Red faces as the state's green scheme hits wall


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Wendy Frew and Marian WilkinsonSeptember 11, 2007
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NSW'S flagship scheme to cut greenhouse gas pollution is on the verge of collapse, putting jobs and millions of green investment dollars at risk and killing the incentive for householders to cut soaring electricity consumption.
A plunge in the state's carbon price - caused by an oversupplied market colliding with investor uncertainty - is crippling the Greenhouse Gas Abatement Scheme. As big energy companies stop buying emission savings, the green-friendly companies that sell them are finding their cashflow drying up.
Blame for the crisis has been sheeted home to the NSW and federal governments. Critics say the State Government has made it too easy for polluters to participate in the market and that the Federal Government has created long-term uncertainty about climate change policy.
Paul Gilding, the head of the high-profile energy saving company Easy Being Green, told the Herald yesterday the scheme was in crisis and that the survival of his company was on the line.
"Easy Being Green is absolutely at risk of ceasing to exist in NSW if the price stays where it is," he said. "It means the end of operations in this state and the end of 140 permanent jobs and 100 full-time contractors."
The revelation of the crisis is an embarrassment for the NSW Government, which will release the Owen report this morning, recommending the sale of the state's electricity retailers and generators.
Under the scheme - the first of its kind in Australia - power plants, forestry groups and energy efficiency companies that act to cut greenhouse gas emissions are awarded certificates, each one representing the equivalent of one tonne of carbon dioxide avoided.
They sell these certificates to energy retailers, which have to meet mandatory emissions targets set by the State Government. The costs are passed on to electricity consumers.
The certificates generated since 2003 are estimated to be worth about $450 million. But over the past few months a series of federal and state policy announcements has sent the market into a spin. The price of carbon
has plummeted 50 per cent, from $12 a tonne of carbon dioxide mid-year to just over $6 yesterday.
Doubts were raised about how a state scheme would merge with any national emissions trading scheme when the Prime Minister, John Howard, released his emissions trading report in May.
The NSW carbon price, already languishing around $11 a tonne, fell further in July when Mr Howard appeared to exclude demand management and energy efficiency abatement from the scheme. At $6, it is no longer economical for companies such as Easy Being Green, Neco and Fieldforce to install light bulbs, low-flow showerheads and other energy-saving devices into homes free or at heavily discounted prices.

Mr Gilding said the scheme's most cost-effective and efficient way of cutting greenhouse gas pollution would disappear. "That will be a tragedy," he said. "This is the scheme that is cutting greenhouse gas pollution at the mass consumer level."
The NSW Government has been accused by some market participants and green groups of contributing to the collapse by making it too easy to generate certificates that did not represent genuine greenhouse gas cuts. The NSW Minister for Climate Change, Environment and Water, Phil Koperberg, declined a request for an interview. A spokeswoman for him blamed the Federal Government for the market crash.
The State Government has formed a taskforce to investigate the price collapse.
The head of the NSW advisory panel on climate change, Martijn Wilder, from the law firm Baker & McKenzie, said he believed a number of energy efficiency companies in the market were "on the edge". He said there were two simple factors: the oversupply of certificates and the uncertainty in the market since the Federal Government announced its carbon trading scheme.
Fieldforce's managing director, Craig Bathie, said if the price of carbon remained at $6, more than half of NSW householders would miss out on free or discounted energy installations, and his company might have to lay off a couple of hundred employees in rural areas.
Neco's carbon services director, Ben O'Callaghan, said his company might have to close its regional Carbon Services Division, and 60 jobs in 10 regional locations would be lost.