Home > Oz Politics > Do the math, Tony

Do the math, Tony

August 2nd, 2010

Unimpressed as I am by Labor Julia Gillard’s Prime Ministership, they (and she) remain far preferable to the alternative. For an illustration of what’s on offer, let’s look at Tony Abbott’s claim (repated on quite a number of occasions) that a $40/tonne carbon tax will double the price of electricity. For coal-fired electricity, CO2 emissions are around 1 tonne/MWh for black coal (a tonne of coal generates about 2.5 tonnes of CO2, and also about 2.5 MWh of electricity), and a little more for brown coal. So, a $40/tonne tax implies an additional cost of 4c/kwh. Electricity prices vary a lot, but currently the standard retail rate in Queensland is around 20c/kWh, so the price increase would be around 20 per cent for households. Businesses that use large amounts of electricity pay lower prices and would therefore face a higher price increase, but since the generator cost of electricity is typically more than $40/MWh, no one paying a market-determined price would face a doubling[1].

What’s really striking about this is that it occurs in a context where Laurie Oakes is questioning Abbott about his credibility. The next question, referring to previous inconsistencies is “But, isn’t it important if you become Prime Minister, that Australians can believe what their Prime Minister says?”. Oakes is pretty good on who said what and when, but he lacks the basic arithmetic skills and policy background to call Abbott out on an obvious lie. And if Oakes doesn’t think it’s important to understand basic facts about the policy issues, you can bet the same is true of the rest of the Canberra Press Gallery, who hang on his every word.

fn1. Probably there are some aluminium smelters on cosy deals from the 1980s and 1990s paying prices below generator cost, but the odds are they would have tobe compensated in any case, whether or not this is justified economically or socially.

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  1. wilful
    August 2nd, 2010 at 15:48 | #1

    Can’t disagree with anything there.

    but do we have to have “math” as a clever internet meme in Australia?

  2. djm
    August 2nd, 2010 at 15:51 | #2

    JQ, I think your comment about Oakes is sadly true about pretty much the entirety of the Canberra press gallery. Our political commentariat seem quite happy to spend reams on personality politics, irrelevant gaffes, and he-said-she-said rumours, but precious little on actually analysing what the potential leaders actually plan to do.

  3. Rationalist
    August 2nd, 2010 at 15:54 | #3

    Funny if Abbott wins.

  4. August 2nd, 2010 at 16:27 | #4

    Quite right … and at the proposed Greens price of $23 per tonne, it is even less.

    Even at $100 per tonne — closer to the community cost of coal burning — it is only about a 50% rise.

    In my household, we spend about $1000 per year in electricity. So even at $100, per tonne the household cost is an extra $10 per week.

    Let’s say that $7.50 of that is given back in compensation to low-low middle income earners so that people like me get nothing but those a fair bit worse off get 100% rebate in cash or kind.

    Hardly the end of the world. If I were bothered about the budget I’d simply cut out one Friday night takeaway once per month. There’s $40 in savings right there.

  5. wilful
    August 2nd, 2010 at 16:52 | #5

    So Fran, you’re in fact saying the CPRS would have NO EFFECT!!??!?!?

    It’s supposed to drive behaviour change!

    Unless your take away meal is emissions intensive?

  6. August 2nd, 2010 at 17:02 | #6


    So Fran, you’re in fact saying the CPRS would have NO EFFECT!!??!?!?

    Not at all. In my case, as a tenant, I am doing all I reasonably can to minimise electricity use. My point is that even in my case, the costs would not be ruinous.

    It’s supposed to drive behaviour change!

    And here is the key problem. Whose behaviour is supposed to change? In the popular mind, combating climate change is a lifestyle choice. Actually though the idea behind these things is to prompt businesses to compete on energy efficiency and energy usage avoidance, to design less emissions intensive buildings and to resort to higher cost but lower CO2-intensity energy supply. That automatically lowers the intensity of goods and services regardless of public behaviour change.

