Prime Minister Julia Gillard outlined a two-stage plan in February for a carbon price mechanism that will start with a fixed price period for three to five years before transitioning to an emissions trading scheme.
The Government has proposed the carbon price commence on 1 July, 2012, subject to the ability to negotiate agreement with a majority in both houses of Parliament and pass legislation this year.
Ms Gillard said industry “is crying out for certainty” during question time in March, but her plan faces growing community concern about the impact of the tax on food, electricity and petrol prices. Liberal Opposition Leader Tony Abbott vowed to fight the scheme “every second of every minute of every day of every week of every month”.
Climate Change Minister Greg Combet flagged a separate approach for the energy sector under an eventual emissions trading scheme, according to AAP in early March.
“The government will be engaging with the major players in the energy sector in coming weeks… to discuss the way in which that sector will be treated,” Mr Combet told reporters.
He added that the government was considering applying an “emissions intensity approach” to electricity.
Without going into detail, Mr Combet said this would require reviewing wholesale electricity prices and considering whether to apply a different kind of emissions trading scheme to electricity.
“This is essentially a way of trying to… achieve the emissions reductions that we’re seeking but looking at dealing with the issue… a little bit differently than a straightforward cap-and-trade scheme,” Mr Combet said.
Opposition leader Tony Abbott said in February, “there will be a people’s revolt against this carbon tax”. Mr Abbott said the tax would destroy 16 coal mines and 126,000 jobs and would see “increases in price cascade right through the economy”, according to the Courier Mail.
The federal Coalition’s pledge to kill the government’s carbon tax if it gets into power is “irresponsible and putting business offside”, according to the Australian Greens.
“That provides a huge level of uncertainty and threatens investment,” Greens Senator, Christine Milne said.
Industry and businesses have reacted negatively to the announcement, but Origin welcomed the proposal’s announcement.
“The sooner we start the transition toward a lower emission economy, the smoother and lower cost that transition will be,” Origin stated in February.
“We look forward to working with government on key issues such as the transition from the fixed to a floating price, the level of the fixed price itself and the mechanisms for supporting those electricity customers who experience difficulty paying their electricity bills.”
A national emissions trading scheme based on scientifically established reduction targets is the most comprehensive way to tackle the challenge of bringing down Australia’s emission, the Sustainable Energy Association of Australia (SEA) stated in February.
SEA chief executive, Professor Ray Wills said the proposed start date, coverage of all major and fast-growing sources of pollution and a system based on actually limiting pollution are “necessary elements in delivering an effective carbon pricing mechanism offering certainty to business”.
Research by Datamonitor revealed that a lack of legislative clarity in Australia is holding the country back from realising its potential in renewable energy and other low carbon industries, according to the Clean Energy Council. Sydney-based Datamonitor analyst Sarah Chambers believes the $2.8 billion of cuts to schemes such as the Green Car Innovation Fund and Green Start Fund will exacerbate the situation.
Australia’s emissions will rise steeply without decisive and effective new policy action, according to annual emissions projections released by the Minister for Climate Change and Energy Efficiency, Greg Combet in February.
The Department of Climate Change and Energy Efficiency report, Australia’s Emissions Projections, takes a detailed account of more than 30 policies and measures to assess the contribution of existing policies to reducing Australia’s carbon pollution. It predicts that without further action, emissions will continue to rise.
In the absence of further policy action, strong growth in emissions is projected between now and 2020.
“This is primarily the result of strong demand for Australia’s energy exports, in particular, coal and liquefied natural gas. Emissions are projected to reach 690 Mt CO2-e in 2020, or 24 per cent above 2000 levels,” the report states.
The report takes into account the Renewable Energy Target and measures which are part of the National Strategy on Energy Efficiency. The report does not include the impact of a carbon price or the Carbon Farming Initiative.
The level of projected emissions in 2020 represents the starting point for Australia’s “abatement challenge”: the amount of abatement required from additional policies to achieve our national emissions targets in 2020.
Based on these projections, Australia requires additional abatement of between 160 Mt CO2-e and 272 Mt CO2-e in 2020, depending on the target.
The Energy Retailers Association of Australia (ERAA) said a carbon price of $25 a tonne would add between $175 and $275 to the average household’s annual electricity bill, if no changes are made to reduce energy consumption, according to AAP.
