Sydney Morning Herald
Tuesday 8/5/2007 Page: 7
GOVERNMENT subsidies to some of Australia's electricity generation companies are so big they exceed the profits made by those companies, a report on energy and transport subsidies says.
Government support for the coal industry and coal-fired electricity is so generous that in some cases it has led to the construction of coal-fired power plants when other types of electricity generation would have been cheaper, the report by the Institute for Sustainable Futures at the University of Technology Sydney has found.
Subsidies to fossil fuel energies, worth close to $10 billion, result in a serious market distortion, create an unfair disadvantage to renewable energy, and help increase greenhouse gas pollution, says the report, written by the institute's research principal, Chris Riedy, and commissioned by Greenpeace. The report identified energy and transport subsidies in Australia during 2005-06 of between $9.3 billion and $10.1 billion. More than 96 per cent of that money flowed to fossil fuel production and consumption, with the remainder going to renewable energy and energy efficiency.
"This effectively creates an uneven playing field for renewable energy, making it much more difficult to respond to climate change in the energy and transport sectors," the report says. "Fossil fuel subsidies can increase greenhouse gas emissions because they reduce the price of fossil fuel energy, which encourages greater use of fossil fuels and higher levels of greenhouse gas emissions." The report notes some fossil fuel subsidies can help cut emissions, such as subsidising a coal-fired power plant to improve efficiency.
However, over 90 per cent of the subsidies identified in the report would increase greenhouse gas emissions, it says. Government subsidies appear to be creating profits for coal-fired electricity generators. "Macquarie Generation, which operates the Liddell and Bayswater coal-fired power stations, earned a before tax profit of $267.1 million in 2005-06. .. the annual fuel subsidy to Macquarie Generation is between $122 million and $304 million," the report says. Road users benefit most from the subsidies, with about 74 per cent of taxpayer funds supporting fossil fuel industries flowing to the transport sector. Another 18 per cent goes to electricity generation and 8 per cent to other kinds of stationary energy.
"Motorists do not pay as much to access and use the road network as they should," the report says. "In 2005-06 the cost of providing the road network was $4.7 billion more than the revenue received from road users." The aluminium smelting industry, which has lobbied aggressively against putting a price on greenhouse gas pollution, has also benefited from subsidies. It is estimated to use almost 15 per cent of Australia's electricity, making it responsible for almost 6 per cent of greenhouse gas emissions.
"The annual subsidy for electricity use at the six existing Australian aluminium smelters is at least $210 million, and is likely over $250 million," the report says. "This removes the incentive to reduce electricity usage and hence cut emissions."
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