Archive for the ‘Carbon Price’ Category

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Liberals Part 3: False crimes of a climate crook

16 January 2013

This is the third part of a series examining the Liberal Party of Australia. Part 1 covers the party’s climate change denial and intention to abolish various existing climate policies. Part 2 examines the climate policies they promise to introduce. This part defends them against incorrect criticisms of their climate policies.

To use language which Liberal leader Tony Abbott might outside of a family program, the Liberals’ climate policy is complete crap. Having said that, its problems do not include some of the things for which it is most often criticized: fiscal impact, directness, and reliance on domestic action.

Fiscal impact

Some commentators (eg. Alan Kohler) claim the Liberals’ policy would have a massive impact on the government’s budget. But there is nothing wrong with the government spending money on addressing the greatest threat facing humanity. Indeed, we should be spending far more than either major party is currently prepared to. The real problem, as I explained in Part 2, is the Liberals would not spend enough. The Emissions Reduction Fund is capped at $10.5 billion by 2020, making it impossible to make sure it meets its target (let alone a more ambitious target). Because the Fund’s current costings depend on achieving 60% of its abatement through buying soil carbon offsets, it is difficult to see how it could make genuine absolute emissions cuts with such a limited budget. Read the rest of this entry ?

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Liberals Part 1: Climate denial and deregulation

11 January 2013

Almost all of my posts to date have focused on criticizing Australia’s incumbent Labor government. I have written very little about the alternate Liberal/National Coalition government. But as we enter an election year, it is time to examine the Liberals’ policies.

Can the Liberals be trusted?

To begin with, it is worth noting that the Liberals have given us every reason to distrust them on climate change.

According to a 2010 survey, only 38% of Coalition politicians accept that humans are warming the planet (compared to 98% of Greens, in line with the scientific consensus, and 89% of Labor politicians). Liberal and National politicians regularly spout denialist talking points, up to and including their leader Tony Abbott. Most notoriously, Abbott reportedly said in 2009 that the science of climate change is “complete crap” but “the politics of this are tough for us”. In 2010 Abbott met with Christopher Monckton, a man who claims climate scientists are conspiring to fake their results in a plot to create a socialist world government. In a speech to the Mining Council of Australia in 2011, Abbott said “the authors of the carbon tax do not see coal, oil and gas as the most important parts of our economy” but “as a threat to the very survival of our planet”, the obvious implication being that his party disagrees. In 2011 former Liberal Prime Minister John Howard launched a book instructing schoolchildren to raise denialist arguments in the classroom. Queensland’s Liberal National government wants to remove climate from the school curriculum, and its Premier and Environment Minister openly deny human-caused global warming.

I could list many more examples. Indeed, it would probably be quicker to list Coalition politicians who have never publically made denialist claims.

Almost all of the Liberals’ actions mark them as an anti-climate party. The Liberals did not take any significant climate action during the eleven years of the Howard government. They consistently prioritize short-term economic considerations like mining industry competitiveness and electricity prices ahead of climate change. Today they are putting way more effort into opposing Labor’s climate policy than in designing and promoting their own (the former is the subject of this post; the latter will be covered in Part 2). Thus it is questionable whether they would even implement their climate policy, let alone whether it would work. Read the rest of this entry ?

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A terrible week for the climate

14 October 2012

This week’s events illustrate (not that further illustration was needed) that both of Australia’s major political parties are in the pocket of the fossil fuel industry, though Labor hides it behind a veneer of greenwash while the Liberals are overt about it.

On Monday in New South Wales, the Planning Assessment Commission approved the Ashton South East Open Cut coal mine in the Hunter Valley. The Commission had rejected the same mine last year, but the company, Ashton Coal, appealed the decision and it has now been approved with changes. The mine is still opposed by residents.

Meanwhile, the NSW government made very clear where its loyalties lie on coal seam gas (CSG). On Tuesday, NSW Resources Minister Chris Hartcher told an Australian Petroleum Production and Exploration Association conference that the “industry needs to get out there and sell the message”. On Wednesday, NSW Planning Minister Brad Hazzard reportedly told the mayor of the anti-CSG Lismore Council that CSG development would go ahead regardless of community opposition.