    People can of course legitimately reduce the tax they pay and keep the rebate by changing their lifestyle. Perhaps they will move to a more energy-efficient house or move closer to work using the tax saved to partly fund the move.

    Of course, if a part of the funds raised (the other $2.50) allowed the dirtiest coal plants to be purchased by the state and retired in favour of CCGT that too would help.

    (By the way, this wasn’t an ETS/CPRS, but a carbon tax)

  7. Emma
    August 2nd, 2010 at 17:39 | #7

    The thing that makes me rage at the newspaper and tv is that the journalists are even too lazy to use google and find blog posts like this one, or Possum, that do the sums for them, and steal your ideas. We have a press corps that is so indolent it can’t be bothered plagiarising. Not when they can put the ravings of superannuated Liberal foreign ministers who should be in gaol on the front page. I despair for the country and the world.

  8. Ernestine Gross
    August 2nd, 2010 at 17:40 | #8

    wilful :Can’t disagree with anything there.


    but do we have to have “math” as a clever internet meme in Australia?

    It wouldn’t hurt, I’d say.

  9. gregh
    August 2nd, 2010 at 17:55 | #9

    I’m with wilful. (I think) – I prefer ‘maths’ to ‘math’ ….makes it seem like a ‘count’ noun

    (sorry, couldn’t resist the Dad joke)

  10. Austin
    August 2nd, 2010 at 18:52 | #10

    It is interesting that journalists are almost always have insufficient background for what they are reporting on. And this is the method by which the public is meant to acquire accurate, complete and timely information. Strange old world.

  11. Hermit
    August 2nd, 2010 at 18:57 | #11

    I believe that the recent round of electricity price hikes approved by State pricing tribunals was really a pre-emptive scare campaign against carbon pricing. The pattern seems to be 40% price rises over 3 years even in the absence of Federal carbon pricing. That’s a lot for a few new transformers. Whatever their rhetoric I think State governments secretly want to undermine the CPRS so their constituents can enjoy the benefits of cheap coal. That pesky global warming is a problem for another day.

    Therefore I’ll repeat a suggestion made on another thread; the power companies absorb the first 2c per kwh since they’ve just gotten a big price rise under dubious circumstances. Even then the price shocks should be less than the introduction of the GST. There should be 100% compensation like PAYE tax cuts and presumably tariffs on imported aluminium. Howard compares more than favourably to his successors in having the courage to tough out the GST, perhaps the last of his kind.

  12. TerjeP
    August 2nd, 2010 at 19:38 | #12

    Wilful – I doubt that a carbon tax would have much impact on demand. The key impact would be on supply. However given the expense of renewables I doubt it would have much impact other than in promoting a shif from coal to gas.

  13. Tony Abbott for PM
    August 2nd, 2010 at 20:07 | #13

    Clearly Climate Change is a non-issue at this election. The far left is still living in denial. That is, they still believe people care about climate change. The support for action on climate change collapsed when people realised they would actually have to pay for it.

  14. TerjeP
    August 2nd, 2010 at 21:09 | #14

    Of course people don’t want to pay. They have been told that the problem is caused by evil corporations so clearly it is the evil corporations that should be punished, not consumers.

  15. August 2nd, 2010 at 21:38 | #15

    TAbbot disengeniously ignoring the true “polluter pays” fee-and-dividend form of a carbon tax: the one supported by Dr James Hansen: where the tax is applied at source (mine head, port etc) and everyone’s compensated for the inevitable price rises, not just the low income earners. No doubt with plenty of cash to spare to help fund MRET targets.

  16. August 2nd, 2010 at 21:49 | #16


    everyone’s compensated for the inevitable price rises, not just the low income earners. No doubt with plenty of cash to spare to help fund MRET targets. (sic)

    I don’t see why everyone should be compensated. Far better to compensate those for whom the imposition would be regressive and take whatever is left over and use it to fund abatement programs. People on above average earnings like me certainly don’t need it.

    I don’t agree with MRETs at all.

