Guest post from Juel Briggs
Nobuo Tanaka, Executive Director of the International Energy Agency, has recently said that by 2030, to meet international emission targets, the world will need to have a carbon price of $US180 ($A225) per tonne. (Source: Bloomberg News.)
Ultimately, such costs will be borne by the tax-payer. At Australia’s current emissions (580 million tonnes p.a.) and working population (10.6 million), a carbon price of $A225 would correspond to a cost per working person of more than $A12,000 per year, or around 25% of the average after-tax earnings. Even if we halve our per-capita emissions by 2030, the cost would still be at least $6,000 each year per working person. Additionally, given the aging of our population it could be expected that by 2030 a greater burden will fall on those working.
If this is the necessary end-point that is required for an emissions trading scheme, then such a scheme is severely flawed to the point of being unworkable. The majority of Australians are not able, let alone willing, to pay such costs and this is clearly a financial burden far greater than our society could bear. We could, of course, keep the carbon price low, but this would have a negligible effect on reducing emissions, or we could take some part-way point. But whatever position we take, you don’t have to be an expert to see that under a carbon trading scheme, affordability and effectiveness are inversely proportional to each other, with the price for effectiveness being unaffordably high.
The scientists and climatologists at IPCC may be competent in the science and modeling of climate change, and the associated economists (such as Stern and Garnaut) have been vocal in informing us of the cost of not taking effective action. However, from my analysis above, it seems that whatever this effective action is to be, emissions trading isn’t one of them. For all the billions of dollars that have been spent on climate science/predictions, economic modeling of the (supposedly) dire consequences of climate change and the marketing of these issues to the public, the very least effort seems to have been spent in devising a truly practical, appropriate, economically sound and environmentally effective method that will actually reduce emissions.
Instead, almost as if an afterthought, we got an inappropriate “Cap and trade” system lifted from air pollution technology and law, where this method is used to reduce minor pollutants from the emissions of power stations, such as sulphur dioxide. Such pollutants are present at negligible levels (0% to 2% for sulphur) compared to the carbon in coal (40% to 80%), and where such minor pollutants can be cost effectively scrubbed out (at around 10% or less than the cost of removing carbon dioxide1) using current commercial technology2. And to expect a method designed for smokestack scrubbing, to transfer to agricultural and ruminant methane emissions is beyond absurd. If we truly have determined and agreed as a society, that there is a reasonable probability that “dangerous global warming” will occur as a result of man-made CO2 (+ methane etc) emissions, then it is time we found a way to reduce these emissions, and/or their atmospheric concentrations, that will actually work and is affordable.
1. To see how a “cap and trade” system is affordable and therefore effective for sulphur dioxide, but will not be for carbon dioxide, the following example is given:
- CO2 emissions from coal fired power stations – 1 Tonne per mW hour.
- (Elemental) carbon in coal 60% by weight, (elemental) sulphur in coal 1% by weight.
- Carbon price $A100/tonne CO2 (expected minimum price required to fund Carbon Capture & Storage)
- Take a high-end Sulphur price of $A900/tonne SO2 (US$ 600 per ton – a typical high price)
- Retail price of electricity = A15c per kW hour = $A150 per mW hour
Using this data, under a carbon trading scheme, electricity would go from $150/mW hour to $250/mW hour (an increase of 67%). Under a sulphur trading scheme (even using a high sulphur price), power would go from $150/mW hour to $161/mW hour (a 7% increase.). In other words, a carbon trading scheme is around 10 times less cost effective (per unit of power generated) than a sulphur trading scheme, and would be at least 20 times less cost effective if the IEA carbon price of $225 is used. For more information on this matter go here.
2. The technology to scrub out SO2 and nitrogen oxides from commercial power generation is cheap, universal and well established. However, the technology of carbon capture and storage in large scale commercial application is as yet untested, with its universal application in power generation expected to be at least 20 years away. See here, Chart 6.29.