Sunday, July 10, 2011

Australian Government Carbon Emmissions Strategy

The Australian Government today released its "Clean Energy Future" strategy, including an initial carbon price of $23 per Tonne. The price will increase by 2.3% per year for three years, after which a trading scheme with a market price will be introduced. The carbon price will only be levied on very large carbon emitters, with numerous exemptions and compensation for industry sectors and individuals.

The government has adopted a strategy to emphasize the compensation package for individuals and assistance to business, while limiting the carbon tax to the minimum possible range of industry at the lowest feasible price. The small number of organizations which will need to register for the scheme (about 500) will limit the cost and complexity of administering the scheme and also limit the political opposition. Most voters will be overcompensated and the industry assistance schemes give numerous opportunities for positive government publicity. Assuming that the minority government can stay in office long enough to bring the scheme into operation, it should be successful, both in political and environmental terms.

The Australian Government has gone to considerable lengths to provide detailed, clearly prepared on-line information about the new strategy. Unfortunately the home page fails validation with 11 HTML errors. The page also rated 0 out of 100, on the W3C mobileOK Checker and failed an automated accessibility test. While these problems will not prevent most people accessing the information and could be easily corrected, this does not indicate the level of attention to detail needed for a policy on which the future of the nation depends.

A price on carbon pollution will create incentives to reduce pollution and invest in clean energy. A carbon price will ensure that pollution is reduced at the lowest cost to the economy.

Under the carbon price, around 500 of the biggest polluters in Australia will need to buy and surrender to the Government a permit for every tonne of carbon pollution they produce. For the first three years, the carbon price will be fixed like a tax, before moving to an emissions trading scheme in 2015. In the fixed price stage, starting on 1 July 2012, the carbon price will start at $23 a tonne, rising at 2.5 per cent a year in real terms. From 1 July 2015, the carbon price will be set by the market.

The carbon price will be accompanied by assistance supporting households, jobs, businesses and communities, to help them adjust, lower their carbon pollution and to protect our international competitiveness.

To assist households with price impacts, there will be two rounds of tax cuts and increases in pensions, allowances and benefits. Significant tax reform will mean that more than 1 million people will no longer need to file a tax return. Increasing the tax-free threshold and cutting taxes also boosts incentives to work. Over 50 per cent of carbon price revenue will be spent on households. Household transport fuel consumption will not be subject to a carbon price.

Substantial industry assistance will be provided to support jobs and competitiveness as we move to a clean energy future for emissions-intensive, trade-exposed industries, manufacturing, food processing, metal forgers and foundries, electricity generators and small business, as agreed by the Multi-Party Climate Change Committee. The Government is also separately investing in protecting jobs in the steel and coal industries.

A $10 billion new commercially oriented Clean Energy Finance Corporation will invest in renewable energy, low pollution and energy efficiency technologies—a major increase in support.

The Government will seek to negotiate the closure of around 2000 megawatts of highly polluting electricity generation capacity by 2020 to reduce pollution and facilitate a smooth energy market transition.

Farmers and land managers will receive significant support to pursue climate change action on the land and enhance biodiversity through a suite of measures including the Carbon Farming Initiative, the Carbon Farming Futures program and a new Biodiversity Fund. Emissions from agriculture will not be subject to a carbon price.

The Government is providing additional support to promote energy efficiency.

Low Carbon Communities will help local councils and communities improve energy efficiency in community facilities, including a new Low Income Energy Efficiency Program.

The Government will expedite the development of a national energy savings initiative....

From: Executive summary, Australia’s clean energy future, Australian Government, 10 July 2011


Scheme architecture ...

Fixed price period

The carbon pricing mechanism will commence on 1 July 2012. There will be a three year fixed price period.

The fixed price

The carbon price will start at $23.00 per tonne in 2012‑13 and will be $24.15 in 2013‑14 and $25.40 in 2014‑15. The prices in the second and third year reflect a 2.5 per cent rise in real terms allowing for 2.5 per cent inflation per year (the midpoint of the Reserve Bank of Australia’s target range).

Fixed price permits

Liable entities will be able to purchase permits from the Government at the fixed price, up to the number of their emissions for the compliance year. Any permits purchased at the fixed price will be automatically surrendered and cannot be traded or banked for future use. Permits freely allocated may be either surrendered or traded until the true-up date for the compliance year in which they were issued. They cannot be banked for use in a future compliance year.

Buy‑back of freely allocated permits

The holders of freely allocated permits will be able to sell them to the Government from 1 September of the compliance year in which they were issued until 1 February of the following compliance year. The price paid by the Government will be equal to the price of the fixed price permits for that year, discounted to 15 June of the compliance year by the latest available Reserve Bank of Australia index of the BBB corporate bond rate, so that the buy‑back price reflects the present market value of the permit. From 15 June onwards, the price paid will be equal to the fixed‑price permits for that vintage. ...

From: Carbon pricing mechanism, Appendix A, Securing a Clean Energy Future, Australian Government, 10 July 2011
Extensive documentation on the "Clean Energy Plan" is provided, including:
  1. Climate change plan: "Securing a clean energy future" and summary.
  2. Financial assistance and tax changes for the community: "Supporting Australian households – helping households move to a clean energy future"
  3. Measures for industry: "Clean energy Australia – investing in the clean energy sources of the future"
Fact Sheets:
  1. Household Assistance
    1. Support for working Australians
    2. Pensioners
    3. Supporting low income households
    4. Self funded retirees
    5. Essential medical equipment
    6. Students and job seekers
    7. Carers and people with disability
    8. Families
    9. Tax reform
    10. Aged care residents
  2. Regional Australia
  3. Supporting jobs and industry
  4. Small business
  5. Local government
  6. Biodiversity Fund
  7. Transport fuels
  8. Tax treatment
  9. Support for the Australian steel industry

Carbon Price Modeling

  1. Website
  2. Modelling Report
  3. Modelling Overview

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