  17. Michael of Summer Hill
    August 2nd, 2010 at 22:03 | #17

    TerjeP, I am interested to know how you would punish the evil corporations polluting? And don’t give us the run around about nuclear.

  18. Ben
    August 2nd, 2010 at 22:09 | #18

    It should be kept in mind that generation costs represent less than half of the retail tariff. You can double the generation costs and you will not double the tariff. Transmission and distribution networks do not emit CO2.

  19. SJ
    August 2nd, 2010 at 22:21 | #19


    I believe that the recent round of electricity price hikes approved by State pricing tribunals was really a pre-emptive scare campaign against carbon pricing.

    No, that’s not possible.

    The state governments might have wanted to do a scare campaign, but they lack the ability to direct what regulators like IPART in NSW do. The “I” in IPART stands for independent – it was quite deliberately set up that way.

    (Note that I’m not employed by or otherwise associated with IPART or any of the other state pricing bodies, nor any of the bodies whose prices are regulated by them.)

  20. Alice
    August 2nd, 2010 at 22:22 | #20

    Ratio – it wont be funny at all if Abbott wins. Think of the kids. He will reduce the training wage for sure.

  21. Alice
    August 2nd, 2010 at 22:24 | #21

    I prefer “maths” or “mathematics”. Math isnt proper english at all. Its probably an americaniZation.

  22. SJ
    August 2nd, 2010 at 22:31 | #22


    However given theexpense of renewables I doubt it would have much impact other than in promoting a shif[t] from coal to gas.

    And that would be a bad thing?

    That’s mostly all that needs to happen, at least over the next couple of decades. Duh.

  23. Jim Rose
    August 2nd, 2010 at 22:48 | #23

    I was speaking to an american friend, and when i said Maths, he could not understand what I was talking about. when I truncated to Math, he understood.

  24. Ben
    August 2nd, 2010 at 22:56 | #24


    Yes, if you read the recent IPART price determination report, IPART said in the executive summary that it is very concerned about the price rises, noting that the current price rise is the largest in recent memory. The rises are due to replacing aged infrastructure and rising peak demand (air conditioning). See the recent AER news release on network pricing: http://www.aer.gov.au/content/index.phtml/itemId/728143

  25. SJ
    August 2nd, 2010 at 23:01 | #25

    I was speaking to an american friend, and when i said Maths, he could not understand what I was talking about.

    I really can’t tell whether that tells us something about the intelligence of americans in general, or the intelligence of the troll’s friends in general.

    In any case “math” is the accepted US term:

    It is often shortened to maths or, in English-speaking North America, math.

    In other news, it’s recently been discovered that US spelling is often different to UK spelling. Get over it, people.

  26. August 2nd, 2010 at 23:02 | #26

    @Fran Barlow

    I like this example: “What happens is that each person gets a $55 rebate. So the poor person doesn’t pay more for energy under this plan…he actually makes money! So instead of paying out $10, the poor person is now $45 a year richer. So the people who can least afford higher energy prices are always better off in a fee-and-dividend scheme.”

  27. Tony G
    August 2nd, 2010 at 23:08 | #27

    Do the maths Johnny,

    “Treasury modelling” – yes, I know – indicated, according to ITS, that an emissions cut of just 5 per cent would increase electricity prices by 86 per cent; ”



  28. SJ
    August 2nd, 2010 at 23:36 | #28

    Tony G’s links above basically say the same thing as John is saying. 86% increase in wholesale price, but only 25% increase in retail price, vs John’s claim of a doubling in wholesale price but only 20% increase in retail price. The difference is due to John’s use of current prices, and ITC’s use of Treasury’s prices in 2015 (see p 176).

  29. SJ
    August 2nd, 2010 at 23:42 | #29

    Fixed link to the above. Hopefully.

  30. jquiggin
    August 3rd, 2010 at 06:23 | #30

    Tony G’s link is to Terry McCrann, which explains a lot, including wrt Tony’s (A&G) gullibility on this.

