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Nobuo Tanaka, Executive Director of the International Energy Agency, has recently said that by 2030, to meet international emission targets, the world will need to have a carbon price of $US180 ($A225) per tonne. (from Bloomberg News) Ultimately, such costs will be borne by the tax-payer.
At Australia's current emissions (580 million tonnes p.a.) and working population (10.6 million), a carbon price of $A225 would correspond to a cost per working person of more than $A12,000 per year, or around 25 per cent of the average after-tax earnings. Even if we halve our per-capita emissions by 2030, the cost would still be at least $6,000 each year per working person. Additionally, given the ageing of our population it could be expected that by 2030 a greater burden will fall on those working.
If this is the necessary end-point that is required for an emissions trading scheme, then such a scheme is severely flawed to the point of being unworkable.
The majority of Australians are not able, let alone willing, to pay such costs clearly making this a financial burden far greater than our society could bear. We could, of course, keep the carbon price low, but this would have a negligible effect on reducing emissions, or we could take some part-way point. But whatever position we take, you don’t have to be an expert to see that under a carbon trading scheme, affordability and effectiveness are inversely proportional to each other, with the price for effectiveness being unaffordably high.
The scientists and climatologists at IPCC may be competent in the science and modeling of climate change, and the associated economists (such as Stern and Garnaut) have been vocal in informing us of the cost of not taking effective action. However, from my analysis, it seems that whatever this effective action is to be, emissions trading isn’t one of them. For all the billions of dollars that have been spent on climate science/predictions, economic modeling of the (possibly) dire consequences of climate change and the marketing of these issues to the public, the very least effort seems to have been spent in devising a truly practical, appropriate, economically sound and environmentally effective method that will actually reduce emissions.
Instead, almost as if an afterthought, we got an inappropriate “cap and trade” system lifted from air pollution technology and law, where this method is used to reduce minor pollutants from the emissions of power stations, such as sulphur dioxide. Such pollutants are present at negligible levels (0 per cent to 2 per cent for sulphur) compared to the carbon in coal (40 per cent to 80 per cent), and where such minor pollutants can be cost effectively scrubbed out (at around 10 per cent or less than the cost of removing carbon dioxide) (see note 1) using current commercial technology (see note 2). And to expect a method designed for smokestack scrubbing, to transfer to agricultural and ruminant methane emissions is beyond absurd.
If we truly have determined and agreed as a society, that there is a reasonable probability that “dangerous global warming” will occur as a result of man-made CO2 (+ methane etc) emissions, then, seriously, it is time we found a way to reduce these emissions, and/or their atmospheric concentrations, that will actually work and is affordable.
Once we establish the carbon trading framework with its staged/guaranteed price increases and linkage to international carbon prices, it will be extremely hard to get rid of when/if we realise that it is environmentally- and cost - ineffective, because of the significant vested interests that exist for its continuance. It will develop a life of its own, supported by, and lobbied for, by powerful sections of national/international finance, investment and carbon brokerage industries, plus the supporting consultants, accounting, audit and legal services, all of whom stand to significantly benefit (financially and in terms of PR) from continuing what is highly likely to become a compulsory unproductive wealth transfer with no emissions reduction effects.
The answer to the world’s carbon emissions, if these truly are a serious problem, is to seriously invest in new technology research, and not tax current energy generation via an emissions trading scheme.
The purpose of emissions trading is to increase the cost of energy to parity with very expensive low-carbon technologies such as carbon capture and storage, solar and wind. In other words, the carbon price will be used to indirectly subsidise such alternative and low-carbon power generation. The problem is, like any other protected industries, there won’t be any real incentive for them to reduce their costs as long as they can get this “subsidy”. Nor will there be any real economic incentive for new competitive low-carbon technologies to be developed. Such technologies should have to move towards competing with traditional energy sources, not get a handout from an ever-increasing carbon price.
1. To see how a “cap and trade” system is affordable and therefore effective for sulphur dioxide, but will not be for carbon dioxide, the following example is given:
Assumptions
Using this data, under a carbon trading scheme, electricity would go from $150/mW hour to $250/mW hour (an increase of 67 per cent). Under a sulphur trading scheme (even using a high sulphur price), power would go from $150/mW hour to $161/mW hour (a 7 per cent increase.). In other words, a carbon trading scheme is around 10 times less cost effective (per unit of power generated) than a sulphur trading scheme, and would be at least 20 times less cost effective if the IEA carbon price of $225 is used.
For more information on this matter go here.
2. The technology to scrub out SO2 and nitrogen oxides from commercial power generation is cheap, universal and well established. However, the technology of carbon capture and storage in large scale commercial application is as yet untested, and the Australian Treasury itself doesn’t see capture and storage having any significant impact on reducing emissions until about 2045 (Chart 6.29)
Juel Briggs lives in Sydney and is an inveterate letter writer who has decided to step up a notch.
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