation is arguably the most difficult one for policy makers.
Do the Greens accept that the taxpayers may have to buy out some existing players? David Victor has recently argued that it may be inevitable, though promising compensation encouraged absurdly fanciful claims from the power, mining, aluminium and other sectors which were rewarded.
Will the Greens be advocating a mechanism (review panel etc.) for dealing with such claims or will you stick with the line that these players have knowingly been receiving a subsidy for many years?
Industry compensation
Hi dk.au,
the Greens' over-riding approach to compensation is that it must be geared towards supporting the emissions reduction goal of the scheme, not undermining its effectiveness. That applies to industry, trade exposed industry, householders, the lot.
That's not to say, for instance, that there should not be some cash payments to householders, but that the bulk of the transfer should be in the form of household energy efficiency investments, for example - reducing people's carbon costs by reducing their energy costs.
When it comes to industry, we'd like to see the bulk of transfers in the form of assistance to reduce emissions - major investments in upgrading technologies to the most efficient on the market, changing processes altogether in some cases (for instance with cement that may be necessary).
There undoubtedly will be cases where a wholesale buy out may be an appropriate use of emissions trading revenue. We might specifically think of Hazelwood, for example - it may well be cheaper and more effective to buy it out, shut it down, retrain the workforce and replace it with renewable generation and efficiency upgrades over two or three years than to make efficiency upgrades that will be a short-term investment anyway.
In terms of a review panel, currently we have an amendment that would task the Productivity Commission with a review of industry compensation. In addition, as part of the Safe Climate Bill, we propose an energy infrastructure body as part of Infrastructure Australia to examine this issue and make recommendations.
ETS versus a carbon tax
Hi Christine
Thanks for the opportunity to ask some questions. Given how complex an emission ETS is to administer, why is it preferred to a carbon tax?
Thanks
ETS vs tax
Hi Damo,
at heart, emissions trading has one big advantage over a tax - that it sets a hard cap on total emissions, with the market deciding only what cost to put on carbon to meet that cap. A tax, on the other hand, sets a hard price and lets the market decide the environmental outcome thanks to that price. The Greens would rather set the environmental outcome than leave that critical question to the market.
In terms of complexity, there is no inherent reason why emissions trading needs to be complex, but Rudd and Wong have created a monster. We have no doubt that if they changed tack and started to design a tax instead it would be as full of complexities, loopholes and rebates as the CPRS. And if it is geared towards the same weak outcome, it will be no better.
Christine wrote about this at some length a while ago, as you can read here: http://christine-milne.greensmps.org.au/blog/climate-change-about-more-m...
Re: ETS vs Tax
There is something contradictory about all this. The Greens say a tax or ETS makes no difference since the dominant parties will complicate it anyway and leave it with weak targets. Mainly because of the negotiating power of the business lobbies. Yet the Green proceed on regardless in Quixotian tilt.
Lets instead sidestep the business lobbies for now. Yes I hear the left wing reflex cries that this is an outrage, we must include them. Such cries are easy to ignore because quite obviously the businesses will pass on the cost (with a markup added) to the consumer anyway. So why not just save the trouble and create an impost directly upon the consumer. At the very least it saves the consumer the markup added by business.
If you don't believe business will add a huge margin then just look at the appalling way Greenpower works. Country Energy will charge you 1.43c per kWh for 10% CountryGreen business, this is equal to $143 per REC. Pretty hard to swallow when the REC price is $29. The markup dwarfs the initial cost. So its manifestly IDIOTIC to prefer to impose a cost on businessesince the ready to hand Country Energy RECs example shows business won't blink at smashing the consumer many times harder than they are hit.
The first part of the solution is an impost on coal fired electricity consumption at the consumer (i.e. natural person) level above some basic threshold.
The obvious impost is to require that all household electricity account offset their excess consumption (above the basic living level) by buying RECs. At prevailing REC prices this will add a measly 0.3c/kWh to their electricity bill. For many household this means buying a single REC about every two months. This requires an intermediary to do the REC buying. Clearly from the $143 effective REC price example Country Energy can't be trusted to do this fairly.