  31. Michael of Summer Hill
    August 3rd, 2010 at 07:31 | #31

    John, it seems Abbott is all talk and no action when it comes to economic and financial matters. That is correct all talk and no action. No wonder Abbott has chickened out debating Gillard for a second time given the Opposition’s pork barrelling will end up costing an arm and a leg. In other words the Opposition cannot balance the budget unless severe cuts are made to public services affecting all those living on the bread line pensioners, sole parents, unemployed etc. Abbott is a fraud.

  32. Michael of Summer Hill
    August 3rd, 2010 at 07:54 | #32

    Update, Update, Update, reports indicate Abbott will announce today another backflip policy on the run delaying the parental leave scheme as it wasn’t costed properly.

  33. Jason
    August 3rd, 2010 at 08:16 | #33

    The math is a bit more complicated than what is being expressed here. Maybe at night when the coal fired power stations are the marginal suppliers would a carbon tax be fully reflected in prices. During the day it would depend on the merit order of coal, gas, etc. In the long run you would expect the carbon tax on coal generators not to be fully reflected in prices (hence the request for compensation) so the math above is an upper bound. In the short term its a bit more complicated because a tax could effect strategic bidding in the NEM (if a generator has a portfolio of coal, gas and other plants) in quite odd ways, its hard to say, but very unlikely to result in prices sufficient to double retail.
    Presumably Treasury has modelled this.

  34. Donald Oats
    August 3rd, 2010 at 08:42 | #34

    Tony `Bruiser’ Abbott has fiddled with the parental leave scheme financials, and moved the starting date to 2012…and he said that the Gillard scheme would run for the 18 months until the Abbott scheme commenced. Hmmm. I luv the smell of non-core in the morning!

    The 500 mil chop to the Abbott scheme just underscores the “Tony can’t add” theme here.

  35. jquiggin
    August 3rd, 2010 at 09:14 | #35

    It’s always more complex than a two-line calculation, but in this case many of the complexities you mention are smoothed out in the determination of the retail price. As you say, Treasury is the place to go for more precise estimates. I’m just showing that Abbott is out by an order of magnitude or so.

    On math/maths, I was thinking about it and I always use “eco” or “econ” as an abbreviation for economics, never “econs”. So, I’m just being consistent.

  36. August 3rd, 2010 at 10:47 | #36

    Just a quick question – you are normally reasonably quick to stop fairly obvious Lib plants from placing talking points. MoSH, on the other hand, regularly places pretty obvious ALP talking points (and off topic ones at that).
    I appreciate this is your site and so your rules and I would not seek to imply anything else, but MoSH does seem to be contravening point 2 of your discussion policy in doing so. I would appreciate a little clarity on this point.
    I would add to your main point, though, that Abbott also seems to be ignoring substitution effects – i.e. as the price of coal fired power rises it is likely that the gas plants would be used more, reducing the effects of any such tax.
    That said, are you confident that Julia’s large focus group is going to come up with a good answer that can be implemented before the election after this one?

  37. Michael of Summer Hill
    August 3rd, 2010 at 11:00 | #37

    Andrew Reynolds, I thought all the above deal directly with Maths you know budgets, costings, quantative analysis, relative pricing, budget honesty, etc or is or is it beyond your comprehension.

  38. Michael of Summer Hill
    August 3rd, 2010 at 11:32 | #38

    Andrew Reynolds, whilst we are on budget honesty Tony Abbott’s aged care policy also seems to be out and in tatters by some $75 million. As our host says he is a bloody liar.

  39. Tony G
    August 3rd, 2010 at 11:35 | #39

    Treasury as per SJ’s link @ 29

    “Australia’s mitigation costs are higher than most developed economies due to its large share of emission intensive industries. (70% of our emissions come from power generation and transport)

    International trade in permits reduces the cost of Australia’s contribution to the global mitigation effort.”

    It doesn’t look like there is going to be any “International trade in permits [to]reduce[] the cost of Australia’s contribution to the global mitigation effort”.

