King Coal Australia Plans to Price Carbon

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SO Australia’s carbon price cards are finally on the table.

From July next year, the Federal Government will look to price greenhouse gas emissions at $23 per tonne rising 2.5 per cent each year.

Then, in 2015, this is replaced by a cap-and-trade system with the price set by the market.

That’s the simple explanation. The devil is in the detail, of which there is an awful lot.

To make the plan politically acceptable, a complex array of exemptions, sweeteners, compensation measures and adjustments to the tax system have been negotiated.
Public debate so far has concentrated almost entirely on the financial winners and losers from the proposed Clean Energy Future plan. At the same time, the country’s position as the world’s leading exporter of coal looks even more secure.

As far as the general public is concerned, the Labor-led Government says the carbon tax will raise consumer prices by 0.7 per cent – a little under $10 per week for the average household.

But in a complicated re-working of the tax benefits system, the Government will use about half the revenue raised from the scheme to give many households that $10 back. Families who earn more, get less back. Some low-income households could actually be marginally better off.

Included in the Clean Energy Future scheme are emissions from power stations, some transport emissions, industrial processes, non-legacy waste (e.g. methane from landfills) and fugitive emissions (mostly methane released from coal mines).

Covered by the scheme are companies which have facilities that emit more than 25,000 tonnes of greenhouse gases per year (meaning if a business operates at multiple sites and none of those sites singly emit above the limit, then they are exempt). In real terms, this will see about 500 companies affected.

Transport fuel used by households and small commercial vehicles is exempt, as is fuel used in agriculture, forestry and fishing.

This led the country’s main airline, Qantas to “warn” this would put $3.50 on the price of a domestic flight.

One commentator, pointing out Australia’s comparatively luxurious standard of living, said this was less than the airline currently charged customers for a bottle of water.

So what of the carbon price’s aim to cut greenhouse gases and boost renewable energy?

The CEF plan is the key driver in the Government’s bid to cut annual emissions by five per cent by 2020, based on their levels in 2000 – a target with bi-partisan political support. By 2020, this target represents a cut of 149 Mt.

There’s the creation of a $10 billion fund for investment in low-emission and renewable technology and cash to fund the closure of 2000 MW of coal-fired power stations.

There’s also the unmeasurable but significant symbolic step of finally acknowledging that the unbridled pumping of greenhouse gases into the world’s atmosphere comes at a cost.

But Australia’s main contribution to the climate change problem, in terms of emissions, isn’t covered by the carbon pricing plan because it is contained in its coal exports.

Australia is the world’s largest exporter of coal. In 2009/10, Australia exported 135 million tonnes (Mt) of thermal coal, used in power stations mainly in Asia.

In 2015/16, Government forecasts say an annual growth of 10 per cent in this trade should see 213 Mt of thermal coal being shipped from Australian ports.

Considering that each tonne of coal burned for electricity emits almost three tonnes of carbon dioxide, Australia’s thermal coal exports in 2015/16 will emit about 600 Mt of CO2.

The Australian Coal Association’s executive director Ralph Hillman has repeatedly claimed the carbon price will restrict growth in his industry and put 4700 miners out of work.

Mr Hillman is used to being involved in major negotiations on the climate change issue. Before he became the coal industry’s lead voice, he was the Australian Government’s environment ambassador. Among his responsibilities was in negotiating Australia’s long-held refusal to sign the UN Kyoto Protocol.

Because the coal miners don’t burn the coal themselves, their main exposure to the carbon tax is in the “fugitive” emissions of methane released during mining and in the transport fuel used. Even then, the government’s plan will compensate mines for up to 80 per cent of fugitive emissions.

Yet as the coal industry complained about threats to its viability, elsewhere its future looks far more positive. Just two days after the carbon price was announced, coal giant Peabody Energy and steel maker ArcelorMittal announced it was pursuing a joint A$4.73 billion (US$5.05 billion) takeover of Australian coal miner Macarthur Coal.

At the same time a report in The Australian showed Australia had more than $50 billion of investment in coal mining and related infrastructure either committed, or close to commitment.

Photo courtesy of Greenpeace

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