Positive Environment News

Australia Industry Wants CO2 Price To Fight Rising Power Costs

Date: 22-Feb-11
Author: James Grubel

Most Australian manufacturers have taken no action to become more energy efficient, despite hefty electricity price rises in recent years and a major political debate about pricing carbon emissions, a report released Monday says.

The report by the Australian Industry Group (AIG), which represents the nation's manufacturing sector, said around 66 per cent of companies had made no energy efficiency improvements over the past five years.

But the report said electricity prices are set to double from 2008 levels by 2015, due to higher prices for coal, new investment in electricity networks and as Australia imposes a price on carbon emissions.

"With energy prices on an upward trajectory, the need to have a well-designed carbon price is even more important and a badly designed carbon price will put even more pressure on energy costs," AIG chief executive Heather Ridout said.

Australia's government is currently examining the best way to put a price on carbon from July 2012, and is considering a flat interim carbon tax until a full carbon trading system can start later.

A multi-party climate committee set up by the government to formulate a climate policy met Friday but has not yet agreed on how to price carbon, or how to compensate exporting industries, coal miners, electricity generators, or households.

Australia accounts for about 1.5 percent of global carbon emissions, blamed by scientists for global warming, and is one of the developed world's highest per-capital emitters due to a reliance on coal for 80 percent of electricity generation.

Electricity accounts for 36 percent of Australian carbon emissions. Australia has a target to cut emissions by at least five percent below year 2000 levels by 2020.

The AIG report said ongoing uncertainty over the carbon price was a serious hurdle for investment in cleaner combined-cycle gas turbine (CCGT) generators.

"Since there is no clarity about when or how a carbon price will be introduced, it is very hard to get approval for investment in CCGT," the report said.

"These assets need to supply baseload demand to earn a decent return, and their relatively small price premium is enough to make them a too-risky investment if there is no clarity on if or when coal-fired generation capacity will reduce. The result has been an investment drought in the electricity sector."

Climate Change Minister Greg Combet said the report reinforced the need to put a price on pollution.

"Our main game focus, and this is reinforced by the AIG report today, is to get a carbon price into the economy, a market mechanism, because that's going to be the cheapest, fairest, most equitable and efficient away of pricing carbon, cutting pollution, driving investment in clean energy," Combet told Australian television.

The Australian Greens said the report highlighted the need to invest in clean technology and to cut subsidies to the coal industry.

"Part of this process means winding back the billions of dollars in subsidies still going to the fossil fuel sector, and part of it means giving necessary support to new, clean industries to make sure they are ready to take over," said Greens Senator Christine Milne.

(Editing by David Fogarty)

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