    The 86% hike by 2015/20 in my power bill would be a fait accompli under a Labor (red) / Greens coalition, as there is little chance of agreement for international trade in permits being reached any time soon.

  40. wilful
    August 3rd, 2010 at 11:57 | #40

    The only truly remarkable thing here, that I simply cannot fathom, is the persistent reputation that the Coalition have as superior financial managers.

    The only basis for this claim that has any legitimacy is the long period of stability and growth since 1993. But as anyone who follows these things knows, the Hawke Keating reforms were instrumental, and the mining boom allowed for a very lazy Treasurer indeed. Subsequently, by following Treasury advice closely, we’ve emerged basically unscathed from the biggest crisis in decades. Meanwhile, Tones reckons Barnaby Joyce would be a fine Finance Minister.

    What gives?

  41. Jim Rose
    August 3rd, 2010 at 12:45 | #41

    ALP leaders attempt to prove they are fiscal conservatives because their party does have more than a passing interest in income redistribution and any associated tax and spending increases.

    The Libs are not so interested in either redistribution or change in general, which makes them natural fiscal conservatives.

    The Libs tend to be inflation hawks because more of their voters are net savers or have large amounts of super.

    views on economic reform differ depending on which party is a consumer advocate.

  42. Michael of Summer Hill
    August 3rd, 2010 at 12:58 | #42

    Wilful, as our host has pinpointed above the Coalition lack credibility and in anyone’s language that would mean inferior financial managers. But having said that it is becoming quite clear that since the departure of Turnbull the Shadow Cabinet lack talent and are more of a rabble.

  43. August 3rd, 2010 at 13:12 | #43

    The cost would vary by state. NGERs puts Victorian grid intensity – which is the highest in Australia – at 1.22 kgCO2-e/kWh, so $40 /tCO2-e would add an average cost of $0.05 per kWh to Victorian bills. The average industrial manufacturer in Victoria buys at around $0.10 per kWh, so this would add about 50% to their electricity bill.
    Not insignificant, but certainly not double. In one case I know of, electricity comprises about 6% of profit, so a carbon price on electricity would reduce profit by 3%. Nobody likes to increase costs, but I’m not sure this would be noticeable amongst other factors and there are steps that could be taken to mitigate the cost, e.g. implementing energy efficiency measures.
    In any case, most are talking about starting at $10 per tonne then increasing gradually; it would be some years until we are at $40.

  44. August 3rd, 2010 at 14:04 | #44

    Pr Q said:

    Oakes is pretty good on who said what and when, but he lacks the basic arithmetic skills and policy background to call Abbott out on an obvious lie. And if Oakes doesn’t think it’s important to understand basic facts about the policy issues, you can bet the same is true of the rest of the Canberra Press Gallery, who hang on his every word.

    Thats true for other so-called “doyens of the Canberra press gallery”, Michelle Grattan, Alan Ramsey etc. They don’t seem to have any kind of theoretical grasp of political economy or anthropology, at most the common-or-garden variety liberalism that they picked up at uni during the late medieval period. Just glorified gossip columnists really.

    And as for using numerical facility or submitting ideas to any kind of rigourous scientific testing, well you can forget about that. Liberal Arts graduates, bah! [gagging sound]

    The younger, more web-savvy journos, such as George Megalogenis and Peter Hartcher, at least give the impression that they are over the higher-order theoretical debates. Although they still remain absolutely wedded to “establishment liberalism”, which is just not good enough in the post-911/GFC era.

  45. Socrates
    August 3rd, 2010 at 14:28 | #45


    That may be true, but then you could also point out that Tasmanian hydro power will not be penalised at all. So overall, the Abbott claim is an exaggeration by at least 100%, more like 400% for the majority, and entirely fictitious for Tasmanian power consumers. It is wrong, regardless of whether you are left-wing, right-wing, monetarist or Keynesian.