The power utilities have an obvious conflict of interest here. The more RECs they buy on behalf of Greenpower the scarcer RECs become and the more difficult it is to meet their MRET. So the obvious corporate strategy is to create the largest possible markup on Greenpower since for a given revenue collection that minimises their REC purchases, thereby maximise the pool of unallocated RECs. This fully explains the extraordinary Country Energy Greenpower price.
It follows that energy providers are completely unsuited for their role in setting Greenpower prices to consumers. Tragically our regulators have given them that role.
The most sensible thing would be an inquiry into the way Greenpower functions with a view to ensuring (through regulation) that say at least 80% of the money collected from consumers in the name of Greenpower is actually used to buy RECs.
The conjunction of a properly functioning mechanism for consumers to effectively buy RECs and a requirement above a threshold to buy offsetting RECs for household consumption will result in a significant forward step in the challenge of emission reduction and will not be subject to interference from the business lobbies to complicate the system. The market function will operate to allocate the enhanced RECs sales to the least cost producers of RECs. It is simple, efficient, effective and least cost to the consumer per unit CO2 reduction.
Once the above model is functioning then it can be expanded it to include another aspect of emissions. Trying to achieve everything at once is classically doomed because you maximise the number of enemies of the scheme and dooms it. As you expand the model you battle on one front at a time instead of all enemies at the outset.
Why insist on following the Napoleonic approach of fighting on too many simultaneous fronts guaranteeing failure?
ETS v tax
Tim you reckon the carbon emission predictability of an ETS makes it preferable to a tax.
The trouble is, carbon price volatility will stymie economic activity to an extent far exceeding an ETS's emission-decreasing worth.
What you do instead is introduce a carbon tax, and iterate the rate at which it is set. The following is my posting in response to the reprint of Professor Garnaut's speech on National Times.
Professor Garnaut compares the effect of a flat carbon price through a tax to an emission cap.
In the one, there is price certainty, on basis of which planners can balance the known costs of investment in emission-reducing technology.
In the other, there is price volatillity, in response to which all planners must enter Wong's Casino and play the game.
If I was a planner, I know which I'd prefer.
If I was a banker, a broker, a middle-man, I know which I'd prefer.
People bleat that we don't know ow much emission reduction we'll get for a given level of carbon tax. (This is not completely correct; McKinsey & Co have produced reports on Carbon Cost Curve).
But that doesn't matter; all we need to know is that emissions are too high, so we introduce a carbon tax at a low enough rate to not disrupt the economy (with offsetting tax cuts elsewhere, so as to not over-tax productive sectors).
If that causes emissions to fall far enough, then we stop there. If emissions don't fall far enough, then we repeat the process: raise the carbon tax a bit, with offsetting tax cuts elsewhere.
... and so on.
Meanwhile, the creation of a market for low/zero emission technology engenders creativity and innovation, and emission reduction gets easier.
This is how free markets drive technological change, which is what is necessary for emission reduction.
What is not necessary is yet another game, another lurk, for the enrichment of bankers and the rest of the bottom-feeders down there on the trading floor.
ETS vs tax
David I have to agree with your view. The Greens, not being business people it would seem, haven't really gotten their head around the price uncertainty problem. In business we seek to reduce the massive uncertainties we constantly face, and a CPRS will definitely add to uncertainty.
And the whole feeding the brokers commissions aspect to a CPRS is a really bad idea. What we need is clarity so we can figure out our operating plans. Passing a CPRS will not bring clarity, it will just add a new price risk, and some clever financial wizards will absolutely find a niche that permits them to parasitically exploit that uncertainty to their own narrow benefit at everyone else's expense. And when (not if) one day they overstep and threaten to destabilise the whole system they will be bailed out, again at our expense. Surely the GFC tells us that trading in newfangled purely financial instruments like these is fraught with facilitating systemic risk. It is a special kind of ignorance that is determined not to learn from such a frightening lesson as the GFC.
The Greens have definitely overstated the difficulty with setting a tax level to achieve an emissions outcome.