ERAA chairman, James Myatt said one megawatt of electricity generated from coal results in one tonne of carbon emissions, a calculation that can be applied to electricity bills.
“It would pretty much be a straight one-for-one correlation for coal-fired power plants,” Mr Myatt told AAP.
“It is basically one tonne of carbon for one megawatt of electricity.
“If an average residential consumer uses about seven megawatts a year,” Mr Myatt said, “for a price of $25 a tonne, it would be seven (MWh) multiplied by $25.”
Mr Myatt, who is also chief executive of Queensland-based Australian Power and Gas, said the carbon price proposed by Julia Gillard will have a greater impact on business, where volumes are larger.
“There is no question it will have a significant impact on people who use electricity to run their business,” Mr Myatt said.
Prices already on the rise
The Energy Users Association of Australia said the carbon price announcement had already increased electricity prices.
“Whilst we generally welcome the indications of intended directions on a carbon price, following the announcement the price of electricity futures for the second half of 2012 has unfortunately increased by up to $5/megawatt hour (MWh) and by an average of around $2.50/MWh,” EUAA executive director, Roman Domanski said.
“The forward wholesale price of electricity has increased by between $4/MWh and $2/MWh.
“Electricity contracts taken up by consumers could also be impacted by these price increases as could regulated retail electricity prices for households and small businesses when these are next adjusted.”
“Whilst the announcement has no information about the actual carbon price, merely that there will be one by the middle of next year, consumers will start paying before then it seems.”
Mr Domanski also noted that electricity bills in all states have already risen sharply over the past few years and that further increases, for whatever reason, were most unwelcome.
Building climate consensus
The Minister for Climate Change and Energy Efficiency, Greg Combet announced the establishment of an independent Climate Commission in February, appointing Professor Tim Flannery (pictured) as chief commissioner.
Mr Combet said the Climate Commission would provide expert advice and information on climate change to the Australian community.
“The Climate Commission has been established by the Gillard Government to provide an authoritative, independent source of information for all Australians,” he said.
“It will provide expert advice on climate change science and impacts, and international action. It will help build the consensus required to move to a clean energy future.”
The Climate Commission would have a public outreach role, he said, to help build greater understanding and consensus about reducing Australia’s carbon pollution.
“The Commissioners are eminent Australians who are leaders in their fields and I’m pleased one of Australia’s leading science communicators, Professor Tim Flannery, a former Australian of the Year, has accepted the role of chief commissioner,” Mr Combet said.
“The Climate Commission will fulfil a key information and education role, enabling the Australian community to have a more informed conversation about climate change. I am delighted to lead this new Commission,” said Professor Tim Flannery.
The Climate Commission will be supported by a Science Advisory Panel, with leading scientists offering further expert advice on the science of climate change and its impacts.
Flood package brings solar ‘back to life’
Action on sustainable energy has been “saved from the floods” following Prime Minister Julia Gillards’ deal with the Greens in February, according to the Sustainable Energy Association of Australia (SEA).
“While the resuscitation of the body of funding to solar flagships is absolutely welcome, the need to do more, not less, on renewable energy has not been recognised,” SEA chief executive Professor Ray Wills said.
Ms Gillard originally announced reductions to funding to renewable energy initiatives such as the Solar Flagships Program, the Renewable Energy Bonus Scheme – which supports solar hot water systems – and the Solar Homes and Communities Plan in January. As part of its February deal with the Greens, the Government agreed to restore $100 million of the $250 million trimmed from a Solar Flagships program, which subsidises large solar energy projects.
When the original solar cuts were announced, the Clean Energy Council said it “makes no sense to fund the clean-up of the worst floods in Australia’s history by cutting investment in climate change solutions”.
Clean Energy Council chief executive, Matthew Warren said the Gillard Government was in danger of losing its way on delivering an effective climate change strategy for Australia by assuming a carbon price will be the “silver bullet” to address the problem.
“The reality is that climatic events like the recent floods are likely to become more severe and frequent with the impacts of climate change,” Mr Warren said.
“Cutting funding for clean energy projects that will ultimately mitigate this impact is as bizarre as it is counterproductive,” he said.