    I don’t think most people understand the complexity, and just rely on their emotional reactions to things, and perceptions of people, rather than evidence. That doesn’t only apply to voting. I have been reviewing some toll road forecasts lately and some financial “experts” made some amazingly optimistic forecasts while times were good, and lately too pessimistic while times have been bad. In both cases, they seemed to go more on sentiment than evidence.

  46. John Quiggin
    August 3rd, 2010 at 14:42 | #46

    @Andrew Reynolds

    I agree as regards the “Update, update” style of MoSH comment – I’ve been a bit lazy about policing comments threads lately which is one reason I went on hiatus.

    MoSH, I request that you stop posting this kind of comment. I’ve found your other comments useful, so feel free to keep on making them.

    As regards the rest of ARs comments, you’ve anticipated several of the themes of my next Fin column which will be based on this post. “Focus groups” was exactly the comparison that occurred to me.

  47. Michael of Summer Hill
    August 3rd, 2010 at 15:13 | #47

    John, I will abide but in my view the updates were more newsworthy than reading some of the monotonous garble.

  48. John Quiggin
    August 3rd, 2010 at 15:36 | #48

    MOSH, you can run them in Monday Message Board or Weekend Reflections if you want

  49. James Haughton
    August 3rd, 2010 at 16:20 | #49

    As a hard lefty myself, I’d like to acknowledge that the ALP claim that Abbott’s paid parental leave tax would significantly increase grocery prices at coles and woolies is also ridiculous.

    Furthermore, the ridiculous line that both parties are running that it is vital to put the federal budget into surplus at a time when the world economy is on the brink of a 1937 style double dip recession, or that government debt is in any particular need of being paid back early, makes me want to bang my head against a wall. And the claim that “australian families” are “doing it tough” is similarly insufferable. The people doing it tough are Australian Aborigines, single parents, the elderly and the long-term unemployed.

  50. August 3rd, 2010 at 16:47 | #50

    @James Haughton

    Quite right too James … But the whole debt mantra is very Judeo-Christian in its moral allusion. It’s like the evils of hard liquor …

    When I was a child, I used to have a grandmother who would quote Polonius to me …

    Neither a borrower nor a lender be;
    For loan oft loses both itself and friend,
    And borrowing dulls the edge of husbandry.

    People who borrowed money were “no-hopers” and those who lent it were fools, in her view.

  51. Alice
    August 3rd, 2010 at 20:07 | #51

    @Jim Rose
    JR – the Americans are absolute heathens when it comes to good grammar.

  52. Alice
    August 3rd, 2010 at 20:10 | #52

    SJ – I cant get over AmericaniZations in spelling and grammar. I was taught properly english grammar and I know friends in academia who have to alter their english grammar to “appeal” to US journals. Whatever it takes (a lot of Zs instead of Ss). It still jars with me and my third grade english teacher….

  53. Jim Rose
    August 3rd, 2010 at 22:01 | #53

    the problem with math and maths was with pronunciation

    I also had to use the American pronunciation of Krugman before he recongised the name.

  54. robert (not from UK)
    August 3rd, 2010 at 23:33 | #54

    Although I guess it’s really only a minor inconvenience, it does irk me every time I type an E-mail and use a spelling such as “honour” or “behaviour”, because my E-mail provider (Yahoo) insists on trying to turn such spellings into US English. If any reader of this website knows of a method for preventing such a problem, I’d be happy to hear about it. Oh yes, and it’s interesting that there has been a dispute here over “maths” versus “math”, because the former spelling is another source of E-mail trouble.

  55. TerjeP (say tay-a)
    August 3rd, 2010 at 23:55 | #55

    I blog a lot on the iPhone and it is endlessly trying to convert everything to American. They already got their way with the billion but they want more. I fear for the future of the kilogram.

  56. Kevin Cox
    August 4th, 2010 at 04:25 | #56

    The objective of putting a price on carbon is to encourage investment in renewables.