Also on Wednesday, federal Environment Minister Tony Burke approved the T3 coal terminal at Abbot Point, Queensland, which is joint-owned by GVK and Hancock. The decision is in spite of UNESCO having called for no new port developments to be approved before the completion of a plan to protect the Great Barrier Reef, and follows Burke’s approval of the associated Alpha mine and rail line. T3 will have the capacity to export 60 million tonnes of coal per year. Assuming each tonne of coal burned emits 2.7 tonnes of CO2, when the exported coal is burned overseas it will result in CO2 emissions of 160 million tonnes per year, equal to the emissions which Australia’s domestic carbon price is intended to save. I urge readers to sign this petition to Tony Burke to reverse his approval of T3. Read the rest of this entry ?

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Reflections on carbon price amendments

12 October 2012

Yesterday the Australian House of Representatives passed amendments to the carbon price. I’ve already posted my initial reactions to their content; here are some more thoughts based on further reflection, loosely organized by issue.

Background

Legislated last year after extensive negotiations between the Labor government, Greens, and independents, the carbon price is presently a $23 fixed price and in 2015 will become an emissions trading scheme (ETS). Unfortunately, it is full of holes that render it ineffective, including allowing companies to buy offsets from overseas, and handing out around $4 billion per year in free permits as “compensation” to polluters. Fortunately, the original policy also included, among other positive measures, a $15 floor price during the ETS phase for investor certainty and a plan to negotiate contracts for closure of 2,000 MW of coal power.

The new amendments, which were also negotiated by Labor and the Greens and will now progress to the Senate, do three main things: remove the floor price, limit offsets from Kyoto’s Clean Development Mechanism (CDM), and link Australia to the European Union emissions trading scheme (EU ETS). To summarize my earlier post about these changes: the removal of the floor price is bad because a low carbon price won’t drive the investment needed to decarbonize our economy; the limit on Kyoto offsets is good because it restricts one avenue for creative accounting; the EU link’s implications depend on decisions yet to be made in Europe and accounting rules yet to be agreed.

According to the Australian Financial Review, the legislation contains some extra changes in addition to those announced in August. These include:

  • Giving the Minister the power to limit the number and type of international permits (a positive step, if the Minister chooses to exercise the power).
  • Giving the Minister the power to set a reserve auction price (I’m not sure if this is a mechanism to prevent the carbon price from crashing, intended to prop up government revenue, or merely an administrative detail).
  • Increasing the number of permits that will be auctioned during the fixed price period (the amount seems small enough to be not very significant).

Offsets

The Government says it “stands behind” the Treasury modeling of the carbon price and refuses to redo it, which seems stupid when they’ve changed the policy that the modeling was based on. I would like to see the modeling redone to see how the changes are likely to affect what proportion of Australia’s target will be met by domestic decarbonization and what proportion “met” by overseas offsets. The original modeling projects domestic emissions will actually rise until the mid-2030s then fall back to today’s level by 2050, with the 2050 target of an 80% reduction being supposedly met by buying international emissions permits. Such an outcome would be utterly inadequate at a time when everybody needs to get to zero emissions as fast as possible.

Worse, I’ve recently realized there was nothing to prevent a far worse outcome than the modeling predicts. When the carbon price was first announced in July 2011, including a 50% limit on international offsets until at least 2020, I assumed it meant 50% of abatement relative to business as usual (which would have been bad enough). But in fact, as explained by Climate Spectator:

In effect this provision allows the Australian government to issue Australian carbon permits up to the emissions cap required to meet the 5 per cent reduction target, and then firms could emit double that amount through also acquiring international carbon credits. This would be entirely consistent with the requirement that firms can meet their liability with 50 per cent Australian carbon permits and 50 per cent international credits.

Australia’s domestic emissions could almost double by 2020 without breaching the 50% limit! The limit is effectively no limit at all; in practice offsets are unlimited. The Greens were either deluded or disingenuous when they trumpeted the 50% limit as “groundbreaking”.

How do the new amendments affect this grim picture? One thing that’s for sure is they make it more confusing.

