The costs of ETS

16 Nov 2009, 12:07 pm   -   Source: SBS - Rena Sarumpaet
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Scientists may argue about whether the government's emission trading scheme really helps the environment. But what are the costs?

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The Federal Government's emissions trading legislation, re-branded as the Carbon Pollution Reduction Scheme, is set to pass the Lower House of Parliament this week, but faces an uphill battle in the Senate.

Negotiations on Opposition amendments are continuing.

The scientists may argue about whether such a scheme, involving tradeable carbon permits, really helps the environment. But what of the costs?

"If Australian coalmines are forced to close and new ones just open overseas, that wont' cut global emissions," A Coal Association advertisement says.

"Our families rely on coal mining," the ad continues.

But John Connor from the Climate Institute believes that we can significantly cut greenhouse pollution, and still grow the economy, and grow jobs.

It seems the government is clear on how much extra individual consumers will pay. Not a lot - around an extra $4 a week for electricity, $2 for gas and other domestic fuels - all offset by generous compensation.

The cost in terms of jobs, according to Treasury modelling, suggests short-term upheaval, but longer term, only a small negative impact.

A rash of privately-commissioned studies points to new opportunities in renewables to help offset the thousands of mining jobs in jeopardy.

Jobs 'would be at risk'

Mining groups deny their modelling has distorted the numbers in order to secure more government concessions in the form of free carbon permits. Their numbers, they insist, are correct.

“Sixteen mines would be at risk of early closure under the current CPRS arrangements, leading to a loss of 3,000 direct jobs, so a total loss of about 9,000 jobs," Executive Director of the Australian Coal Association Ralph Hillman said. 

So, the Opposition is urging even greater support for business, despite fears now that emissions trading will hit the Budget, instead of being self-funding as was hoped.

Taxpayers & emissions trading

Recent Treasury estimates see the government earning less from selling permits than it will pay out to big emitters and the community.  In sum, emissions trading would cost taxpayers $2.5 billion by 2020.

Deutsche Bank number-crunched Australia's 25 biggest polluters - basing its assumptions on the most modest emissions cut anticipated by the Government, which is five per cent.

Thanks largely to the free carbon permits - which can be sold if the firms pollute less.

“The overall impacts are relatively benign," Deutsche Bank's Tim King said.  

The study found an average three-percent impact on company valuations, for 17 of the firms.

Only Caltex and Virgin Blue would fare much worse. Airlines don't quality for free permits.

And both may find it hard to pass on extra costs to customers. The Government's promised much higher emissions targets of up to 25-percent, if a global agreement is reached at Copenhagen.

The uncertainty around that makes the exact cost to business, impossible to judge now.

"Under a 25 per cent emissions reduction scenario, the government will be auctioning less permits than under a five-percent reduction scenario," Tim King said.

“There'll be less supply of permits, the same level of demand and therefore the price of permits will be higher, and therefore the cost of companies for purchasing those permits will be higher," he added.

On the plus side though, a higher carbon price should drive investment in greener technologies. And that, after all, is the whole idea.

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Your Comments

Costs

Steve Franks - from Sydney, 2 years ago

Based on the rcommended EU ETS Trading scheme that Kevin Rudd would have us join 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 per cent 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.

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