Carbon Price Revolt

The Eureka Rebellion of 1854

Today’s AFR reports about the intensifying revolt over carbon pricing. Some of the rebel elements include BlueScope, OneSteel, and of course the the Business Council of Australia (BCA), which represents some of the most caron and energy-intesive business in Australia. 

While BlueScope and OneSteel indicate that they want to be exempt until 70% of world steel makers pay a carbon tax, the BCA brings forth the same arguments that have been rebutted before.

In a letter written to the Prime Minister last Friday, the BCA’s President Graham Bradley raises some “concerns” regarding a price on carbon:

1. Australia “going it alone” – Allegedly, the BCA’s members believe that an Australian climate policy should act “in tandem with international action, not ahead of it,” and that because Australia only accounts for about 1.5% of global GHG emissions, any mitigation effort would have only limited effect.Fact is that Australia is not ahead of international action, but rather trailing far behind, and that Australia’s commitment to reduce emissions has not changed in years (5% below 2000 levels by 2020). Alledged lack of a concerted effort to achieve global agreement appears to be an all to easy and convenient excuse to delay action. After all, 195 parties to the UNFCCC have to agree on a way forward. One country alone is sufficient to make this process a difficult one.

   As for the argument that Australia is responsble for “just” 1.5% of global emissions, one should keep in mind population figures. 1.5% of global emissions are caused by 22.6 million Australians – the current world population is estimated at 6.9 billion (feel free to do the math).

   While total emissions seem insignificant, the pictures changes dramatically when we consider per capita emissions.Only a few countries with the largest total emissions also rank among those with the highest per capita emissions because there is a strong relationship between emissions per capita and income per capita,with wealthier countries having higher emissions per capita due to higher rates of consumption and more energy-intensive lifestyles. Australia has the highest per capita emissions in the world, about 20.8t CO2-e per capita. Followed by the US (19.8t), and Canada (17.8t).  China’s per capita emissions stand at around 4.5t, about just 22% of that in Australia. Australia is a growing country, therefore, reducing growth in per-capita output would have a significant mitigation influence.

   While China, and to a lesser extent India, are major emitters of greenhouse gases, this does not discount the responsibilities for climate change by developed countries. One should not forget that a significant amount of goods produced in China are consumed in developed countries, including Australia, and that Australia supplies China with large amounts of coal for its power plants.

2. Compensation arrangements under the CPRS prposals are insufficient and carbon leakage is looming - Clearly, between 66% and 94.5% of permits allocated for free(!) to emission-intensive, trade-exposed businesses simply is insufficient.Compare this to Phase 3 of the EU ETS, where from 2013 onwards, free allowance indutsry assistance will be based on GHG performance-based benchmarks (10 % best performing installations under the EU ETS). Companies meeting the benchmarks will in principle receive all allowances they need, while  businesses that do not meet the benchmark will have a shortage of allowances and either lower their emissions or acquire additional allowances.

   This enormous disadvantage of insufficient free allocations or exemption clearly means that Australian jobs will move overseas, where it is ok to pollute countries with less stringent environmental and/or climate-related legislation. Especially agriculture will be affected because it is not even covered by the proposed carbon tax.

   In the end, it is clearly more importand to secure jobs before ensuring a biospehere which can sustain our life. After all, all this climate change is just based on some computer-modelling.

3.  Need to maintain the reliability of electricity industry and viability of private sector investment – This is an interesting one because the electricity sector (e.g., Origin) has already stated that the absence of an ETS would put a risk to investment. And what about the Queensland Gas Scheme, the CPRS-based Electricity Sector Enhancement Scheme or the Coal Sector Adjustment Scheme, or even the LRET/SRES scheme? Don’t these provide some guidance in regards to investment? What about NGERS, introduced 2007 by the Howard government, or the EEO Act 2006? Wouldn’t that have given businesses the opportunity to assess the carbon-intensity of hteir operations and allowed them towards reducing the liability under a price-on-carbon-scheme?

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