ETS: unworkable, unaffordable, ineffective

NOTES

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

• CO2 emissions from coal fired power stations - 1 tonne per mW hour;
• (elemental) carbon in coal 60 per cent by weight, (elemental) sulphur in coal 1 per cent by weight;
• carbon price $A100/tonne CO2 (expected minimum price required to fund carbon capture and storage);
• take a high-end sulphur price of $A900/tonne SO2 (US$ 600 per ton - a typical high price);
• retail price of electricity = A15c per kW hour = $A150 per mW hour.

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)