As but one example among many: In simple terms every PV power system designer (I am one) knows perfectly well the price of power that makes investing in large scale PV hugely compelling. To put compelling into context we also know well that funds managers will accept returns of around 8% or so for these kinds of low risk annuity generator type of investments given the marketing bonus (for funds acquisition purposes) of being green.
With this information we can readily set an upper value for the carbon tax, and suprisingly its not very high. At this upper value large PV systems will be created at the maximum rate that the economy is capable of creating them. Of course as you say, we can choose a slightly lower level initially if we wish.
Its not rocket science at any level. Battling clever business lobby strategies around a messy CPRS is far more complex than tweaking a simple carbon tax on consumers.
Nice baiting
Nice line about how Greens are business people. How do you know? But anyway...
Can you name a major business group in Australia that has advocated a carbon tax instead of an emissions trading scheme?
Consumer tax
Tim, I mean Greens HQ, the policymakers, who quite reasonably appear to be fully engaged in political activity. Nothing is without a downside and not being so engaged in business will necessarily inhibit your insights about business reactions. If it were not so, then you would be making the preposterous claim to: not do what I do but somehow feel you know how to do it better than I. I am not referring to everyone who ever voted Green, for the simple reason that I myself have voted Green and am also heavily involved in conducting business.
I advocate a carbon tax on consumers not business. I've given the reasons, but to summarise:
a) If we tax business then we have a consumer tax anyway which is:
carbon tax on consumers = carbon tax on business + (sometimes savage) markup
b) And then we have your own argument that regardless of whether we have a carbon tax on business or an ETS it will be diluted and loopholed to the point of total inefficiency.
I also advocate that the public sector of our economy be fully carbon neutral before pursuing the business sector. I understand its your policy, I think it should be your focus as a replacement for the current efforts. I think Greens HQ, like Icarus, are over-reaching and you will achieve more faster by being more targetted in your approach. Attack the weak points first then it will be easier to slay the beast in due course.
My reasoning is that with time it will be increasingly difficult for business to object, much as with time, the tobacco lobby lost under the weight of evidence. And we know very well that the big fossil fuel employs precisely the same tactics as big tobacco, so it follows that the same strategy should be used to defeat them.
And in the meantime we do the things that big fossil fuels can't stop us doing, like taxing consumers and making the public sector Green. The tax should be fully returned as an increase in the income tax free threshold or some other measure, so its revenue neutral. The point is people (i.e. consumers) start making different choices for where their energy comes from because the tax evens out the current unpriced externality.
CPRS
There are fundamental flaws in the entire proposed legislation. The government is trying to be everything to everyone and as a result the objective has got lost in a complex web that has lost touch with reality. By providing a greater tax on essential services will not reduce emissions, this has been clearly demonstrated in the past. All costs borne by industry will eventually be passed on to the consumer. Electricity is no exception. There is no proof that consumption is reduced either. Result nothing changes, except you pay more. If you pay for something you want to see something for your money.
Why isn't there an incentive based program to assist fossil fuel based dependent industries to make the transition to cleaner alternatives? If they are to be compensated then a percentage of that compensation needs to be invested in the development of cleaner alternatives.
It is not reasonable to think or a reality that we will stop using coal or natural gas to generate electricity.
We are so backward here in Australia and have always been followers with grandiose ideas, but too gutless to take the lead on anything. Look at Germany for one example. They have a multi billion Euro renewable energy industry now, based in the middle of Europe, one of the most unlikely places to develop a huge solar industry. What was the cost of this to each German taxpayer? … an extra 6 Euro a year?
What needs to be implemented here is an advanced form of MRET. There needs to be larger targets, 30%-40% at least, feed in tariffs or a mechanism that will support the price of REC's and incentives for hybridisation of existing and new fossil fuel power generation facilities. This will enable pollution to be reduced dramatically at a smaller cost to the public than going bunter and imposing taxes on anything that looks like it will emit some form of gas.
Provide real incentives for change with transitional programs that will make industry want to make the move. We will all come out as winners.
CPRS
Loved Bob Brown sitting next to Barnaby Joyce in voting down the ONE chance at a CPRS Bill.
