Industry twigs to Dr No’s carbon meltdown

Careful what you wish for. Tony Abbott’s fanatical resistance to a carbon price cops more flack today from the power industry and it’s looking pretty ridiculous on a number of fronts. The first is the investment uncertainty generated by Dr No. From the AFR:

National Generators Forum executive director Tim Reardon said…“It is not helpful to the industry to continually open up the possibility of changes to existing programs that are aimed at transitioning to a carbon-constrained economy,” Mr Reardon said.

“This only adds to the uncertainty that investors face. We will work with the government of the day to develop effective policies to achieve least-cost emissions abatement and this includes recognition of the impact on investors.”

That’s self-explanatory. Next up, nobody knows what “Direct Action” actually is (except that it’s real muscular):

Under Direct Action, it is proposed that companies will be able to sell abatement to the government if they can reduce emissions below “business as usual” levels. Businesses that undertake activity with emissions above their “business as usual” levels will incur financial penalties.

Energy Supply Association of Australia chief executive Matthew Warren said it was not clear how the baseline would be set under Direct Action. Any new scheme would have different financial effects on companies, depending on how it was calculated, he said.

…Mr Hunt said organisations would be given maximum input into the setting of baselines as part of a white paper process after the election.

Hmmm, so we’re going to fix a carbon price scheme that has already been debauched by industry compensation via “maximum input” from industry, further entrenching interests in the policy process and ensuring the slowest possible progress.

As well, following the required double dissolution election, we’ll require a fully consultative White Paper, with all of the interests again mounting their caravan to the Department of Redundancy Department in Canberra, again. Even then, the likely outcome is that the White Paper won’t make baseline prices transparent and a handful of bureaucrats will throw a dart to decide who wins and who loses, instead of a single and objective price set by the market.

But let’s assume these various issues are not so inefficient and contemplate who the likely winners and losers will be. Because the Coalition has committed to not clawing back any of the compensation already paid under Labor’s carbon price, presumably to avoid any political blow back from said industry, the winners will be the biggest polluters. Carbon gushers like Victoria’s LaTrobe Valley brown coal power stations, will be “unfairly advantaged” versus cleaner producers. Meanwhile, any alternative energy industries that would have been firing up investment as carbon is generally priced, will instead be winding down investment and shipping the IP to Germany. Auf Wiedersehen!

Finally, there is the question of why we are bothering. Will muscular Direct Action deliver change at a better price? From Grant King, CEO of Origin:

“the cost of abatement under Direct Action ought to produce a lesser cost outcome for any alternative for which it substitutes.

“If the alternative choice was to buy that same amount of credits or reduction units from the EU system, then that would tell you at what price it was worth paying to do that,” Mr King said.

Given the above problems, the answer is pretty obvious.

An emissions trading scheme is my favoured approach to addressing climate change because of the global efficiencies it presents. But if you have issues with it, a straight carbon tax works just as well. The point is, carbon needs to be priced now if climate change is to be addressed via private markets.

If it’s not done soon then climate change will destroy the current system as polities panic and radicalise. This may seem far away but it can be counted in decades not centuries. As a supposed ‘liberal’ in this context, Tony Abbott’s carbon policies make sense only as a fig leaf for climate change skepticism or as short term political maneuver. Given the magnitude of the challenge either is reprehensible.

Comments

    • Yes it’s not easily reversible and stabilisation is now the target and even that is fading fast.

    • I dunno. There are several reports of highly efficient desalination membranes using carbon nanomaterials.

      With that, and of course some energy intensive construction of enormous irrigation schemes and pumping, it is entirely possible to irrigate this vast country.

      Even if we only manage to grow grasses for a decade, there will be a very measurable carbon-sinking effect – assuming the dead-grasses are allowed to give their carbon to the topsoil.

  1. For some reason a big multinational (often foreign owned) electricity company trying to tell me that something is a good idea just makes me nervous.

    • Especially when there is abundant evidence (linked to previously on this blog) that both Big Oil and Big Finance .. not to mention smaller fraudsters galore .. luuuurrrrv the myriad profit-making opportunities that pricing CO2 represents.

      • +1 I can confirm there was definitely consulting industry pressure to bring this into existence . The underlying belief is that there is serious money to be made working the system here.

      • This is why I think the fee and dividend scheme supported by James Hansen among others makes sense.

        Collect a carbon tax and distribute all revenue received on a per capita basis.

        It has the side benefit of being a reasonably progressive transfer as the richer sections of the community tend to have more carbon intense lifestyles.

      • Fee and dividend makes a lot of sense, but like any price on carbon, its politically impossible in this country.

      • @ Lorax – given that australian emissions are globally the equivalent of me pissing in the ocean. Then i suggest a better way might be to just sell less coal and use it ourselves to improve our own standard of living.

      • Exactly aj. It is all just another financialisation to be gamed. I read recently that it is estimated the Al Gore via his various green consultancies has amassed a fortune of some $35m. Little wonder he continues to spruik danger and yet buy waterfront properties .

    • These were the same companies lobbying against a carbon price previously mind you. But I am sure you didn’t trust them then either.