First, it is important to distinguish between two types of international emissions trading: one the one hand, linking to schemes like the EU ETS which have an emissions cap like Australia’s ETS will; and on the other hand, offsets from other mechanisms which rely on estimates of “additionality”, how much a carbon credit supposedly lowers emissions relative to a business-as-usual baseline. The latter type, at the very least, is a breeding ground for creative accounting. The former type could hypothetically be relatively credible, if there are consistent and rigorous accounting rules to make sure apples are being traded with apples, though I’m skeptical. What is certain is that both types of international trading will prevent decarbonization in Australia, whereas we urgently need all countries to decarbonize their economies at home. And the Australian and European policies are both deeply flawed, so linking the two will allow them to contaminate each other with their flaws.

I’m not sure whether the 50% limit will apply to European permits, though it won’t make much difference if it does. Assuming no or minimal restrictions on emissions trading between Australia and Europe, the two will effectively function like one big emissions trading scheme with one cap. (By the way, Europe’s target is a 20% cut by 2020 relative to 1990, which might sound a bit better than Australia’s target of 5% by 2020, but Europe’s low carbon price shows it is similarly toothless.) In addition, an unknown number of offsets will be imported from mechanisms like the CDM, and perhaps from other national emissions trading schemes.

The Australian Government is talking to various other countries about linking to their respective schemes. (It is disturbing that Labor now seems to see this as the main focus, as opposed to accelerating domestic decarbonization; indeed Labor keeps cutting domestic climate policies.) Climate Change Minister Greg Combet says the Government does not want to link to uncapped schemes like New Zealand’s, which is superficially reassuring. Yet Combet does not seem to see any problem with allowing offsets from the uncapped CDM, and he also says Australia and Europe are talking to China, who certainly don’t have an absolute emissions cap. Australian companies will also be able to buy unlimited Australian land carbon offsets from the Carbon Farming Initiative (CFI).

As I understand, an Australian company will now be allowed to use up to 12.5% CDM offsets, and up to 50% total international permits (or I suppose up to 100% European permits, if the 50% limit does not apply), plus unlimited CFI offsets. Of course these percentages only apply to Australian companies; I am not familiar with the rules for European companies (though from memory I think the EU limits CDM offsets as well). My conclusion is that companies will still be allowed to emit in excess of the combined Australian-European emissions cap, let alone the Australian cap, by a very significant amount – although even this situation may be better than it was before the amendments, when there was no limit on CDM offsets.

All this makes it very complicated to figure out where the emissions cuts that Australia will claim as progress toward its own target are likely to physically occur, if they occur in the real world at all.

Price

The EU link, combined with the removal of the Australian floor price, means Australia’s carbon price will effectively be determined by decisions made in Europe. Currently the EU ETS is flooded with surplus permits, which have caused its carbon price to plummet to €8/tonne (AU$10/tonne). Another contributing factor is that Europe’s emissions have gone down because the economy has gone down, making its target easier to meet in the short term – but that low carbon price is not sending a long-term signal for decarbonization, so when the economy comes back up the emissions will come back up. European politicians are debating whether and how to rectify the situation, but so far coal-addicted Poland has vetoed all attempts to do so. Conflicting signals are coming out of the EU on whether it is likely to move to a more ambitious emissions target.

Labor and the Greens are confident the EU will fix their ETS and the European carbon price will recover. If so, it had better happen very quickly, because polluters are allowed to buy EU permits now at the current low price and “bank” them to use later. If the EU does not fix its scheme, Bloomberg New Energy Finance forecasts a European carbon price of AU$12 in 2015, $3 lower than Australia’s floor price would have been, which would save polluters $1 billion per year. And if Labor and the Greens are correct that the European price will be above $15 in 2015, it raises the question: what is the point of removing the floor price?

Complementary policies

Linking to Europe makes it even more important that we maintain and strengthen existing complementary policies like the Renewable Energy Target (RET), and introduce new ones, for example a national feed-in tariff, to drive decarbonization here in Australia. As pointed out by Renew Economy:

Because of their own frustration with the EU ETS, leading European economies have taken their own additional measures to effect a transition to a low carbon economy, and to ensure that they remain competitive with the Asian economies and their Asian counterparts, who are dominating the clean energy markets. England has introduced an additional carbon price for its energy sector, on top of a renewable energy target and generous feed in tariffs. Germany has accelerated its exit from nuclear and is pushing for the most ambitious transformation to a renewables-dominated electricity grid. Ireland, Spain and the Scandinavian countries all have supplementary measures to add to their low carbon opportunities.