    4 cents extra per kwh is not enough to encourage investment in renewables under typical investment models. Most organisations want at least a ROI of 20% to justify new risky investments. At $6,000 per continuous kw – which is about the cost of electricity at the factory gate for mass scale renewables – the price of electricity has to increase by at least 8 cents per kwh at the factory gate. The current price of electricity at a power plant in NSW is 6 cents per kwh. Maybe what Abbott was trying to say was that the price of electricity would have to double to encourage investment in renewables.

    Putting a price on carbon is not going to get the investment needed. A simpler approach more certain approach, is to reduce the cost of investment through interest free loans repaid over the life of the asset. With this sort of financing almost all renewables are immediately profitable and almost risk free.

    Depending on a price on carbon makes for a risky investment because it depends on the price being maintained for the life of the asset. Interest free loans can be written so that the interest free charge stays for the duration of the loan and so the ROI can be much lower than 20% and still be attractive to investors.

    What we need is a modern day Denison Miller (the first governor of the CBA) to become the governor of the Reserve Bank and to create the low (zero) interest credit to fund the investment. This will remove the need to increase the price of energy.

  57. Dave McRae
    August 4th, 2010 at 10:26 | #57

    Love your work JQ – but I suspect Abbott may be even worse than what you say – and your calcs may be slightly exaggerated

    a $40 per tonne of Carbon is about $11 per tonne of CO2
    (40/3.66 where 3.66=(12+16+16)/12 )

    So it may be closer to 1c/kWh for the $40tC

    (I could be really wrong – it’s been a long time – I think I may have to take my shoes off to check :p — I’ll be back)

  58. jquiggin
    August 4th, 2010 at 12:33 | #58

    @Dave McRae
    I’m pretty sure the price is meant to be per tonne of CO2 – for someone who doesn’t know the difference between wholesale and retail, a couple of extra oxygen atoms are neither here nor there.

  59. Hermit
    August 4th, 2010 at 15:19 | #59

    Remember that wind and solar will get two bites at the cherry, a carbon price and ongoing per-unit subsidies. Residential PV currently gets feed-in tariffs around 60c per kwh in some States (not mine) while commercial wind and solar can sell Renewable Energy Certificates currently worth $40-50 per Mwh or 4-5c per kwh. By 2020 some 45 million RECs were to have been purchased annually but I believe a new plan will split renewables into large and small categories with different arrangements.

    On top of that renewable demonstration plants get capital assistance and it seems in future they may also get loan guarantees. Another low carbon form of generation has been criticised for getting loan guarantees but that privilege is no longer unique. That industry also maintains a fund to manage its own waste unlike the 200 million tonnes of CO2 that Australian coal and gas fired power stations add to the atmosphere each year. Times that by four when Australian coal and gas is burned by overseas customers.

    The obvious question is why don’t all forms of low carbon generation get the same subsidies? That is feed-in tariffs, RECs and capital grants on top of any carbon price. Hydro doesn’t need it since it can do well on the spot market if dams are full. Perhaps someone can explain why wind and solar get VIP treatment.

  60. August 4th, 2010 at 15:40 | #60

    PrQ is correct. The most used measure is per tonne of carbon dioxide equivalent where all emitted gasses are given a measure which equates their global warming potential (GWP) to CO2. Methane, for example, has a GWP of around 70.
    Incidentally – This could mean Abbott is correct, depending on whether the calculation PrQ is using is based purely on the CO2 emitted or on all gasses emitted. I don’t know and haven’t the time to do this.

  61. Chris Warren
    August 4th, 2010 at 17:23 | #61

    @Kevin Cox

    Why not both – interest free loans for socially useful, taxes or charges for the socially damaging?

    If current polluting investment is getting ROI of 20%, (and I see no risk that equates to this) then there is scope for a tax/levy.

    The fact that present damaging production is making profits creates a resistance to change so we cannot just expect renewables to overtake fossil fuel producers. For example BP (a fossil fuel producer) has purchased many of the solar technology patents and is sitting on them or letting them play in the market (eg BPSolar) but at prices that protect the role of fossil fuels.