  2. Why would a climate denier like Tony Abbott ‘introduce’ any alternative carbon policy?

    Any Dr No carbon policy is in fact conceding defeat on the point!

  3. Mr Holes,

    While I agree with everything you say from an economic perspective, politically any kind of price on carbon is a dead duck. Any politician in this country who proposes a price on carbon may as well paint a target on their head with a sign reading “shoot me now”.

    Once the carbon tax is gone — and I believe it will go, if not in the next Parliament, the one after — it will be politically impossible to reintroduce.

    The only way forward are more economically expensive, but politically palatable, alternatives such as regulation, subsidies and incentives. This probably means policies like raising the MRET, direct government investment in low emissions generation capacity, subsidising the cost of energy efficient vehicles and appliances, more subsidies for domestic solar, insulation etc and of course, lots of solar panels on schools. Essentially, all the things the Howard government did in the mid-2000s to hold off introducing an ETS.

    All of this will be much more expensive and much less effective, but at least a government introducing such policies is electable.

  4. As a suggestion, and this applies to yesterday’s article pic of the Gillard/Hansen photoshop item, would it be possible to simply refer to these 2 as Gillard and Abbott – sans the pictorial and headline ridicule? Seriously, this is all looking somewhat childish.

  5. I thought this was an economics and business website, I’m getting a bit sick of the posturing on greenie issues and pollies popularity.

    • The environment and economy are intimately, intimately connected.

      Even the words “economy” and “ecology” come from the same root word.

    • And pricing carbon via direct action as opposed to a market mechanism is a very uneconomic way of doing things … hence the article

  6. “AMP Capital chief economist Dr Shane Oliver said the carbon tax was contributing to the demise of firms across the economy.”

    “For companies which have exposure to energy, and other factors which are affected by the carbon tax in a significant way, the carbon tax and the costs related to it are having a significant impact on the ability of these companies to continue,” Mr Gammel said.”

    “Australian Chamber of Commerce and Industry chief economist Greg Evans said: “Rapidly escalating energy prices caused by the carbon tax and other green programs are taking their toll on many Australian businesses.”

    “It defies logic to adopt a policy which even the Treasury acknowledge will lower our standard of living and be harmful to national productivity”

    http://www.dailytelegraph.com.au/business/companies/australian-securities-investments-commission-reports-record-company-closures-many-blame-carbon-tax/story-fndfr3g3-1226599283585

    • Er, you are quoting the Telaliegraph.

      Hardly a compelling citation.

      For all we know Dr Shane Oliver may have said: “.. the carbon tax was NOT contributing to the demise of firms across the economy.” The Telly is not particular about such minutiae as accuracy.

      He may well have said what you quoted, but please, how about a reference that does not have us erupting in howls of derisive laughter?

    • The point is that NOT arresting climate change will generate cataclysmic economic and social losses (and actually is already starting to generating these). Of course, there will be costs from reducing the carbon-intensity of the economy as well. This is inevitable. The simple questions are which set of losses will be the greater, and how can they be mitigated.

      So far, the losers from adaptation are politically and economically concentrated and therefore relatively powerful, whereas the losers from non-adaptation are diffuse, numerous and fragmented. As well, the potential gainers from adaptation include a host of players who are either not present (because they are yet to be born) or have no voice (because they live in other jurisdictions). So this is a very difficult issue to resolve.

      I think it appears likely it will not be resolved at all until we start to experience profound damage to global agriculture on a scale that brings about widespread, endemic famine.

      In the past, famines have prompted all kinds of chaos. The revolutions in France and Russia had their origins in famines. The revolts in MENA in recent years also owe a lot to food shortages and inflation.

      It is reasonable to suppose this all lies ahead for our populations. There will be self-serving resistance, rehearsed denial and cost shifting, political opportunism and voter cynicism…and one day we will find that agriculture, fisheries and forestry will descend into irretrievable collapse.

      At this point, people will do something. Until then, we will argue among ourselves and achieve next to nothing.

  7. Carbon Price is a category 5 storm in a tea cup. The Daily Tele piece yesterday only added to that storm and was mostly nonsense.

    So lets see. GDP remains at trend, unemployment unchanged, jobs growth remains (although slightly weaker but that was going on pre carbon price), inflation and cost of living pressures are just about non-existent.

    Revenue from the carbon price is about a fifth of the GST and only around 2% of total revenue to let’s all take cold shower on this one! Don’t forget the compensation package means that most people are better off and business is indirectly compensated by the household package or directly. The direct assistance often means business actually makes a profit out of the carbon price – this is why industry is generally not complaining too much. Usually when you take even 2 cents off business they scream like little piggies.

    We have seen a healthy drop in emmissions since the carbon price so it appears to be doing what it’s supposed to do. Yes. It is possible to put up the price of a commodity via taxes and then compensate and have an impact – fairly simple economics!

    • “We have seen a healthy drop in emmissions since the carbon price…”

      Naturally. As more energy intensive businesses close down, we will achieve even great emission reductions. And of course the carbon tax provides prohibition to new energy intensive businesses from starting up, no messy manufacturing processes to be concerned with, good gosh, even greater emissions reduction.

