Emission scheme to shield the poor


Sid Marris
May 28, 2007
A CARBON emissions trading system would generate billions of dollars in revenue that could be used to compensate low-income earners and industry for the higher price of electricity.
Reducing emissions by 60 to 90 per cent by 2050 would involve short-term pain but the costs over the longer term would be even greater if Australia adopted a cautious approach, according to economic modelling done for the Climate Institute.
The modelling, to be released today, comes as all eight Labor premiers and chief ministers signed an open letter to John Howard ahead of his emissions trading taskforce reporting on Thursday. They reminded the Prime Minister that their governments had already committed to a national emissions trading scheme by 2010.
"We see such a scheme as an indispensable step in tackling climate change and ensuring Australia reduces its greenhouse gas emissions at least cost," the letter said. "Any scheme must have an environmentally credible, long-term target for emissions reduction, helping to ensure investment certainty while also including measures to protect our energy-intensive, trade-exposed industries."
They also called for renewable energy targets and research and development of clean coal and renewable energy technologies.
The Climate Institute modelling presumes nuclear power could replace up to 20 per cent of coal-fired electricity generation by 2050 although the institute believes in principle other costs such as waste and proliferation risk outweighing the benefits.
Gas, typically a lower emitter of carbon, played a bigger part in the modelling of future electricity production done by consultants McLennan Magasanik Associates.
Institute research director Erwin Jackson said the modelling presumed Australia reduced its emissions at a similar rate to bigger industrialised countries, even though it accounts for 1.5 per cent of global emissions. He cited the promise by Japan to reduce its emissions by 50 per cent.
In his weekly radio address, Mr Howard said yesterday the "dark cloud" on the economic horizon was the potential mismanagement of Australia's response to climate change. "If we overreact, the economy will be damaged and jobs lost. Equally, we must maintain a strong response so that Australia can play her part in the worldwide effort to reduce greenhouse gas emissions," he said.
"It is fundamental to any response both here and elsewhere that a price be set for carbon emissions."
The report says a cautious model, which may be adopted by the Howard Government's task group report due on Thursday, would impose a carbon price of about $10 a tonne and reduce emissions by 8 per cent by 2050.
The economic effects, though, while moderate in the next decade, would be much harsher towards the middle of the century.
Wholesale electricity prices would rise only 22 per cent in the decade to 2020. However, to keep reducing emissions would require prices to grow more rapidly later on, up 128 per cent by 2040.
However, under the best combination of a full emissions market, renewable energy programs and efficiency savings, the rise in the decade to 2020 would be 65per cent, but by 2040 it would be 90 per cent higher.