Carbon debits

Bulletin with Newsweek
Tuesday 16/10/2007 Page: 38

The government's failure to protect jobs in renewable energy is leaving the industry out on a limb.

STATE AND FEDERAL governments would contend that all jobs are valued equally. But it would seem that some jobs might be more equal than others. Or at least that governments go to greater lengths to save them. In the past two weeks, an estimated 1000 jobs in the new and rapidly growing energy efficiency industry in NSW have been lost. The cause was a dramatic slump in the price of carbon traded in the NSW Greenhouse Gas Abatement Scheme (GGAS), the world's oldest and second-largest carbon trading scheme.

Freddy Sharpe, chief operating officer of Easy Being Green, the biggest and most successful of the companies operating in that space, blames the price fall mostly on the failure of governments to provide certainty to a new market. It's ironic, he says, because the government had made a large step forward by announcing that the state schemes would be migrated into a new national trading scheme. It's just that it couldn't explain how that would be done, so traders feared the state-based carbon certificates would lose their value, and sold them down accordingly.

Easy Being Green specialised in the installation of energy-saving light bulbs and efficient shower heads in homes. These installations would generate carbon credits, which Easy and other companies such as Neco and Fieldforce would then sell into GGAS. While these carbon credits traded at around $11 to $13 a tonne, this and a handful of other companies doing similar work made good money. When the price slumped to $6, the margins disappeared.

"Easy Being Green showed that it was really easy to engage consumers on energy efficiency," Sharpe says. "We could create and register large volumes of carbon credits. That took the market by surprise. Maybe we were too successful for our own good" Easy Being Green has all but closed down its home-based energy efficiency business, with the loss of 140 permanent staff and 100 contractors.

Neco was forced to sack 55 - mostly in regional areas - of a total of around 90. "It's been a tough ride," says Ben O'Callaghan, Neco's carbon services director. "If the government is serious about this market, then they need to set targets, and be clear on regulation." This is not the first time this has occurred in the new carbon economy. Governments insist they do not want to "pick winners" in this new regime, but it is clear that they are already making such choices. A decision last year not to meaningfully expand the renewable energy target kicked the stuffing out of what was shaping up to be a successful new industry, and forced many players instead to concentrate their expansion overseas.

However, a pre-election backflip on the issue by the federal government has held out hope of major new developments, and has caused a big leap in the value of the certificates traded under that scheme to more than $40 a tonne. It is hard to imagine any government allowing 1000 jobs suddenly to disappear from the coal industry with such little comment, particularly if it was caused by sudden movements in the carbon market.

Indeed, the government has supported the coal industry with an estimated $8bn to $9bn of annual subsidies - including exemption from diesel excise and road construction. Still, this has not been enough to save the industry shedding almost a third of its workforce in areas such as the Latrobe Valley over the past two decades, mostly due to increased mechanisation. "The idea that climate change is the major cause of job loss in the industry is just wrong," says Tony Mohr, climate change campaigner for the Australian Conservation Foundation. "Governments tend to be more protective of existing jobs than new jobs.

There is a bias about protecting existing industries rather than new ones." But he says if climate change cannot be controlled, job losses will be dramatic. Witness the loss of jobs in the farming sector during recent droughts, or the 54,000 jobs that could be lost if the Great Barrier Reef is destroyed. The renewable energy industry, Mohr argues, is a heavy employer. In Germany, for instance, more than 200,000 people are employed in the sector. But for that to occur in Australia, policy certainty is needed. "It's symptomatic of the policy void we have in Australia," says Mohr. "If you want to start a renewable energy business, you want to be able to look with confidence five to 10 or more years into the future, not just the next two."