Trade-exposed industry compensation

Officials from the Department of Climate Change and Energy Efficiency told the Australian Financial Review that the changes effectively increase the (already ridiculous) level of carbon price compensation to trade-exposed industries.

As I’ve written before, industries which the Government has deemed to be “emissions-intensive trade-exposed” (EITE) get $3 billion per year in free permits (supposedly to protect “jobs and competitiveness”). The highest-polluting EITE industries get 94.5% of their emissions permits for free, diluting the $23 price to $1.27. Note the 94.5% number actually refers to 94.5% of the industry average, so any company with emissions below its industry’s average could be overcompensated for its emissions. These absurd levels of compensation are guaranteed in law for at least five years, and the rate at which the percentage of free permits reduces is so meaningless that the total number of free permits could actually rise over time.

The combined effect of the changes made in the carbon price amendments further increases the chances that EITE companies will be overcompensated for their emissions – effectively being paid to pollute instead of paying to pollute. This is because EITE companies will now be able to buy CDM offsets at ridiculously low prices around AU$4 and make multi-million-dollar profits by selling their free permits at the higher Australian-European carbon price.

Coal power plants compensation

Meanwhile, the contracts-for-closure policy has been cancelled because coal-fired generators refused to accept the amount the Government was offering, saying they are still profitable despite the carbon price. Actually, they are now more profitable, because the Government is paying them $1 billion per year in cash and free permits as carbon price compensation (supposedly to protect “energy security”). Their compensation, combined with the cancellation of the floor price, has actually increased their value by up to $1 billion. The only condition for a coal-fired generator to receive compensation is that it continues to operate, effectively an incentive to stay open for years. All this reinforces what should have been obvious: the Government should never have decided to pay polluters to stay open while planning to pay them to close.

Yet yesterday, the House of Representatives voted down a Greens amendment to refer the generators’ compensation to a review by Productivity Commission (the Greens will try again in the Senate). Labor had the gall to call the Greens’ move a “breach” of last year’s climate policy agreement. What was Labor’s abandonment of contracts for closure, if not a breach? What was Rob Oakeshott’s abandonment of the floor price, if not a breach?

Business lobby arguments

Following the success of their campaign against the floor price, business lobby groups have shifted back to their original argument that the price should be lowered before 2015, which presumably would mean moving to emissions trading and setting a target sooner. It appears they are attempting to convince the Government to bypass the independent Climate Change Authority and lock in a weak emission target. It also illustrates their aggressive negotiating strategy: businesses got what they wanted, yet still they complain, while many environmentalists foolishly rhapsodize about changes with unclear implications.

Conclusion

Confused? Me too. One of my pet peeves about climate policies is that governments tend to make them near-impossible for an average citizen to understand – and yet we will all be affected by whether they are effective at preventing catastrophe, or merely employ creative accounting to produce an appearance of change.

To ensure a higher carbon price and strong domestic action in future, both Australia and the EU should increase their emissions targets, limit trading between each other, and ban all international offsets as South Korea and California have done. Australia should also bring back its floor price, indeed strengthen it; cancel or phase out polluter compensation as soon as possible; announce a replacement plan to close coal power plants; increase the RET; and introduce new climate policies additional to the carbon price. The Government must resist campaigns by business lobby groups to further weaken climate policies.

Most immediately, I urge readers to sign this petition by Environment Victoria to withdraw the compensation for coal power plants.

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Climate change, foxes, and hens

25 September 2012

Prime Minister Julia Gillard announced yesterday the Labor Government will introduce a tax on the consumption of hens by foxes.

“By making hen consumption more expensive, this policy will make alternative food sources relatively cheaper,” said Gillard.

From 2015, Australia will have a hen consumption trading scheme, in which foxes will be able to buy and sell rights to eat hens.

The scheme aims to cut hen consumption by 5% by 2020.

“A market mechanism is the most cost-effective way to reduce hen consumption,” said Gillard.

All her economic advisers agreed, rejecting demands by animal rights groups that the market mechanism must be complemented by other measures including fox-proof fences around poultry farms.

“We look forward to working very closely with foxes and other stakeholders over the coming months to ensure we reduce hen consumption at the lowest possible cost and while maintaining the competitiveness of our fox industry,” said Hen Minister Greg Combet.

Reaction from foxes

The pro-hen industry coalition, the Global Organization of Businesses for Bantam Liberation and Emancipation (GOBBLE), cautiously welcomed the announcement.

