EU carbon market crashes


The shambles that is the EU is held up as a shining example of what Australia should aspire to be – fractured, miserable, uncertain, and verging on bankruptcy. Terrific. And to cap it all the carbon price has now crashed to 12 Euros, or AU$16, far less than the Three Gs (Garnaut, Government and Greens) want ours to start at. Hopefully it will continue on down until it reaches the level of the Chicago Climate Exchange, where trading finally ceased at a few sad, sorry cents per tonne. Right before it was closed for good.

PRICES in the European Union’s emissions trading scheme have plunged to two-year lows, intensifying pressure on the Gillard government to start with a low carbon tax and threatening to complicate negotiations with the Greens, who are pushing for a strong start to the Australian scheme.

Business groups yesterday seized on reports that the EU permit price fell 11 per cent on Friday — and 22 per cent in a week, testing a two-year low of $16.79 a tonne — saying it highlighted the dangers of a fixed-price scheme that could leave Australian businesses facing higher prices than international competitors.

The EU price has traded well below the $20-$30 starting rate recommended for the Australian scheme by government climate change adviser Ross Garnaut.

European analysts said the reasons for the fall included the bleak economic outlook sparked by the Greek debt crisis, lack of confidence in the will of European governments to achieve their stated policy aims, and the fact energy-efficiency measures appeared to be replacing carbon pricing as the EU’s main climate change lever.

So Australia will plough into carbon pricing just as others, who have experimented with it and seen it fail, are looking elsewhere. Brilliant again, Julia, Greg, Ross etc etc.

Read it here.

World of "sham carbon policies" exposed

Henry Ergas

Earlier in the week we had the government plugging the same old line: “Australia is falling behind other countries and we need to catch up – and by the way, here’s a Productivity Commission report which agrees with us.” Henry Ergas in The Australian unpicks the spin:

CONTRARY to repeated assertions by the Prime Minister, the Productivity Commission did not endorse an economy-wide emissions trading scheme. Rather, its recently released report on carbon emissions policies models an ETS that applies only to the electricity sector and excludes all trade-exposed industries.

As the commission shows, current policies aimed at subsidising renewable energy incur high costs for pitifully little outcome. No surprise then that its modelling finds that scrapping those policies and imposing a carbon price of $9 a tonne on the electricity sector would cause less harm.

True, the eight countries the PC analysed have more than a thousand policies in place, many focused on electricity generation. But in aggregate those policies yield barely 210 million tonnes of electricity sector abatement.

Take China, the world’s largest and most rapidly growing emitter, which the Garnaut report says has “pledged large reduction targets, implemented reforms that deliver on its commitments, and set sail on a global mission to dominate new opportunities”. But the PC finds China’s abatement affects barely 1 per cent of its electricity emissions, while its abatement outlays, at one-third of 1 per cent of gross domestic product, are well below Australia’s.

Moreover, the PC’s measure of net abatement takes no account of subsidies to emissions. Recent estimates place subsidies to fossil fuel use in China at about 1.4 per cent of GDP. For each dollar spent curbing emissions, China therefore spends $4 promoting them.

Yes, some countries, notably Germany and Britain, devote substantial resources to emissions reduction. But even there, the PC finds high costs for modest impacts. Indeed, as the report notes, the Germans spend $150 to $300 a tonne of carbon securing emissions reductions that under the European Union’s ETS are simply offset by increased emissions in Italy and Spain.

That may seem irrational. But the reality is that this is an area whose politics are now entirely symbolic. Notwithstanding sweeping promises in international forums, and regardless of the homilies of climate change’s high priests, governments do not believe communities have any stomach to make real sacrifices for a goal that seems ever more illusory.

Trapped between the zealots and that brute fact, they resort to what are little more than bribes, buying, at absurdly high cost, a bit of abatement here, dispensing an exclusion from obligations there, and sprinkling the whole with scarcely credible claims to moral principle. Unsurprisingly, the policies born from this combination of shabbiness of motives and pretence to public spirit are as incoherent as they are socially wasteful. But that does not mean those policies are not privately profitable. Indeed, studies find even the EU ETS increased European generators’ profits by some 30 to 50 per cent, as free permit allocations ensured revenues increased by more than costs. Such transfers merely increase the inefficiencies, as profits are dissipated in attempts to secure and protect rents, while those who would bear the costs throw further resources at self-defence.

