Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

The biggest game on Earth

By Paul Gilding - posted Wednesday, 14 February 2007


The reason many in big business are excited about carbon trading, even though by definition putting a price on carbon increases costs, is that it allows clever companies to grab some of the value that gets transferred around the economy as a result. The opportunity in Australia alone is huge.

Consider these numbers. To stabilise the climate, we have to cut CO2 pollution dramatically to about 20 per cent to 40 per cent of 1990 levels by 2050. The gap between business-as-usual and even a 60 per cent cut by 2050 is about 13 billion tonnes of CO2 and its equivalents. Put a conservative price on carbon of say $15 a tonne and that's about $200 billion of value that can be applied to the infrastructure and technology developments we need to close that gap.

The economic impact, however, is even greater, because that value is applied not in isolation as an investment but to cover the incremental additional costs of clean technologies over dirty technologies.

Advertisement

Assume that's a 35 per cent increment and we're talking about facilitating $800 billion of investment in the solution. This is a very serious economic issue and a very serious business opportunity. From light bulbs to power stations, we're about to invest big-time. The corporate sector gets it and the consumer will soon feel it.

To understand how carbon trading works, just look at NSW, where a limited state carbon market is already operating. Since the system first started in 2003, about 37 million tonnes have been traded with a value of more than $400 million. Where does the money come from and where does it go? It comes from electricity users, who in NSW now pay a small amount extra on each kilowatt of power they use. That explains part of the future; we'll all pay more for our emissions of carbon, embedded into every thing we buy, and we'll all benefit from less pollution.

Where does the money go in the NSW scheme? It pays for activities that reduce future CO2 emissions. TRUenergy, for example, is building a new gas-fired power station at Tallawarra in NSW, that wouldn't have been economic except that it generates carbon credits they can sell, because it's so much cleaner than the best coal plant.

For consumers in NSW, it works out to be a good deal as well. They pay more per unit of electricity, but they get help to cut their actual electricity bill. A company I lead, Easy Being Green, distributed three million high-efficiency light bulbs in 2006 to 500,000 homes, cutting each of our customers' electricity bills. At our peak in that project we were employing 240 people to distribute the globes and also water-saving showerheads.

Now we're going into homes and installing the globes directly. Our people trade carbon with individuals every day. The transaction is simple. We'll give you this equipment that will cut your power consumption, therefore cut your indirect CO2 emissions and reduce your annual power bill, by more than $100. You give us the rights to the CO2 you save and we'll sell it under the NSW carbon trading scheme to pay for the globes and our costs. So even with a higher price per unit of electricity, their overall power bill can go down. Very good economics, and even better politics.

Roll this out across the economy and the transition begins. Large amounts of value are transferred around the economy. Those who cut emissions win and those who don't, pay.

Advertisement

Those companies that respond quickly to the opportunities will succeed; those that prevaricate will lose.

Entrepreneurs will seize the opportunity and massive amounts of capital will flow to those that get it right, while others will go broke trying. This is the creative destruction of capitalism at work, and it's why a well-designed market is our best hope. Getting the system design right is the key job for governments, which takes us back to politics.

Will Howard get it in time? Maybe, maybe not. He stumbled this week, and forgot his lines. He's not good when he doesn't believe what he's saying and on this one, he doesn't yet get it. His problem, and I suspect Kevin Rudd's as well, is that he sees the environment as an important issue to be managed, an issue the voters care about, so important for political reasons.

However, climate change is no longer just an environmental issue nor a temporary political issue. This is a geopolitical, economic and social challenge with the potential to redirect civilisation.

It's the biggest game on earth and many will be left in its wake, wondering what hit them, perhaps some of the world's most successful corporations such as ExxonMobil, and perhaps one of Australia's most successful politicians. We are entering a different world. Deep turbulence is ahead. Hold on for the ride.

  1. Pages:
  2. 1
  3. 2
  4. Page 3
  5. All

First published in The Australian on February 10, 2007.



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

17 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Paul Gilding is an independent adviser and commentator on sustainability and climate change and a Special Advisor to KPMG. Former roles include executive director of Greenpeace International, founder of Ecos Corporation and CEO of Easy Being Green. www.paulgilding.com

Other articles by this Author

All articles by Paul Gilding

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Paul Gilding
Article Tools
Comment 17 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy