Wednesday, October 20, 2010

Climate study: Australia falling behind in indirect carbon pricing

A report commissioned by the Climate Institute has analysed the indirect carbon price in the electricity generation sectors of six countries: Australia, UK, USA, China, Japan and South Korea, with Australia languishing at the bottom just ahead of South Korea.

"A direct and broad based price tag on pollution is required if Australia is to meet its targets at lowest short and long-term cost. However, it is also critical to ensure that our international competitiveness is not lost to other countries gaining early mover advantages in clean energy investment and reducing their economies' dependence on pollution," said Mr Erwin Jackson, Deputy CEO of the Climate Institute.

"Countries such as India are already taxing imports of pollution intensive products like coal. Putting a price tag on pollution is also insurance against possible trade measures aimed at highly polluting exports." said Mr Jackson.

The comparative study shows that national broad energy policies are having an implicit effect on carbon emissions reduction and carbon pricing, even without primary mechanisms such as an Emissions Trading Scheme or carbon tax in five of the six countries.

"More and more competitors are putting a price tag on pollution to boost clean energy competitiveness," said Erwin Jackson. "There is no risk of Australia leading the world in making businesses responsible for the pollution they cause - we have already been overtaken by competitors including the UK, China and the USA."

Country rankings of implied carbon price in the electricity sector shows that Australia is the second lowest of the 7 regions studied:

* UK: US$29.30
* China: US$14.20
* North East USA: US$9.50; USA overall US$5.10
* Japan: US$3.10
* Australia: US$1.70
* South Korea: US$0.70

Highlighting reasons why the UK is leading this comparison, Erwin Jackson said "The UK is reaping the benefits of its policies to price pollution, in addition to its participation in the European Emissions Trading Scheme, and has an equivalent price tag around 17 times that of Australia's. Investment in clean energy in the UK reached around US$ 11 billion in 2009 and captured around 17 per cent of the market in the countries studied,"

"The UK's low pollution economy now compares to its healthcare and construction sectors. Over 900,000 people are now employed in the UK in low pollution businesses and jobs in these sectors have been growing strongly despite the UK's economic downturn." said Mr Jackson.

"China's policies to meet its targets and dominate the global clean energy race imply a price tag on pollution over eight times higher than that of Australia's. In 2009, clean energy investment in China reached US$35 billion compared with US$18 billion in the USA and less than $US1 billion in Australia."

At the report launch in Sydney on Tuesday 19 October, KPMG's partner in charge of Sustainability, Climate Change & Water, Jennifer Westacott, said: "The lack of a robust carbon price was hampering Australian business' ability to compete and attract investment, despite a global increase in the clean energy sector."

"The question is no longer 'should we have a price on carbon?', but 'how comprehensive should it be? 'and 'how do we transition key sectors based on technological readiness, competitiveness and the pace of global negotiations?'." said Westacott.

The report notes that "there are few policies which apply specifically to the coal sector, despite the fact that coal generation has the largest share of any fuel in all the countries in this report, and that coal has a higher emissions intensity than almost all other generation sources Those policies that do relate to the coal sector, such as the mandating of certain types of technology in China, tend to have a larger impact than policies which relate only to a small share of production, such as solar feed-in tariffs".

Erwin Jackson, Deputy CEO of The Climate Institute, discusses the implications of this report on Australia in this video:

The study, commissioned by the Climate Institute of Australia, was done by Vivid Economics. The report's key author, Dr. Cameron Hepburn of Vivid Economics summarises the findings of this study in this video:.

* Climate Institute media release - Driving Competitiveness in the Clean Energy Economy

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