New Year's resolution: deliver on energy

Opinion by Anthony Cox
Secretary of The Climate Sceptics

PM Gillard has declared 2011 the Year of Delivery with a carbon tax being a prominent part of the C.O.D. parcel. A carbon tax involves putting a price on carbon so it can be traded. Experiences in Europe and the US, the world’s biggest markets for carbon trading, show the difficulties in pricing carbon.
The European example is a textbook example of how a ridiculously complex scheme can be easily rorted. Each nation within the European Union (EU) has a National Allocation Plan (NAP). These plans are mandated by Brussels European Unit Allowances (EUA’s) – carbon credits – which are allocated to physical installations within the Member State’s NAP.
 One scam which the EU has had to deal with has been the deliberate production of greenhouse gases for which the fraudulent producers are paid to destroy. Another scam involved companies buying EUA’s in countries that did not have a consumption tax (GST or VAT), and then selling them again in countries that did have a consumption tax. The trades were all set up and executed electronically so the traders could make off with the consumption tax money before the tax authorities were aware of what was happening. The EU fixed that by zero rating EUA’s. That’s right; the solution to the criminal activity was to make the carbon credit worthless.
 In the US carbon trading was conducted through the Chicago Climate Exchange [CCX]. The CCX has ceased operation with the last trades of carbon at a US price of 5 cents, essentially worthless.
The upshot is, whether by government response to inherent defects and criminal opportunism or by pure market determination, the value of carbon has been found to be nothing.
So how will Australia fare under a carbon priced economy? Not very well if the experience of Australian participants in the CCX is anything to go by. The city of Melbourne and AGL Hydro Partnership both invested in carbon at the CCX when it was at dollar prices.
The closest Australia has come to a carbon pricing and trading scheme is the NSW Greenhouse Gas Reduction Scheme [GGAS] which was introduced in 2003 and became the Electricity Savings Scheme [ESS] in July 2009. The GGAS was a “Baseline and Credit” scheme whereby electricity suppliers could earn certificates of compliance by not producing electricity above a designated generation base with fossil fuels or, if they did, by abatement through offsets and investment in alternative energy or sequestration. These certificates of compliance represent the standard 1 tonne of carbon dioxide [CO2] and can be surrendered to the authority or traded. The average spot price under GGAS was $4.34 and under EES $16.98. Both of these figures are much less than suggested prices for carbon of at least $30 per tonne under any Federal scheme.
One consequence of this limited trading under GGAS was the $2 billion blow-out in the solar panel scheme. This blow-out represents only the initial and current costs of subsidization of the solar panels which can be up to 50% of the cost and the inflated feed-in tariff of 60 cents, now reduced to 20, which was 10 times the cost of fossil power. It does not include future costs such as inverter replacement which is typically insured against the installer and indemnified by the government. Inverters cost up to $3000 at today’s prices and are replaced at least once in a panel array’s 20 year life.
Nor does this cost include the fact that the feed-in-power from the panels is a minute part of the total power used by the grid; most of the time there is no power coming from the panels at all and the return on the infrastructure is negligible. In effect the feed-in tariff is money for nothing.
The GGAS, like all carbon trading schemes, was designed to reduce emissions and the supposed effect of man-made global warming [AGW] and to make alternative [to fossil] energy sources competitive. However a new carbon trading scheme is planned for the residents of Norfolk Island. This scheme suggests an additional motive apart from combating AGW.
The Norfolk Island scheme is being funded by the Federal government and run by Southern Cross University [SCU]. Organiser of the scheme, SCU professor Garry Egger saysthe main goals of the project were to test the effectiveness of a Personal Carbon Trading scheme over a three year period; reduce per capita carbon emissions and reduce obesity and obesity related behaviours…”
This is straight out of the Clive Hamilton handbook for a non-consumerism based existence. Professor Egger’s step plan to a frugal and slimmer self has already been looked at in England by the UK Environmental Agency. The Agency’s chairman, Lord Smith, has proposed that:
Individuals would then periodically receive statements that show the carbon impact of each purchase and how much of their annual ration has been used up. If they exceeded this ration, they would need to buy extra credits from those people that have not used their full allowance, in a similar fashion to existing emission cap-and-trade schemes.
Elsewhere in England Professor Kevin Anderson, Director of the Tyndall Centre for Climate Change Research, asserts that ”the only way to reduce global emissions enough, while allowing the poor nations to continue to grow, is to halt economic growth in the rich world over the next twenty years.”
And most succinctly IPCC official, Ottmar Edenhofer, says that climate policies to deal with AGW are in fact not about the environment but about redistributing the wealth from Western to third world nations.
So, is carbon trading not about solving AGW and instead merely the hand-maiden of wealth redistribution and the transition of Western consumer society into a more Spartan form? The answer to that is fundamentally determined by what alternative energy sources are being supported by the carbon price.
In recent research professor Barry Brook and his team looked at the comparative cost of the various renewable energies such as wind, various permutations of solar, geothermal and gas. On a purely financial comparison, without taking into account base load capability, the only viable alternative to fossil fuels is nuclear power. Brook found the carbon price necessary for solar thermal is $150 per tonne and for wind $350. Given the relative costs of all other alternative energies any carbon pricing sufficient to make them competitive with fossil fuels would also reduce Western society to the standard described and advocated by the likes of Anderson and Edenhofer.
So the choice is clear for Gillard’s year of delivery; introduce a carbon price sufficient to support the renewable energy forms such as wind and solar which are the darlings of the AGW bien peasantry and produce a drastically reduced lifestyle for Australia. Or introduce nuclear power with a much cheaper carbon price and sustain current living standards.