Carbon Price Package

8/4/2019 Carbon Price Package

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The Carbon Price Package

Mike Clark

TTKD August 2011


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The warming world

Source: NASA GISS

Temperature trend 1970-2010


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Fingerprints of human-caused

climate change

Source: skepticalscience.com


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Why act on climate change?

Picture: Skeptical Science.com Source: Doran 2009, Anderegg 2010


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*What are you sinking about?

Cartoon adapted from Jip Lenstra by Bart Verheggen (http://ourchangingclimate.wordpress.com/

)

and then again by me.


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Tackling climate change is in

Australias best interest Australia risks being hit hard by climate change impacts. It is in our interest to play our part in global action to

keep warming to under 2 degrees.

Being a laggard doesnt encourage action from othercountries, it encourages others to be laggards (Garnaut).

Oz is responsible for 1.5% of the world carbon pollutionand is one of the worlds top 20 emitters.

Countries with similar and smaller levels of pollution toOz are responsible for ~40% of the worlds pollution,without action from these countries we cant stoptemperature rises.


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Analysing climate action

Affordable (Will it be cost effective?) Sensible (Can we manage it?) Innovative (Will it spur innovation and

transformation to a low carbon economy?)

Effective (Will it work?)


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Guts of the scheme

1. Carbon price2. Household and business compensation3. Renewable electricity4. Supplementary measures (brown coal

buy out, carbon farming etc)

5. Independent governance


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The carbon price

Carbon pricing means polluters pay to pollute Polluters now have a financial incentive to

reduce pollution (no pollute = no cost= profit)

Carbon pricing is the cheapest way to reduceemissions (Source: Productivity commission, (2011); Garnaut (2011))

Reduce pollution No action

Pay price =Lower profitorGoods cost

more

Dont pay =Higher profitorGoods cost

less


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How the carbon price will work

Paid by ~500 biggest polluters Starts at $23 ton in 2012 Fixed price, by rises 5% yearly for 3 years

the carbon tax

Moves to floating price in 2015, where totalemissions are capped and decrease yearly the ETS


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Transport and fuels

Household cars and business light vehicles donot pay a carbon price

Farm, fishing and forestry vehicles also dont payfor off-road use

Domestic aviation, shipping etc and non-transport use of fuels do pay

Charged through an increase in fuel excise or adecrease in fuel subsidies equivalent to carbonprice (I think ~6c/l)


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Electricitygeneration; 36%

Direct fuelcombustion;15%

Agriculture;15%

Transport; 14%

Sources of carbon pollution in Oz and

those under carbon price

Source: Australian Govt, DEECC analysis ofNational Greenhouse Gas Inventory, 2009

Excluded:-Agriculture-Land use emissions-Household andbusiness light vehicle use

-International transport

Fugitiveemissions; 7%

Industrial processes; 5%

Deforestation; 5%Waste; 3%


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Who pays the carbon price?

Source: APH.gov


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Effect on jobs and the economy

The Australian economy will continue to prosper while cuttingcarbon emissions

Employment is projected to grow strongly with a carbon priceSource: The Treasury, Australian Government

GDP


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Electricity generation to 2050

A carbon price makes polluting electricity more expensive Renewables become a better long term investment

i.e. Conventional coal is almost completely gone by 2050

i.e. Over 40% of electricity comes from renewables

Source: The Treasury,Australian Government


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Effect on prices

Prices will rise a total of 0.9% between now and 2016 due to thecarbon price

Average household bills will increase $9.90/wk before anycompensation and assuming you do not take action to avoid this

Source: The Treasury,

Australian Government


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Household compensation

Over 50% of money from carbon price Tax cuts, pension and benefit increases Tax free threshold tripled to over $18 000 Average household compensation $10.10/

wk compared to average cost of $9.90/wk

https://www.cleanenergyfuture.gov.au/

Household-assistance-estimator


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Household compensation

Take home message:- Oz has ~9 million households- 6 million will be fully compensated

- 8 million will receive some compensation, many onlyface costs of $1 or $2 /wk

Source: Australian Govt

Household

adjustedtaxable

income

Single

Couple

withoutchildren

Couple

withchildren

Single

parent

%

households

%

Receivingsome

assistance

%receiving>100% of

expectedcost of

living

impact

Low (less

than)