“We will work with the government to achieve a price on hen consumption, as it is the most cost-effective way of reducing the consumption of hens.” said a spokesperson for GOBBLE, who was previously a senior government adviser. “It’s much cheaper than, say, just banning hen consumption.” Read the rest of this entry ?

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Laggard to Leader

11 September 2012

A landmark report was launched a few weeks ago by Beyond Zero Emissions (BZE), Laggard to Leader: How Australia Can Lead the World to Zero Carbon Prosperity.

Laggard to Leader is at its heart a response to the oft-heard arguments that Australia is too small for our actions to make a significant difference to global warming, but it is much more than that. The report debunks Australia’s claims to be taking meaningful action at home and in UN climate talks. It comprehensively outlines a whole different way of thinking about the role of individual countries in climate change than that of the Australian government and political elite. It challenges the economic excuses for inaction. And it proposes an innovative set of bold actions Australia should take to make a real difference.

The report is professionally presented but accessible, as it is mostly written in plain language. It sometimes seems to confuse CO2 with CO2-equivalent, but its arguments are convincing.

The report begins by summarizing the urgency of the climate crisis and contrasting it with the lack of achievement in international negotiations. Humanity must rapidly phase out fossil fuels and other sources of greenhouse gas emissions, leaving the vast majority of the planet’s fossil carbon in the ground. The UN climate talks have gone on my entire life, but far from negotiators’ constant claims they are making progress, global fossil fuel CO2 emissions have risen by 50% since 1990 (and Australia’s emissions by 30%). The Kyoto Protocol has been sabotaged by offsets and creative accounting, and Canada has gotten away with completely flouting its obligations. Despite agreeing in 2010 to take urgent action to limit global warming to <2°C (a target which climatologists now realize is itself quite dangerous), countries’ national emissions targets do not remotely add up to that global objective, and the world remains on track for a catastrophic multiple degrees of warming. Most recently in Durban, they agreed to negotiate a global agreement that would not be implemented until 2020. But as the Australian government’s own Climate Commission says, this is the critical decade.

As the negotiations currently stand, the best-case outcome will be far too little far too late. BZE argue therefore we cannot rely on the UN process and its associated top-down model of climate action, which they describe as “Treaties, Targets, and Trading”. The aim of Treaties, Targets, and Trading is for all countries to agree a global binding treaty in which national emissions targets add up to achieve a safe global objective, and countries may trade pollution rights. (Laggard to Leader skips an important nuance here: this is Australia’s particular view of the ultimate aim of climate talks, as advised by Ross Garnaut.)

In accordance with UN accounting, Australia is generally considered responsible only for emissions occurring within its borders. The problem is we do not yet have a global framework in which national targets add up. Thus we need to look beyond our domestic emissions to a larger “sphere of influence”, which also encompasses emissions from the burning of fossil fuels we export and the manufacture of products we import. Global trade means countries have overlapping spheres of influence. This shared responsibility makes more sense from an ethical and practical point of view. Read the rest of this entry ?

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Australian climate policy: 10 revealing graphics

4 September 2012

I’ve written a great deal about the holes in Australian (and global) climate policy. As such discussions can get very complex and confusing, I decided it was time to try a more visual format for a change. The following graphics dramatically illustrate just how ineffective the Gillard government’s climate change policy is.

1) We’re heading for 4°C

Let’s start by putting Australian policies in their global context. Despite an international agreement to take urgent action to limit global warming to less than 2°C (a target which climatologists now realize is itself quite dangerous), countries’ national emissions targets do not remotely add up to that global objective. Even assuming countries meet their targets (which some don’t appear to be doing), the Climate Interactive scoreboard shows the Earth remains on a pathway to over 4°C global warming by 2100 (and feedbacks could cause more warming on top of that).

Australia is not aiming further than the rest of the world – indeed we are a laggard. Australia continues to play an obstructive role in global climate talks, and has pledged to cut emissions a mere 5% by 2020 (though legal emissions caps are yet to be recommended by the independent Climate Change Authority). And despite claiming to accept the science of climate change and having signed up to the 2°C target, the Australian Government seems unperturbed by the ambition gap.

If we allow several degrees of global warming, humanity faces a very uncertain future. Read the rest of this entry ?