You lot have blown it.
There is always more than one reason for any course of action
Anonymous (that says a lot, doesn't it), there is always more than one reason for taking any course of action. If I cross the road next to a chicken, I am not responsible for explaining why the chicken crossed that road.
Why do you say this was the one chance at a CPRS bill? That's obviously untrue, since the government is already bringing it back again. It's their responsibility if they refuse to negotiate with all parties to attempt to get it through the Senate.
If this is the last chance for the CPRS as it stands, so be it. We are better off without this law than with it, as the post explains.
Painting the Abbey Green
Tony Abbott's crash course in environmental politics and terminology over the Xmas break should be seen for what it is, a cynical preference-buying exercise for the potential 17% NSW Green vote (as determined by the December 15 Newspoll), NSW being a crucial state that Abbott needs to turn around in order to win government.
Regardless of how green Abbott may want to paint himself, he is still a member of a coalition that includes those renowned environmental protectors, Nick Minchin, Eric Abetz, Wilson Tuckey and Barnaby Joyce, whose shade of green could only be described as khaki.
Green Abbots/Rudds etc
But how does this differ from the Rudd crowd, except insofar as parliamentary discipline is much tougher in the ALP? When either of the major parties talk about climate change, or any other matters environmental, it is simply because they want your vote, nothing else. If you want change you have to vote for people who are offering something different from the present political/economic system and that is certainly not the ALP; I personnaly doubt if it is the Greens either, but that is what we are on this blog to discover.
Howard Gibson
Painting the Abbey Green
shows how much you know Jim, Wilson Tuckey has been a proponent of tidaly power for twenty years as well as hydrogen and energy efficient transmission of electricity - its all on the website www.wilsontuckey.com.au - but don't let the truth get in the way of a good story
Alana, Of the Tuckey thoughts
Alana,
Of the Tuckey thoughts that you have selected there,
Tidal power requires damming of bays to direct tidal rise and fall through turbines. This always sounds good, particularly where there is a tidal variation of 10 metres, until you take a close look at the consequences to the environment and sea life.
Hydrogen power, the most difficult of the "green" energy mediums, requires either plenty of solar origin electricity (CSP, Wind power, Wave power) or a plentyful supply of ethanol with which to produce the hydrogen in the first place other wise nothing is achieved.
High Voltage Direct Current transmission of electricity for lower transmision losses over great distances has its greatest purpose in linking solar origin power facilities where they are spread out, or for linking Australia's west to the East to connect all solar facilities into one national grid for best effect.
So unless Wison Tuckey is solidly behind renewable Solar Origin electricity, he is really saying nothing at all.
Controlling Cost Increases for the Community
As all companies that have cost increases, including fuel (petrol and diesel), energy (electricity and gas) incurred by an emission trading scheme will have to automatically pass their increased costs to somewhere, how do the Greens intend to control cost increases leading to higher inflation and possible interest rate rises.
As an example, during 2008, the cost of fuel (including diesel) was very high, and companies passed their increased costs back through the community. The company I was working for, placed a $5.00 delivery fee on each shipment to help cover increased fuel costs. Retailers passed this delivery cost back through their customers.
The example above was a very small impost, but if the price of energy is substantial, all businesses will have no choice but to pass their increases costs back to the community, so it is important that the Greens have a strategy to control cost increases caused through an emission trading scheme.
Change is going to cost us money
Grant, no matter how a switch from the present system to a system that relies more heavily on renewable energy is undertaken, it will be us the people who bare the vast bulk of the cost. The cost will either be applied directly through increased cost of domestic energy and fuel, indirectly through increased costs of goods and services, indirectly through higher levels of taxation, or through some combination of these three. The only wriggle room in the equation lies with the level of cost impost that is applied to imports, exports, and multinationals operating on our soil.