$30,000 $45,000 $60,000 $60,000 34 100 100

Middle(between)

$30,000-$80,000

$45,000-$120,000

$60,000-$150,000

$60,000-$150,000

40 97 66

High (above) $80,000 $120,000 $150,000 $150,000 26 74 18


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Business compensation

Includes both free permits and grants for emissionreduction investments

Trade exposed emissions intensive industries getvery generous support

- Receive ~95% or 66% of emission permits for free- % of free permits decreases at 1.3% a year

- Compensation based on industry average whichcreates an incentive to reduce emissions

- Assistance worth $9.2 billion over 4 years

- Level of assistance to be reviewed by the PC


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Business Compensation $1.2 billion Clean technology program for

manufacturers- help for less emissions intensive manufacturers

- grants to improve energy efficiency and decrease theirenergy use

- grants for business R&D into emissions reductions

- government and industry share the costs of investments

Clean energy skills program Small business assistance (asset write-off) Assistance for any regions heavily affected by the

carbon price


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Renewable energy

$10 billion dollar Green bank- Clean energy finance corporation

- Support renewable energy, energy efficiency and low

pollution technology- Invest in commercialization and deployment of plants plusin businesses that manufacture components

Australian renewable energy agency- Merge $3.2 billion of existing programs (i.e: solar flagshipsinto one agency)

- Includes R&D

Renewable energy target (20% by 2020) retained


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Other measures

Coal buy out - money to close ~2000 Mw of themost polluting coal plants

5.5 billion over 6 years to coal generators (freepermits and cash)

Extra help for Steeland Gassy coal mines

- government specific

measure

Source: Simpsons fan 66 at en.wikimedia

Hazelwood power station


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Biochar

Other measures Carbon farming

- Reducing pollution and capturing and storing

carbon in soil and trees

- Farmers who do this will earn credits they can sell to

offset other business pollution

Billion dollar biodiversity fund


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Governance

An independent climate change authority- recommend short and long term targets

- review progress- aims to remove some of politics from CC action

Clean energy regulator- will administer the carbon price scheme

Productivity commission-

review industry assistance, watch for windfall gainsetc.

- track international action Governance gives scheme flexibility


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Targets and Emissions

Minimum 5% decrease by2020 (24% decrease on

BAU) 80% decrease by 2050 During emissions trading up

to half of emission reductions

can come from internationalcredits/offsets

Source: The Treasury, Australian Government


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Is it EASI?

Effective- package will reduce emissions

- current 2020 target is below our fair share but scheme has flexibility tochange this

- exemptions for some, makes cuts harder for others

Affordable- carbon pricing is cheapest method to cut pollution, but giveaways to

various companies increase the cost of the scheme

Sensible- only modest effects on the economy, little overall effect on jobs, bothwill grow strongly

Innovative- package moves Oz towards a low carbon economy, essential for

affordable long-term emissions cuts


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Main criticisms

2020 target too low Doesnt cover transport Too many polluter giveaways

But do these undermine the scheme?

Answer: No


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Dont throw out the good inpreference for best.

Professor Ross Garnaut, July, 2011


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Thermometer and satellite

temperature datasets all agree

Source: skepticalscience.com


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Why it is warming?

The principal warming and cooling influences on climate since 1750

Source: IPCC AR4


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Why are electricity prices rising?

Garnaut update paper 8. (2011)


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China

Pledged to reduce its emissions intensity by 40-45% by 2020.Chinas actions represent by far the largest contribution to reducing global

emissions below what they would have been under business as usual Garnaut,final report (2011)Actions include: closing inefficient power plants and factories, raised taxes onsome emissions intensive industries, massive support for low emissions powergeneration and transport, emissions trading schemes in pipeline.

Source: Garnaut,

final report (2011)


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Voluntary action

Voluntary action (VA) will be treated asadditional to the cap. I.e.: with a 5% target to2020, if VA reduced emission 1% the 5% target

would mean a 6% total drop. VA include

1. A tax deductable pledge fund that will helpindividuals buy and cancel pollution permits

2. Greenpower purchases. Remember to keep the effect of VA in

perspective: the total cap will be ~500 milliontons


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Carbon Price Package

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