China to tax the biggest polluters

Sydney Morning Herald
31 March 2011, Page: 9

CHINA will hit "outdated" highly polluting industry with a big electricity price surcharge as part of a push to dramatically slow the growth of the country's greenhouse emissions over the next five years, a senior Chinese official has said. Xie Zhenhua said yesterday China had singled out "outdated" companies in eight energy intensive industries including iron and steel, cement, aluminium and iron alloy for a special 20 cents per kW surcharge on their electricity payments. Mr Xie told a Canberra seminar another category of "limited" enterprises would be hit with a 5 cent per kW surcharge both surcharges apparently higher than Australia's mooted carbon price of about $25 a tonne.

The vice chairman of national development and reform also revealed China was "trialling" legally binding carbon markets as a means of reducing emissions in some cities and provinces, but said decisions had not yet been made about the level of a carbon price or which companies would be liable to pay it. The Climate Change Minister, Greg Combet, used Mr Xie's visit to criticise the Coalition's argument that Australia was proposing action against greenhouse emissions when competing economies where taking none. "The opposition has suggested that no other countries are taking action, and therefore Australia should not with the example of China often cited,..

China is taking very significant action to reduce its carbon pollution and to transform to a new clean energy economy", he said. Mr Combet also promised to "investigate" Professor Ross Garnaut's suggestion that bad regulation of electricity networks was causing unnecessary rises in power prices. Professor Garnaut called for an urgent review and said the rules virtually required the energy regulator to allow price gouging. The chairman of the Australian Energy Regulator, Andrew Reeves, said a review into whether the rules encouraged overspending in infrastructure was under way, but any changes would not take effect until 2014.

Professor Garnaut's analysis was backed by the Energy Efficiency Council. Its chief executive, Rob Murray Leach, said prices were "rising dramatically because the regional monopolies that manage the network are planning to spend over $39 billion on poles and wires over five years,.. These costs are passed straight on to consumers". But George Maltabarow, the managing director of Ausgrid, which supplies power to Sydney, the central coast and the Hunter, said the company's $8 billion capital program was driven by the need to replace ageing infrastructure.

"About 50% of our large electricity substations were built in the 1950s and 1960s", Mr Maltabarow said in a statement. "Electrical equipment generally has a life of 40 to 50 years and so we have reached the stage now where much of this infrastructure needs to be replaced. "This is the main driver for network investment. However, meeting increasing peak demand is also a factor". Mr Xie said coal as a share of China's energy mix would fall from 79% to 55% over the next 20 years.