Lucky Last: Suddenly, green’s back in fashion

We have lift-off. Business wants a price put on carbon sooner rather than later and a chastened federal government, clinging to power with the aid of the Greens and three far-sighted independents, is getting the message.

The climate naysayers are diminishing and will soon be left behind altogether. There is no dodging the issue. World greenhouse gas emissions need to peak before 2020 and drop quickly thereafter. There is no time to lose, says Paddy Manning in Business Day.

Australia is a crucial player as the 15th largest emitter and a leading exporter of climate change. We are also one of the best-placed economies to shoulder the cost of climate mitigation and adaptation, and make the jump to a zero-emission future. Read More

Paddy Manning in Business Day (18 September 2010):

The need to save our environment is on the political agenda again.

WE HAVE lift-off. Business wants a price put on carbon sooner rather than later and a chastened federal government, clinging to power with the aid of the Greens and three far-sighted independents, is getting the message.

The climate naysayers are diminishing and will soon be left behind altogether. There is no dodging the issue. World greenhouse gas emissions need to peak before 2020 and drop quickly thereafter. There is no time to lose.

Australia is a crucial player as the 15th largest emitter and a leading exporter of climate change. We are also one of the best-placed economies to shoulder the cost of climate mitigation and adaptation, and make the jump to a zero-emission future.

Whatever combination of solutions you choose, we have options galore: abundant gas and uranium, and massive renewable energy resources that are economic to develop, especially wind and solar.

We have one of the world’s biggest retirement savings pools searching for predictable, long-term returns and a crying need for government bonds. Shovelling super into the sharemarket doesn’t cut it any more. If we choose to build genuinely clean energy infrastructure we can fund it, privately or publicly.

In June ANU climate scientist Will Steffen said he was increasingly advising investors who wanted to switch to low-carbon-emitting energy technologies. ”Our private sector sees that if we don’t start moving fast we could easily become a stranded country in a stranded economy … sitting on a big pile of coal no one wants.”

Economist Ross Garnaut, author of Australia’s Climate Change Review, told ABC radio on Thursday he reckoned coal demand would peak before 2020. That’s soon. Australia’s coal rush can’t last and, given rising food insecurity, it would be madness to let the coal industry push further into some of the best farmland in the country.

So, good on BHP’s chief coal miner Marius Kloppers, whose Wednesday speech was well timed to put climate action back on the political agenda.

That does not mean we should do what he says. We shouldn’t. Kloppers’s suggested ”mosaic of initiatives” would, in practice, lower the bar for industry, even below where it was set by the government’s failed carbon pollution reduction scheme.

Kloppers called for not one carbon price, but two: ”A combination of a carbon tax … and limited trading system – for example, for stationary electricity production only – is both easy to implement and effective”.

The combination of a carbon tax on liquid fuels (levied on petrol or diesel wholesalers, for example) and an ETS on the electricity sector and other forms of stationary energy (i.e. industrial use of gas or coal, not for power generation) would cover about 65 per cent of our emissions. But it would exempt trade-exposed emissions-intensive industries such as LNG and coalmining, aluminium smelting and alumina refining – which will account for roughly 20 per cent of the country’s carbon pollution by 2020.

Kloppers proposed a ”trade-friendly” regime that would rebate emissions costs for trade exposed industries in full, to prevent so-called ”carbon leakage” – when heavy polluters move offshore – until there is a global agreement on climate. Critics say this would remove any carbon price signal for exporters. Under the government’s proposed ETS, they would have received free pollution permits – initially equal to 94 per cent of annual emissions (or 66 per cent in the case of the LNG industry), and dropping gradually from there.

Although that high level of compensation was criticised heavily, the free permits at least gave polluters some incentive to reduce emissions. If they did reduce emissions, they could sell their unused permits.

A full cash rebate of emissions costs removes that incentive altogether. One market analyst described the proposal as ”extraordinary”.

The upshot? BHP pays less of any carbon tax, of course.

Whoopee for BHP’s Worsley Alumina refinery in Western Australia, for example, or its export LNG business which includes stakes in the North-West Shelf and Browse Basin joint ventures.

The company argues carbon rebates would be wound down in the transition to a full international agreement on carbon pricing. Maybe so. But the lack of an early price signal for heavy-polluting export industries is inconsistent with Kloppers’s desire for a broad-based system.

There’s a bit of inconsistency going around. While Kloppers is talking up the need for action on climate change, BHP is failing miserably to meet its own greenhouse targets because, according to a source close to the company, its main focus is on ”production, production, production”. In 2006 then chief executive Chip Goodyear said BHP would cut greenhouse gas emissions per unit of production by 6 per cent by 2012. By 2009 they were tracking at 3 per cent above the 2006 baseline. Carbon-based energy use per unit of production was supposed to fall by 13 per cent over the same period. Instead it has risen by 8 per cent. BHP’s report offered no excuse.

But Kloppers has given our post-election climate debate a kick-along this week, as did key players such as AGL Energy’s Michael Fraser and Business Council president Graham Bradley, who said a form of carbon price was ”inevitable”.

Resources and Energy Minister Martin Ferguson told G-Biz business was making a ”strong statement about the need for certainty for the purpose of guaranteeing investment in Australia, especially in electricity generation. More and more, the only section of the community with their heads in the sand are members of the Coalition led by Tony Abbott.”

All aboard.

Source: www.businessday.com.au