Emission trading talk julu07 light text

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Information about Emission trading talk julu07 light text
Travel-Nature

Published on March 27, 2008

Author: Alfanso

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Emission trading / Carbon tax or what?:  Emission trading / Carbon tax or what? June 2007 Ben Ewald For Climate Action Newcastle Examining the Prime Ministers Task Group report on Emissions Trading This talk has 2 parts:  This talk has 2 parts Firstly, a description of carbon tax and emissions trading in general. The basic economic levers that could be used to turn the economy around from high carbon to low carbon ways of doing business. Secondly, a look at some of the details of the current commonwealth proposal, and to a lesser extent the states’ proposal. The gasses:  The gasses CO2 1 CH4 Methane 21 N2O Nitrous oxide 310 HFC 23 11,700 HFC 32 650 SF6 23,900 PFCs 100 year warming potentials To Reduce atmospheric CO2::  To Reduce atmospheric CO2: Burn less coal, oil and gas Take CO2 out of the atmosphere Energy efficiency Renewable energy Carbon sinks. Offsets. Carbon tax Emissions trading Price Signal What is a price signal?:  What is a price signal? Jargon for consumers noticing that electricity costs money. Industries noticing that the price is going up. The increased price of electricity automatically makes non carbon generation more profitable. The beautiful thing about this price signal is that it is proportional to CO2 output. Carbon tax:  Carbon tax By regulation, CO2 emitters have to measure and report the amount of CO2 released, and pay a fixed amount of tax on each ton. OR domestically used fossil fuels have a tax imposed that reflects the CO2 they will produce. Raises revenue. Sets the price but not the amount of emissions. Simple to regulate, hard to dodge. Emissions Trading:  Emissions Trading Cap and trade model: By regulation, emitters have to hold a permit for each t of CO2. The country sets an emissions total for the year, and prints that number of permits, each one allowing the holder to emit 1 t of CO2. Permits are auctioned (sensible) or given (foolish) to companies that emit. The cap is tightened each year. Permits can be bought and sold. ETS fine points:  ETS fine points Most schemes allow offsets, eg a certificate from a forester declaring that 1 t of CO2 has been sequestered will be accepted in place of an emissions permit. Some schemes have an escape valve on the price, with a fixed penalty price that is substantially higher than the auction price. This limits the risk from price spikes. Ideally the escape price would be uniform across the globe. International trading of permits or offsets could be possible. Middle men are keen to take their percentage. ETS Grandfathering:  ETS Grandfathering “Grandfathering” refers to granting emissions permits to current emitters. Disadvantages early movers, benefits maximum emitters. Preferred option of generators. Of course As the permits have value, it is in effect a subsidy. Too much grandfathering is a failing of the European trading system. In favour of grandfathering:  In favour of grandfathering If a serious cost was imposed on carbon emissions, some coal fired generators would just not be worth running. “Stranded assets” would result if they were not able to pass on the price increases to consumers. Weep for the poor shareholders. This could result in blackouts / power shortages if alternate energy suppliers are not up to scale in time. BUT I think it is unlikely that generators would be blocked from passing on price rises to consumers, as blackouts are politically unacceptable. scope:  scope An ETS or Carbon Tax can specify the scope of activities that need permits: electricity / heavy industry / transport / domestic gas / air travel / fugitive emissions from mines, landfill, gas transmission, petroleum industry flares. The more inclusive the scheme the better it can cap emissions, but the harder it is to negotiate and administer. 1 ton per person per year is sustainable! (5Gt/planet/yr):  1 ton per person per year is sustainable! (5Gt/planet/yr) Notes for previous graph:  Notes for previous graph The timing of maximum emissions is critical. The sooner we go over the peak and start coming down, the less steep the line has to be. Delaying the peak means that in order to limit atmospheric CO2 to 400ppm change has to be more severe and disruptive. We need a firm 2020 target as well as a 2050 target. More notes on the graph:  More notes on the graph The vertical axis shows 200 million tonnes from stationary energy in Australia. With 21 million people that’s about 10 tonnes per person from that sector alone. A sustainable fair share for every human on the planet allows one tonne per person per year, so there is a long way to go. Social Justice:  Social Justice Domestic energy prices will rise under any effective system. Either a carbon tax or a permit auction system raises revenue, which could be put into schemes to reduce the impact on poorer people. Simplest would be to reduce GST or payroll tax, most effective would be to subsidise energy efficiency retrofits. Part 2:  Part 2 The report of the task group on emissions trading. Prime Ministerial Task group (PMT for short) It has a photo of earth from space on the cover, so is trying to look like an environmental rather than a mining document. ACF on both ETS proposals:  ACF on both ETS proposals The schemes have elements that should be part of an effective ETS. However, neither proposal on its own is enough to avoid dangerous climate change. We can only argue that other countries must reduce their emission to the extent that we are reducing our own. http://www.acfonline.org.au/articles/news.asp?news_id=1258 CANA on ETS:  CANA on ETS Either a good ETS or CT would achieve deep cuts, but a poorly designed ETS would not. Offsets should not be included. They “divert investment and resources” Include Electricity, transport, waste, industrial emissions. Exclude agriculture and land use changes. Full auctioning of permits Annual permits, not permanent property rights. No Aluminium subsidy, but “performance based border tax adjustments for goods exported to countries that do not have a