There are strategies available for large reductions in greenhouse gas emissions that do not require an ETS or CPRS at all. If the federal government was serious, it could with not too much more than a stroke of a pen decide that:
1. Only renewable power generation in excess of the MRET can be sold as "green power";
2. Accelerate the increase in MRET each year;
3. All federal government departments and instrumentalities could elect to buy 80% of their current electricity demand as green power for the next 10 years up to some price threshold, first suppliers to get renewable energy baseload power to market, at the locations, and within the price range get the contracts;
4. All new federal government vehicles (where practicable), could be required to not be powered by carbon derived fuels. 100% of any electricity demand for such vehicles would be met by the purchase of additional green power (no requirement that this power is baseload). All such vehicles could be turned over every 2 years, so as to stimulate a second hand market; and
5. A ceiling on the quantity of coal that can be mined in Australia each year could be applied. If companies want to increase exports then they've got to decrease domestic consumption.
Naturally some small pieces of legislation will need to be passed to allow the federal government to modify or escape from current contractual supply agreements without crippling penalties. The increased costs faced by government in taking some of these decisions will necessitate an increase in taxation, an unpopular move.
---------
My question to the Greens is, how does the Greens' treatment of the "wriggle room", ie the cost burden applied to imports, exports, and multinationals, differ from that of Labor's CPRS.
Change is going to cost us money
Morning Zoltar
Much of what you say makes sence, especially items 1 to 4 above.
Item 5 may be a little tricky, as I believe that Chinese companies are negotiating to purchase mines to ensure that they have continuity of of supply of coal for their power generation. If Chinese companies own mines, then the Australian Government would have great difficulties in constraining coal exports without possible major impacts to other Australian exports to that country. Love it or lump it, Australia only survives on the billions of $ that we receive for our coal and mineral exports. The other component is, how do you balance the use of brown coal in Victoria required for power generation, and the export of coal from different companies in Queensland.
All the experts I have read, state that Victoria would be in deep trouble in not being able to supply the amount of required electricity without the existing coal fired power stations, and that this would be current for the next couple of decades. There is an alternative, and that would be for the Federal Government to finance the conversion of the coal fired generation to gas fired.
Your last point about small pieces of legislation to escape from supply agreements would need the Governments, State and Federal, to be prepared to run the whole energy supply system / infrastructure, as no international company would ever come near Australia again if the precedent had been made that any Government contract could be negated at the whim of the Government of the day.
In the end, I see the biggest problem to ever reducing our emissions, is the dramatic population increase being planned for over the next 40 years (35 mil by 2040). If this figure is achieved we can kiss goodbye to any hope of reducing our emissions to pre 2000 levels, even on a per capita basis (we would all need to move back to living in caves, or have converted to nuke power generation). Can you imagine the emissions generated from motor vehicles alone, when we are putting just under a million (in 2009 900,000+) new vehicles on the road each year now, with a population of around 22 millions.
Well put Zoltar
Point 1 is already true. Greenpower has a pretty serious problem though in that the people who set the Greenpower price to the consumer are hopelessly conflicted (see earlier post). I think that can be fixed easily as already indicated, it only requires our legislators to pay a small amount of attention to the problem. Simply requiring 80% of Greenpower receipts are put towards actually buying RECs (i.e. doing what was intended in the first place) and the system is working well enough.
Point 2. Couldn't agree more.
Point 3. Very nice. This is easier than you imagine. All they need to do is buy RECs, they are big enough to do this on their own accounts, thereby eliminating any utility markup. Its an extremely cost effective move. There is no need to renegotiate any supply arrangements because the way Greenpower functions is through the simple purchasing of RECs which dovetails beautifully with their existing supply arrangements. Over time as existing supply arrangements come up for renewal they can renegotiate but its not essential. Grant's concern simply doesn't apply.
Point 4. Works well, especially since Better Place has already committed to wiring ACT for EV's.
Point 5. I like it. It neatly eliminates the argument that the economy will crash. It simply sets a limit as this much and no more. By itself it won't achieve much, but it will at least circumvent runaway emissions which is a very useful first step.
I doubt very much the Feds will allow China to buy enough coal mines to gain more than a very small percentage of our output, so its easily accommodated and so not a meaningful concern.