    As I see it economics cannot solve the real problem.

  62. Donald Oats
    August 4th, 2010 at 22:16 | #62

    The price increases due to an operating CPRS would hopefully be small, but persistent and possible to compensate for by increasing efficiency with respect to energy use, electricity in particular. It is not rare for a business to pare off say 3% from the costs of manufacturing, for example, and to devote significant effort to the goal. A persistent and growing cost will definitely get the attention of businesses.
    As an interesting example of what may be achieved with a bit of elbow grease and brains (of course this is a media release because in the modern world scientists and politicians alike get spin-doctored to death 🙂 ) Really though, it underscores the point that improved use of energy is feasible even for less obvious businesses, prunes for example.

  63. TerjeP
    August 5th, 2010 at 01:08 | #63

    Chris – rather than a cocktail of policies I’d like to see proponents on a price on carbon stay true to their message about it being the most efficient means to achieve transition to lower emissions by dumping all the bells and whistles that are less than efficient. If you want more incentives just have a higher price.

  64. Kevin Cox
    August 5th, 2010 at 06:17 | #64

    @Chris Warren
    You are right Chris. We can do both and to make the system ‘compound’ we should insist that the money raised from the charges be invested in ways to reduce the damage caused by burning fossil fuel.

  65. TerjeP
    August 5th, 2010 at 08:55 | #65

    Does invest mean subsidies? Why would you take an efficient method of lowering emissions, a carbon tax, and bolt on an inefficient method?

  66. August 5th, 2010 at 17:26 | #66

    @Kevin Cox
    “The objective of putting a price on carbon is to encourage investment in renewables.”

    Interesting, I thought the objective of a price on carbon was to reduce greenhouse gas emissions. Just like investing in renewables reduces greenhouse gas emissions.

    The distinction is important because there are activities that would be driven by a carbon price, that reduce greenhouse gas emissions, but not necessarily involving renewables. These could include investments that increase energy efficiency, or shifts in consumption from lamb and beef to other foods.

    Whether there is investment in renewables depends on the expected carbon price over the investment period. So if the carbon price starts at $40, but is expected to increase in real terms by 4% per year, renewables are more likely to be an attractive option.

  67. Mug Punter
    August 6th, 2010 at 22:57 | #67

    Laurie Oaks and lots of the MSM are just gossip columnists …. content free. We deserve better.

  68. Chris Warren
    August 7th, 2010 at 02:27 | #68

    TerjeP :Does invest mean subsidies? Why would you take an efficient method of lowering emissions, a carbon tax, and bolt on an inefficient method?

    The “inefficient” is an economics-based tag. It is not “inefficient” when judged by the longer-term requirements of humanity.

    Those who wave the economic efficency flag, usually destroy society for some to benefit others.

    I suppose if we can subsidise the military and parliaments – surely subsidising ecolological security should not be too difficult.

  69. Tony G
    August 7th, 2010 at 07:29 | #69

    Peter Woods @ 16

    “The objective of putting a price on carbon is to encourage investment in renewables.”

    Interesting, I thought the objective of a price on carbon was to reduce greenhouse gas emissions. Just like investing in renewables reduces greenhouse gas emissions.

    The distinction is important ”

    It is debatable whether a price on carbon will reduce emissions, but it will not necessarily encourage investment in renewables. Any increase in energy costs will have a corresponding reduction in the standard of living, as the funds at the disposal of the individual would be reduced.

  70. August 15th, 2010 at 18:15 | #70

    We have to recognise the (fossil fuel) path dependencies we’ve created. And that the point of any form of carbon pricing is to put fossil fuel/ energy intensive organisations out of business. Maybe there are a few lessons to be learnt from Germany – going from opposing the EU ETS to becoming one of the leading exporters of wind technology and know how.

    It is sober to still observe that in Australia most of the debate – if not all – is about who should bear the economic cost of putting a price on carbon, rather than tackling climate change and making that long overdue shift towards a low(er) emissions economy.

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