ALP climate change policy 2/2

July 26, 2010

My take on the debate-that-wasn’t coming soon … in the meantime, here’s part 2 of my analysis of the ALP’s climate change policy.

Right now, the ALP may well be wishing they had never announced yesterday that they would set up citizen assemblies to investigate the idea of a carbon tax. The proposal has been roundly condemned from all sides of politics. Malcolm Farr, this morning on Insiders, made the most charitable comment (which happily coincided with my own conclusions) – that it’s a way for Labor to make us feel that they’re listening to our opinions. The condescension implied in such a stance is enough to put most people’s teeeth on edge.

Gillard might have been hoping that the announcements which followed over the last 24 hours would push the story out of the news cycle. Unfortunately, the issue just isn’t going away.

Although it is an idea that deserves strong criticism, it is also eclipsing the rest of the policy – and the proposals released since yesterday morning should really come in for scrutiny. With that in mind, we’ll get stuck into part 2 of analysing the ALP’s climate change policy.

Most of what follows is expected to be funded from what was originally set aside for the now-delayed (perhaps permanently) Emissions Trading Scheme, with other funds already committed and re-directed.

All new power stations will be required to meet best practice standards on their emissions. These standards are actually below the levels set in the ETS. Under that scheme a baseline of 0.86 tonnes of CO2 per megawatt hour of electricity produced was proposed – new power stations will have to come in well under this figure. In particular, proposed coal-fired power stations will have to demonstrate that they are ready to implement carbon capture and storage (CCS).

Alongside this, Gillard has said that existing power-stations, including coal-fired ones, will be required to assess their potential to conserve energy, and to make those assessments public.

A real problem presents itself here. CCS (which is most commonly defined as capturing CO2 before or after the fuel used to generate power is burned, then pumping the gas back into the ground) is a largely unproven technology. There are a handful of industrial scale projects in operation around the world, and none in Australia. Concerns with leakage due to seismic shifting or problems with the pipes carrying the gas have not yet been sufficiently addressed, but would almost certainly require in-depth geological surveys to be completed on any proposed sites. Finally, the increased costs in operating a CCS facility in conjunction with a power plant that would be transferred to the consumer, and the extra fuel required (up to 30% more than current levels) could well render the idea a futile exercise.

In Australia, CCS is not a viable prospect, either technologically or financially. There are currently three operating pilot projects, with five more proposed. The earliest any industrial scale project is expected to be operational is 2020. The ALP’s proposal, then, may well have the effect of preventing any new coal-fired power stations from being built.

There are currently twelve stations which have been approved, and the restrictions will not be applied to those. Perhaps those twelve stations would be able to supply our energy needs until CCS becomes viable for industry. If there is a shortfall, ideally renewable energy production would fill the gap. In a worse-case scenario, however, we might well be looking at energy shortages and inflated prices.

The question, then, turns to just what Labor proposes to do to boost renewable energy production. Gillard has reaffirmed a 2020 target of 20% of Australia’s energy to be supplied by renewables, with a grab bag of funding to encourage this.

The solar flagships project, which has $1.5 billion allocated to it, is expected to award funding to two successful project applications in 2011. Schools will be able to receive up to $50,000 (or $100,000 for multi-campus schools) to install solar or other renewable systems. Finally, a further $100 million will be set aside in a Renewable Energy Venture Capital Fund, to encourage other projects.

In order to utilise renewable energy generation, Labor will invest $1 billion in connecting these new projects to the existing electricity grid. (This would include, for example, current solar projects in Queensland, wind and wave in Western Australia, and geothermal across the country.) Existing electricity market rules will be applied, but if an otherwise viable project does not meet those rules, funding will still be available to implement connection.

On a smaller scale, from July 1, 2011, any business that improves the energy efficiency rating of their existing buildings to 4 stars or higher can claim a 50% tax deduction. This scheme will run until the end of the 2015 financial year. There will also be an extra $30 million for the Green Building Fund. The total cost will be $180 million, rising to around $1 billion by 2018-19. Initial funding has already been provided.

Car owners whose vehicle was manufactured before January 1, 1995, will be able to trade in their car at a dealership for a car which meets current emissions standards and receive a $2000 rebate. The old car will be scrapped and recycled. This scheme is capped at 200,000 vehicles, about 10% of old, emissions-intensive vehicles currently on the road. Just as an example, saving one gallon (just under four litres) per 100 miles (62.5 kilometres), saves 20 pounds (over 40 kilograms) of CO2 – which adds up to approximately one tonne per 10,000 miles (6250 kilometres) of driving.

This is being widely reported as a ‘cash for clunkers’ scheme similar to that introduced in the US to boost manufacturing during the global financial crisis. The American program attracted so much interest that its funding needed to be more than doubled, and some owners upgraded to new cars that were at least as energy-inefficient as their old ones. Labor’s program avoids the latter problem by setting minimum efficiency standards for the new purchases, but $2000 is a very small amount. For example, a new Hyundai Getz (which would be eligible under the scheme) costs, on average, $13,000, making a $2000 cash-back payment seem rather insignificant. The program is not only open to new cars, however, making it attractive to people who may be nursing an old car because they cannot afford a better used car – students and older people, particularly.

It’s not known whether this rebate would be given in addition to any trade-in offered by a dealer, although it appears likely. Finally, at this point there are no mechanisms in place to prevent dealers increasing their prices by $2000, leaving buyers back where they started. In itself, however, the program has much to recommend it. It is a small measure, but one that provides a quick remedy to an ongoing problem.

Funds will be redirected from three existing programs to support the rebate – from solar flagships, carbon capture and storage, and the Renewable Energy Benefit. Gillard stated that the government would still meet its solar and CCS targets; there had been a less-than-expected uptake of funds, so money is available to re-direct without causing a shortfall in the projects.

Lastly, a Labor government would, from 2011, begin legislating new mandatory fuel efficiency standards for future new cars. This would be done in consultation with industry, and take effect in 2015. The lead time would allow manufacturers to re-gear their production so that they could meet the new standards.

Summed up, the ALP’s climate change policy amounts to a collection of relatively small programs, new mandatory standards and one Great Big New Avoidance of the issue of carbon tax. Connecting renewables to the grid has, perhaps, the most potential in terms of boosting uptake of renewable energy projects. Historically, connecting to the grid has been done in a piecemeal fashion – and, in the case of geothermal power, sometimes not possible at all. If the Labor proposal is properly administered, it could see more projects, and more people opting to choose renewable power for their needs.

The citizens’ assembly albatross, however, is going to hang around Labor’s neck for some time to come, I’m afraid.


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