Only in bad light, and even then only by the weak-sighted, could such policies be confused for meaningful efforts at tackling climate change. That is the sham the commission’s spotlight exposes. But none are so blind as those that would not see. Forcing the government to face up to the PC’s findings is the task ahead.

Read it here.

Models wrong again – so what's new?

Warwick McKibbin

Not climate models this time (for a change), but Treasury modelling of the effects of a carbon price on the Australian economy. And according to Wayne Swan, we won’t even notice it! Brilliant! It’s almost as if the model was tweaked to produce the desired result… where have we heard that before? Tiny little question, if the economy doesn’t notice it, how is it supposed to reduce emissions?

But Swan has been caught out:

A prominent economist who sits on the Reserve Bank board has criticised the Government’s assessment of the economic impact of the carbon tax.

Yesterday Treasurer Wayne Swan said that based on Treasury estimates, a $20 per tonne carbon tax would not have a long-term impact on jobs and the economy.

He said employment will increase by 1.6 million jobs by 2020 under a carbon price.

But economist Warwick McKibbin, from the Australian National University, says the Government’s modelling is flawed.

He told Lateline Business a carbon tax could affect the cost of living.

“That’s the adjustment process in these models; if you raise carbon taxes and people lose their jobs, real wages will fall and therefore you’ll go back to full employment,” he said.

“So the critical question in that sort of model is not what happens to jobs: it’s what happens to real standard of living.”

Professor McKibbin runs his own software company which develops modelling for policy analysis, including a carbon pricing model.

He says he has submitted different modelling to Treasury and says the Government should use his model in its estimates.

“It would be very unfortunate if the leaked announcement that came out yesterday about the employment effects of carbon taxes was used in a model that wasn’t mine, because mine is the only model that has unemployment,” he said.

“The other models that people have for carbon pricing actually assumes full employment, so by definition, no matter what you do to the economy, employment cannot change.

“What should happen if you put on a carbon tax in those models is real wages should fall. Now, from the selective leaking, I think that that question hasn’t fully been understood.” (source)


Garnaut tells the truth about a carbon price

The truth will out

Just one line from his latest report is enough:

“Australian households will ultimately bear the full cost of a carbon price.” (source)

So it isn’t the big polluters, is it Julia and Greg?

Lies, lies and more lies from our deceitful government. When will it ever end?

Garnaut: China has carbon trading, so…

"Low carbon" China

See? Australia is lagging behind China in cutting emissions. Disgraceful. We must follow China’s lead and implement Julia and Greg’s wonderful carbon tax to cut our emissions from 1.3% of the global total to just a teensy-weensy bit less than 1.3%, at a cost of several billion dollars each year, which will be slugged mercilessly from the wallets of every family in Australia…, every year…, for ever…

CLIMATE change adviser Ross Garnaut says China is experimenting with carbon trading in a number of large cities because it knows that’s the cheapest way to reduce emissions.

The economist held talks today with the man responsible for China’s climate change policies, Xie Zhenhua, ahead of ministerial-level meetings.

Professor Garnaut said the emerging power was trialling carbon trading in five provinces and three cities – Tianjin, Shanghai and Beijing.

“The way China tends to do these things is they try them out, sometimes in different ways, and if they seem to be working they adopt them nationally,” Prof Garnaut told reporters, adding he wouldn’t presume what China’s next step would be.

“(But) they are experimenting with broader approaches like a carbon price because the economists in China as well as other places have worked out that’s a lower-cost way of doing things.”

Maybe we should copy China in other ways, like building a new coal fired power station every fortnight… no, wait. Laughably, even Greg Combet is citing China as a shining example of “tackling climate change”:

Mr Combet’s climate change department put out a briefing paper today, outlining the action China and other countries were taking to reduce emissions.