Contrary to what Grant says, we don't owe our survival to our coal and mineral exports. Instead we owe our absurdly high relative standard of living to those things. We can easily tolerate an existence based on less consumption, much the way as 6 billion or so of our fellow travellers accept without question. Survival is very overblown term here. The shoe is on the other foot. It would be more accurate to say that the survival of our civilisation and many of those that follow us almost certainly depends on cutting emissions rapidly.
Whole of government carbon neutral
Following from Zoltar's post what is preventing the Greens from introducing a bill to make all three tiers of Australian government carbon neutral?
The AGO can conduct an audit on all Federal, State and Local governments and estimate the total CO2 emissions generated by *all* their activities. It doesn't need to be a perfect estimate, just within 10% of the truth would be good. And the scope of the audit could initially be narrow, say direct fuel and electricity initially and then subsequently gradually expand to become more complete as the years go by.
Then enough RECs can be purchased each year to offset all the estimate emissions. RECs can be used to offset petrol consumption and all other sources of emissions just as easily as they offset electricity.
The Feds can buy the RECs on behalf of all forms of government rather than require State and Local buy them.
A whole series of benefits arise from this, not least of which is a serious boost to investment in domestic decarbonisation.
The inclusion of SHWSs undermines RECs for this purpose
The problem with RECs is that they include solar hot water systems as well as "green power". Solar hot water systems are an energy efficiency measure, and as such act as a delay in the need for additional energy production. In the context of the government trying to deliberately increase the "green power" generation capacity, and with government (at multiple tiers) already encouraging a SHWS on every roof, such energy efficiency measures would reduce additionality.
Jim, I stumbled upon this today, http://www.cleanenergycouncil.org.au/cec/policyadvocacy/Submissions/curr... I have no connection to this publication, but it makes interesting reading.
SWHS vs Greenpower
The thing is the atmosphere (or our total coal stocks for that matter) can't tell the difference between a reduction in coal fired energy use through:
a) a SHWS not demanding energy from the grid or;
b) a PV array pumping equivalent kWh of energy into the grid.
So at the level of the overarching purpose of reducing the use of fossil fuels they are completely identical things. A SHWS and a PV system have precisely the same effect of delaying the need for additional energy production as well. There is no distinction. The delay arises only because of a background trajectory of increasing demand for energy not because of some difference in influence of SHWS and PV.
A preference for PV over SHWS has no basis in science, it is in the end political and economic.
It turns that SHWS is economically preferable to PV (it is cheaper). Oddly though only 5% of Australian households have SWHS. So in the end it makes sense to heavily encourage this sector since it is the least cost pathway. The low penetration can be used as the basis of an argument that either more incentives for SHWS should exist or if that carrot is failing then some stick should be introduced like EHWS inspections and mandatory replacement is their efficiency is poor (due to failing insulation, etc).
RECs are a very tidy vehicle for achieving the objective of reducing fossil fuel use.
I am with the CEC. The problems mentioned in the report you cite all stem from one thing. Demand for RECs isn't keeping up with supply. By increasing demand for RECs by whole of government purchasing RECs to achieve carbon neutrality the problems outlined in the report will be neatly solved.
Increase the demand for RECs
A solar PV and a solar HWS are similar, but there are some differences.
Surplus energy in a SHWS is fully lost, with a grid connect PV system surplus energy is not fully lost. Improvements in the energy efficiency of electrical appliances (and to a lesser extent the power grid) provide scope for an increase in the utility of a gird connected PV system (as more coal can be prevented from burning), with a SHWS the only change in its utility can be downward (efficiencies elsewhere decrease the amount of burnt coal that a SHWS is replacing).
On a personal note, I had a SHWS installed today (hence my interest in discovering what RECs were all about), by my calcs I needed a RECs price of $45 to break even with an offpeak electric installation (over the lifecycle of the warranty periods) given the current rebates. In purely financial terms I've needed to bet that the price of off peak electricity increases significantly in coming years, or that the SHWS lasts several years beyond warranty, in order to justify my decision. If the bottom hadn't fallen out of the RECs market, and if the NSW government hadn't reduced its rebate a week or two before I had need of it, then it would have been easier to make the right decision for the planet. I'm glad I wasn't on gas or experienced frosts, the planet would have lost.