      And yes, we’re all better off. Except those in energy intensive sectors that close down. Ah but that is the price the green economy is happy to pay. Mustn’t be like the US where prospects of cheap energy are being relished as precursor to industrial revival. We’ve got property.

      Sounds like McKibbin’s predictions are playing out perfectly.

      • Ah but that is the price the green economy is happy to pay

        It’s got nothing to do with the “green economy”. 🙄

        It’s about the survival on this planet of our descendants. 😯

        Oh, I forgot, you’re part of the MB Denier Club, and you think scientists are all in collusion to lie to us.

      • ” And of course the carbon tax provides prohibition to new energy intensive businesses from starting up, no messy manufacturing processes to be concerned with, good gosh, even greater emissions reduction.”

        This is the Green plan in action. Despite evidence showing that global temperatures are not rising, raising legimate serious questioning of the the AGW thesis, we have factual decline in our important economic sectors being cheered on. Groupthink gone mad, sacrificing our economy for a threat being slowly discreditted.

      • And bp, I suppose taking it all a step further we have yet to feel the full impact of complying with Renewable Energy Targets. We can expect significant increase in energy costs and these increases will flow across the economy. Capital costs to energy generators over the coming years are huge.

        As GSM notes, we are being held hostage by an ideology increasingly decreasing in merit.

      • As GSM notes, we are being held hostage by an ideology increasingly decreasing in merit.

        You can’t reason with zealots.

        Once their zealotry becomes a crusade, its like trying to hold back the sea.

      • A man with a conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point. We have all experienced the futility of trying to change a strong conviction, especially if the convinced person has some investment in his belief. We are familiar with the variety of ingenious defenses with which people protect their convictions, managing to keep them unscathed through the most devastating attacks. But man’s resourcefulness goes beyond simply protecting a belief. Suppose an individual believes something with his whole heart; suppose further that he has a commitment to this belief, that he has taken irrevocable actions because of it; finally, suppose that he is presented with evidence, unequivocal and undeniable evidence, that his belief is wrong: what will happen? The individual will frequently emerge, not only unshaken, but even more convinced of the truth of his beliefs than ever before. Indeed, he may even show a new fervor about convincing and converting other people to his view.

        –Leon Festinger, When Prophecy Fails, 1956

  8. R2M,
    Again for the record from this flat earther ;
    I do not deny that Climate is changing.
    I do not deny that humans have some impact on climate.
    I do not deny that , along with many inputs, CO2 has impact on Climate.

    In light of the huge ongoing costs being lumped onto taxpayers and economies with their vested interest backing, the issues that I still believe are not satisfactorily resolved/explained are a) whether any of the above can yet be considered of Crisis magnitude requiring a “crisis” type response b) whether far more forceful natural enablers – non human related- are combining to produce the observed data c) why observed data from pro-AGW sources is so consistently found to be cherry picked, skewed and “interpreted” in order to prove, what they claim, is such a blatantly obvious occurrence (AGW) d) why observed data regularly conflicts with AGW predictions and climate models.

    It is obvious to me(and I do support) UNsubsidised “clean energy” is the best outcome for the planet.But I believe technological advances as they arrive and develop have the best and most economically sustainable way of delivering that , while not imposing higher Green rorted energy costs on populations in the process.

    These are not unreasonable positions to hold. I don’t force my view on others , I’m just disagreeing. I don’t expect you will agree with them and likely ridicule them and me for having them.

    • I do not deny that , along with many inputs, CO2 has impact on Climate

      The world of science is eternally grateful for your concession, GSM. 🙄

      Your response falls more or less into the standard category of such responses, as explained by Clive Hamilton in his book Scorcher

      * There is no evidence of global warming.
      * If there is evidence of global warming, then it is not due to human activity.
      * If global warming is occurring and it is due to human activity, then it is not going to be damaging.
      * If global warming is occurring and it is due to human activity, and it is going to be damaging, then the costs of avoiding it are too high, so we should do nothing.

      • There is nothing new posted earlier by me. That would have been obvious if you were not so occupied with the manic insulting of those who disagree with you.

        “Your response falls more or less into the standard category of such responses, as explained by Clive Hamilton in his book Scorcher”

        Rubbish. I stated my position clearly enough. You can’t pervert it with your hyper-imagination.

      • R2M, see if you can distort this one to suit your bias:

        I know that most men — not only those considered clever, but even those who are very clever and capable of understanding most difficult scientific, mathematical, or philosophic, problems — can seldom discern even the simplest and most obvious truth if it be such as obliges them to admit the falsity of conclusions they have formed, perhaps with much difficulty — conclusions of which they are proud, which they have taught to others, and on which they have built their lives.

        – Tolstoy, opening to Ch 14 of What Is Art and Essays on Art (Oxford University Press, 1930, trans. Aylmer Maude)

      • What would be the point?

        By the way, scientists never “prove” anything. All they ever do is provide the best possible explanation they can think of. That is why the history of science is littered with theories that have been overtaken by better theories. Proof is a mathematical or logical concept, not a scientific one.