price on emissions” Carbon levy on excluded sectors. My opinion on pmt:  My opinion on pmt Delays. Commonwealth scheme has 2012 start date rather than 2010 in the states’ proposal. The broad scope looks initially good, but may be designed to make the scheme more difficult to implement, eg will put up the price of petrol which is always politically unpopular. Energy intensive and trade exposed = aluminium (+cement + steel) subsidies embedded in the plan. Failure to set a rigid cap shows lack of economic understanding. Permits only have value due to scarcity, and only a mug would pay good money for a permit if there is no rigid cap. My opinion cont:  My opinion cont Task group composition: Several top Bureaucrats, Xstrata, Power generators, company directors (Qantas, ANZ, Esso, NAB, rice, biodiesel, alumina) Missing from the membership: Sustainable generators, Building council, Environment lobby, academic economists. The group represents only one half of the story. Untruths in pmt:  Untruths in pmt “The absence of a pathway for key developing countries to make commitments is a fundamental shortcoming in the Koyoto Protocol, which undermines its suitability as a model for future cooperation” Ch 4, p51 BUT developing countries can participate in CDM, and they could be brought into the next commitment period. See CANA beginners guide to KP. http://www.cana.net.au/kyoto/ This is a continuation of Australia’s shameful attempts to undermine the only serious international agreement. Lies contd:  Lies contd Untruths: On p 8 of the executive summary “Australia already has an emissions cap that is applicable until 2012” referring to the vague intention to limit Australia’s GHG to 108% of 1990 levels. This however is unenforceable and there is currently no barrier to any industry that chooses to increase emissions that would break the cap. PMT finds against current policy::  PMT finds against current policy: P 9 “Favoring certain lower emissions technologies over others places a higher cost on the economy and, consequently, unnecessarily lowers Australian living standards. (See Chapter 3.)” this directly contradicts the federal governments huge support of “clean coal” Aluminium Lobby success:  Aluminium Lobby success P12 “ameliorates, through free allocation, the carbon-related exposures of existing and new investments in trade-exposed, emissions-intensive industries” This suggests that Australia will be available to international corporations as a place they can set up new high CO2 industries and be subsidised to avoid carbon costs! P194 Appendix L Even suggests that energy intensive industries would be eligible for compensation for losses at the end of the period during which they receive public subsidy of free permits! AND that the Australian cap should be increased if new industries come to Australia! This shows that the report has been hijacked by the Aluminium industry. PMT on offsets:  PMT on offsets P12 Recognises a wide range of “credible offsets”. Weak regulation or dubious offsets will lower the value of emissions permits, making it possible to continue to pollute and just buy offsets that may have no ecological value. AP6:  AP6 Asia-Pacific Partnership on Clean Development and Climate: Aust, China, India,Japan, S Korea, US. No targets. No timetable No credibility BUT is promoted in PMT as where Australia should put its efforts. Summary opinion:  Summary opinion The PMT proposal protects some of Australia’s highest emitters from the effects of a carbon price signal. The wide range of offsets proposed may include offsets of no environmental benefit. The proposal lacks the required urgency. Citizens must watch the process closely or we will be sold an ETS that does no good. Extra bits:  Extra bits The following slides include some related issues: “Baseline and Credit” schemes. How environmentally sound are the available carbon offset schemes? (There are 17 retail carbon offset schemes available in NSW) Baseline and Credit:  Baseline and Credit These schemes estimate emissions under Business As Usual then give credit for changes that should reduce these. The baseline is subject to gaming. What is “best practice”? How long does the credit last? Baseline and credit gaming example:  Baseline and credit gaming example If you replace an electric hot water system with a solar system you get a subsidy through “renewable energy certificates”. If you replace a solar system with a new solar system you don’t get the subsidy, unless you temporarily install an electric system in between! Koyoto Protocol basics:  Koyoto Protocol basics The United Nations Framework Convention on Climate Change 1994 (UNFCC) is the parent treaty for the KP. Ratified by 165 countries, 35 +EU have targets. “legally binding” but its unclear what the penalty for missing the target is. First commitment period 08-12 Koyoto “flexibility mechanisms”:  Koyoto “flexibility mechanisms” Clean Development Mechanism CDM, allows countries with targets to implement CO2 reduction projects in other signatory countries, and collect “certified reductions” Joint Implementation, allows the same thing between annex I countries, ie countries with targets. Emissions trading, allows the purchase of reduction certificates. Start date Jan 05. Total Environment Centre report on offsets industry:  Total Environment Centre report on offsets industry ‘Telling people to plant trees (to address climate change) is like telling them to drink more water to keep down rising sea levels.’ A recent study by the Queensland Tourism Industry Council surveyed 10 carbon offset products and found that the level of emissions that each provider deemed to be associated with a flight from Australia to Europe varied from 3.5 to 11.5 tonnes. Price $43 to $230! http://www.tec.org.au/dev/index.php?option=com_content&task=view&id=563&Itemid=328 Offsets:  Offsets ‘In terms of other effects of offsetting, some commentators have suggested that the practice allows prosperous Western nations to continue to enjoy carbon-intensive lifestyles at little extra cost while the most immediate effects of unabated climate change will be experienced in the poorer countries of the world.’ “Selling absolutions”

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