An impasse means the polluters win
I'm not sure that the Greens' stance is really going to get results. With a Gov't willing - downright eager - to negotiate with the Liberals to weaken the CPRS and ETS and completely unwilling to negotiate with the Greens to strengthen it it's clear that there is no will in mainstream politics for strong and effective policy on climate change. I suppose in that case there's nothing to be lost by refusing to back the Gov't's legislation but nor do I see much chance it will make any real positive impact. Even if the Greens get more seats at the next election, Labor and LibNats will combine to continue to dilute and delay any measures that impact fossil fuel use.
Of course, as the ongoing massive increases in Australian fossil fuel extraction and export add to the problem the situation can only get worse; lowest cost scenarios all involve a lot of effort - and expense - early. The sooner we bite the bullet the lower the costs further down the line. But what we are getting is delay during which fossil fuel extraction and export is being expanded as fast as possible. Doing the least we can get away with, doing no more than the least that any other nation does, avoiding any policy that makes energy cost more, refusing to acknowledge the external costs of cheap and dirty energy, partying on like those the bill for costs and consequences won't ever come due; that's Australia's response to the greatest challenge of our times. Whilst time may show mainstream Australia that the need to act is vital, the delay will mean the costs will be even greater. The capacity of people to ignore serious long term consequences in order to avoid short term rises in costs should never be underestimated.
Carbon Tax
Hi Tim,
I have long argued the case for a carbon tax. Even earlier than 1992 when I ran against David Caygill in NZ to highlight these issues. However, I am now proposing something even simpler, and far more effective. Fifty percent of Australia's CO2 emissions come from electricity generation and motive fossil fuels. Australia currently generates and consumes 220 billion kilwatt hours of electricity. What I propose is a 3 cent per kilowatt hour levy (around 20% prior to the recent price increase of around the same amount) on this electricity consumption. Three cents times 220 billion equals $6.6 billion per year. This amount collected for 30 years (to 2040) accumulates to around $200 billion dollars. This money I propose becomes the alternative energy investment fund applied solely and fully to the construction of CSP, Wind, Geothermal, and Wave electricity infrastructure. This fund would be able to provide up to 6 billion dollars per gigawatt of base load alternative energy facilities of whatever form that is decided to be the most effective.
The advantages are firstly that the resulting installations are upon completion fully paid for, i.e. they are not encumbered with capital repayments and interest, meaning that the electricity produced can be provided at the minimum cost which by my evaluation is close to the current generation costs achieved by coal firing. Other advantages are that this system is user pays, ie there can be no argument of unfairness, this system provides a build as you earn, this system is self compensating ie if power useage goes up so does the build fund along with the accumulation rate, and this system provides a cost to both families and most business at a level no greater than would be expected from season or occaisional variation in useage.
It is inevitable that personal transport and light commercial transport will move progressively away from fossil fuel energy to electrical energy. This will not be a rapid transition, so the levy funded electrical energy infrastructure replacement programme should be able to keep pace providing clean energy as the demand for it accelerates.
This is an approach to solving half of Austaralia's CO2 emission problem in a direct way which provides absolute certainty of outcome on an absolutely defineable time frame. This is a system which can be accelerated if required should Climate Change be determined to accelerate even further.
With a simple to manage low economic impact solution working certainly and steadily towards solving half of the emission problem, the government of the day is then free to work on the far more complex issues associated with industrial processes and agricultural CO2 emissions.
So the question is, do you believe that the new offer by the Greens to the other parties provides an equal or better certainty of outcome than a user pays levy system outlined in brief above?
Carbon Tax
Some good stuff in there Bill.
Another way to fund it is to make it mandatory for managed super funds to put an amount (say increasing to 10% over time) of their allocation into ownership of renewable energy infrastructure like wind, solar farms, geothermal etc.
This really is the perfect kind of super fund investment. Renewable energy plants are the epitome of a low risk annuity generator.
The historical use of super funds to simply blow asset bubbles which then collapse has been shown to be an extremely damaging activity. Its got to be better than that.
Post new comment