“Thirty-two countries and 10 US states already have emissions trading schemes in place,” the paper states. [24 of those countries are in the fraud-riddled EU ETS, aren’t they? And it’s nine US states now that New Hampshire has bailed out of the RGGI, isn’t it – Ed]

On China, it notes that Beijing’s latest 12-year plan speaks of an imperative for the country to establish a “green, low-carbon development concept”.

China’s new targets include:

  • increasing the proportion of non-fossil fuels in energy consumption to 11.4 per cent by 2015;
  • reducing energy per unit of GDP by 16 per cent by 2015;
  • reducing carbon dioxide emissions per unit of GDP by 17 per cent by 2015.

China? Low carbon? My aching sides. Of course, the “trick” to “hide the incline” is the magic words “per unit of GDP”. So let’s do the math, as our US friends would say. China is likely to have a GDP growth over the next four years of, say, approximately 9% per year, so if we take 2011 as a baseline 100 units of GDP, 2012 will be 109 units, 2013 will be 118.8 units, 2014 will be 129.5 units and 2015 will be approximately 141 units. So reducing emissions by 17% per unit of GDP actually works out as an increase of 17% on 2011 figures in absolute terms.

If we take China’s 2007 emissions figure of 6.5 Gigatons of CO2, which is probably far less than in reality today, that means an increase of about 1.1 Gt CO2 per year by 2015. For comparison, Australia emitted just 0.3 Gt per year in 2007. Which means in just four years, China will increase its emissions by nearly FOUR TIMES Australia’s annual total. Any reduction our pointless carbon tax might make will be simply lost in the noise. If we manage to reduce emissions by 10% by 2015 (highly unlikely), that equates to one fortieth of China’s increase – a joke in other words.

The reality of China is that it is far more concerned with raising its population out of poverty than “tackling climate change”, and nothing Australia does will make the slightest bit of difference.

More spin than a launderette from Garnaut and Combet – but what else do we expect?

Read it here.

A thousandth of a degree for $2,000 per family

Climate sense

That’s the cost/benefit analysis of a price on carbon in Australia, as Bob Carter points out in a letter to The Australian this morning:

OUR new Climate Commissioner, Tim Flannery, says that his role is to provide accurate information to the public about climate change. (Letters, 15/2).

Perhaps he might start by answering the two most critical questions that taxpayers have in mind.

The first is how many degrees of warming will be averted by a cut in Australian CO2 emissions of, say, 20 per cent by 2020. Second, what extra costs, including all flow-through costs, will be imposed on an average family by the taxation strategy that is aimed at producing such a cut. Available estimates indicate that the answers to these questions are: (i) less than one one-thousandth of a degree Celsius by 2020; and (ii) more than $2000 per family of four per year.

Australian battlers, on whom the extra costs will impinge the most, are unlikely to view this as a good public policy option, and if Flannery has more policy-favourable figures in mind, then now might be a good time to share them with us.

Bob Carter, Townsville, Qld

Seems like great value, doesn’t it?


Greens vs. Gillard

In the even-redder corner, the Greens!

Grab the popcorn and reserve a front row seat for the political punch-up of the year. The Greens and Labor will go head-to-head over the pointless carbon price, with the miners and the opposition throwing punches from outside the ring. Priceless!

JULIA Gillard and the Greens are on a collision course over the assistance levels for big greenhouse gas emitters in the government’s proposed new carbon pricing regime, as mine companies prepare to combat suggestions Australia is a “laggard” in international efforts to combat climate change.

The Prime Minister pledged not to throw out the “good work” on transitional arrangements for big polluters that was part of Kevin Rudd’s emissions package, but Greens deputy leader Christine Milne warned they would “not pass muster” if the multi-party climate change committee was focused on getting the best result.

The clash came as The Australian learned that resources companies were gearing up to fight what they called “exaggerated claims” about international efforts to combat climate emissions. Fresh from demolishing Mr Rudd’s prime ministership over the mining profits tax, the resources industry is preparing to oppose any carbon pricing scheme seen to be “out in front” of climate change efforts by the nation’s competitors. A briefing to mining executives prepared by the Minerals Council of Australia, obtained by The Australian, warns: “We need to be alert to exaggerated claims about the efforts under way in both developed and developing nations.” (source)

Seconds out, round one. Ding, ding.

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