Climate Institute urges early start to emissions trade

AAP Newswire
28/05/2007

CANBERRA, May 28 AAP - Setting a low carbon price and delaying an emissions trading scheme will hurt Australia's economy more than taking early decisive action, the Climate Institute Australia warns. The independent group released economic modelling today on the electricity sector's future, ahead of a report by Prime Minister John Howard's task group on carbon emissions trading due on Thursday.

The study shows electricity prices soaring by 75 per cent by the 2020s under the scenario of a soft start to emissions trading, compared with 10 per cent if early action is taken. "This research highlights that it would be reckless to delay action or only take half measures because of the risk it would pose to the Australian economy," institute chief executive John Connor said. The modelling by McLennan Magasanik Associates charts four different scenarios for achieving a target of cutting emissions by 80 per cent in 2050. It shows immediate action on emissions trading and a mix of clean energy and efficiency policies is the most cost-effective policy.

Such an approach would see emissions cut by about 20 million tonnes per year by 2020 and moderate the carbon price through to 2050. Under a "wait-and-see" model of a $10-per-tonne starting carbon price and full trading delayed to 2020, emissions would rise by about 20 million tonnes by that year. That scenario would force up the price in later years to a peak of $86 per tonne in the 2031-40 period and stay high at $78 in the following decade.

Under the institute's preferred model, carbon emissions would start at $29 per tonne, peak at $54 per tonne in 2021-2030 and decline to $42 by 2041-50. The other two scenarios chart a middle ground, with higher starting prices which peak around $50-60 a tonne in the middle decades. "Making significant cuts to greenhouse gases from our electricity sector is affordable and achievable if we act now with a realistic carbon emissions trading scheme, a market-based clean energy target and comprehensive energy efficiency policies," Mr Connor said.

"Accounting for 30 per cent of Australia's overall greenhouse pollution, our electricity sector needs to make a decisive switch to clean energy but it should be backed up with an economy-wide approach that links into international carbon markets." Wholesale electricity prices under the wait-and-see approach would rise from $38 per megawatt-hour in 2008 to only $46 from 2010-2020 but nearly double to $87 in 2031-40.

Under the mixed scenario, the price would initially soar to $63/MWh in 2010-20 and reach $73 in 2031-40. The report says the inclusion of even a moderate energy efficiency program with a trading scheme would reduce the electricity sector's cost of achieving the reduction target by near 50 per cent, or about $12 billion. It also says introducing nuclear power would make only a modest contribution to reducing emissions by 2050 because of the time it would take to establish the new power source.

The institute's policy and research director, Erwin Jackson, said nuclear power generation would reduce the production share of coal rather than cut into renewable energy contributions. He played down the effects on employment of a shift to cleaner energy sources in Australia. "Renewable technologies in particular are more job intensive than the more traditional energy sources," he said. "The impact of domestic policies on our coal mining industry will be next to nothing because most of our coal's for export. "It's what actually happens in other countries that matters."