Australian Policy
Clean Energy
Nicole Hannay
Anuar Tuleshov
February 29, 2012
“The world’s most emission-intensive advance economy is prepared to use a market mechanism to cut carbon emissions in a low-cost way.”
Deutche Bank Carbon Agent
Tim Jordan.
Australia is a country that widely supports the idea to halt the growth of the countries carbon dioxide emissions they contribute to worldwide. Different approaches and policies have been attempted so far by the government in order to meet requirements of the Climate Change Convention and Kyoto Protocol. Australia’s The Clean Energy Bill (2011) is a policy that was introduced into Australian legislation in October 2011; it is a groundbreaking movement in the Carbon Tax and Emissions Trading Scheme (ETS) seen as a policy tool for reducing emissions. Overall this policy has revolutionary potential for being a leader in global climate change.
Leading up to this bill Australian political parties had already agreed upon a common goal – reduce carbon dioxide emission and limit global warming.
The coalition government (John Winston Howard) coincided with the labor party (Kevin Michael Rudd) on an emissions trading scheme strategy, they agreed ETS was the direction to move Australia forward. The election of 2007 secured the win for the labor party, and resulted in the implementation of the Carbon Pollution Reduction Scheme. The opposition liberal party took a contradictory stance on the ETS model after a leadership change in December 2009 and consequently opposed further movement in the policy. Ironically more leadership change is what reignited the ETS debate. Julia Gillard successful defeated labor party leader Kevin Rudd in June of 2010, and in the federal election in August 2011 formed a minority government with support of 3 independent members of parliament (MPs) and Australian Greens MP. The controversy ensued when the Clean Energy Bill was announced in February 2011, it would consist of 2 mechanisms: First starting out as a fixed price carbon tax (July 2012) and then it would progress into a floating price emissions trading scheme after 3 years, essentially a cap and trade policy (July 2015). This was seen as controversial because Gillard had made political promises to not implement a carbon tax while in power– this was a political concession the party made to the Australian green party in order to secure a minority government. Such is politics.
There are a few primary goals that the Australia government has decided to aim towards in this carbon policy. It introduces the carbon pricing mechanism in such way that deals with assistance for emissions-intensive trade-exposed industries (the Jobs and Competitiveness Program) and the coal-fired electricity generation sector.
Australia has the highest level of emissions per capita of the developed nations and even though they are only responsible for 1.5% of global emissions that fact that they are emitting at the highest rates is cause for concern. The reason for the high per capital emissions stems from Australia’s dependency on coal, coal generates 80% of electrical energy for Australians and is a high source of carbon emissions.
Clean Energy
Objects:
- to achieve Australian`s obligations under Climate Change Convention and Kyoto Protocol
- -5% of 2000 by 2020,
- increase global awareness about climate change
- take action to reach Australian`s long-term goals (reduction GHG emissions to 80% below 2000 levels by 2050
- take that actions in a cost effective way
- put a price on GHG emissions that fosters and encourages investment in Clean Energy usage
- support economic growth of Australia
- jobs and competitiveness of the economy
- Cut 120 million tonnes in Australian carbon pollution by 2020 (ie 45 million cars off the road over the same time)
Another objective the Australian government has is to increase the energy efficiency of existing and new firms. Australia is pushing towards power generation in the renewables sectors as well as in natural gas, these are some of the long term goals of the policy. This is important in evaluating the effectiveness of achieving the policy goals. This policy has already seen an increase in spending and exploration by 62% this has not deterred new investment it has encouraged it.
The 2 phase mechanism is initially a fixed carbon tax that is applied on a per tonne rate. A$23.78, this will affect the top 500 polluters in Australia starting July 2012. The 500 polluters will be required to purchase permits for each tonne of CO2 they emit. To ease the burden of this new policy, emission intensive trade industries (steel, aluminum, zinc) will receive 94.5% of the carbon permits for free for the first 3 years, this ideally will buffer them into the new policy. The carbon price is equal to the cost per tonne emitted; this results in financial incentive for a firm to cut emissions. By 2015 ETS will be in full effect, the companies involved will need a permit for every tonne they emit.
Since Australia is trying to reduce carbon pollution, basically it requires strong legislative law in order to abate pollution. If Australia takes no action by 2020 our carbon pollution could be 20 per cent higher than in 2000, not 5 to 25 per cent lower as the Australian Government intends. The Australian Government’s targets are equivalent to a reduction in every Australian’s carbon footprint of nearly one third to one half. To help reach these ambitious targets of lowering these emissions, the Australian Government is developing and putting in place the policies we need through clean energy to support Australian businesses and households, reduce their carbon pollution, to create the new green-collar jobs of the future and to transform our economy.
How could goals be achieved? First and foremost, the Government should have right and appropriate law. Then it has to encourage investment in clean energy.($5 billion dollars were invested for developing new clean energy technologies). The technologies that will be developed in Australia also can be helpful to the rest of the world to reduce their carbon pollution. Moreover, the tax that will be imposed to any entity that emits pollution, will encourage the use of clean energy technologies. Also the comprehensive plan aims to introduce a carbon price and invest money in renewable energy. It includes transforming the energy sector away from high polluting sources such as brown coal and storing carbon in the land through better land management strategies.
Implementation over time. The mechanism begins on 1 July 2012, and operates on a financial year basis. The financial years beginning on 1 July 2012, 1 July 2013 and 1 July 2014 are fixed charge years. However, in the flexible charge years beginning on 1 July 2015, 1 July 2016 and 1 July 2017, some carbon units may be issued for a fixed charge (to act as a cap).
What Australia was able to do was identify the externality and assume the cost into the market price. The carbon emitted was external to the market price, Australia then used that cost to make the decision on its price. This carbon tax or pigovian tax is levied on market activity that creates the negative externality (carbon) essentially it is intended to correct the market failure so that social costs are covered by private costs. This is where Australia is so successful. The government is gaining tax revenue from the companies who are emitting CO2 and instead of just raising the tax base they are redistributing the taxes elsewhere. This is revolutionary because the tax is being reallocated to lower the income tax of the poor. In a Robin Hood like metaphor they are stealing from the rich to feed the poor, or taxing the bad and lowering taxes on the good. The bill also creates income tax reductions for those earning <$80,000 a year and will increase the tax free minimum earning from $6,000 currently to $18,200 in 2012 and further to $19,400 by 2015.
These mechanisms positively impact the poor because they are working from the bottom up, a very socialist perspective. In addition to helping the lowest income earning and giving cuts to the essential middle bracket, the bills also offers personal tax cuts for 90% of workers. Overall this is a comprehensive scheme when it comes to maximizing social benefits for the citizens of Australia. It is innovative, revolutionary and has strong financial support from both the public and private sector. Notwithstanding more political interjections the Clean Energy Bill (2011) could be the first step towards a successful global climate change initiative.
Even though implementation of this policy requires tremendous investments, it is worth every dollar spent. Australia and the rest of the world will benefit from it.
References
http://www.climatechange.gov.au/en/government/reduce.aspx
http://www.pc.gov.au/projects/study/carbon-prices
http://www.cleanenergyfuture.gov.au/
http://agneyablog.wordpress.com/2011/12/06/australian-carbon-tax-facing-the-uncertainity/
http://www.reuters.com/article/2011/07/17/us-australia-politics-idUSTRE76G2ZQ20110717
http://www.reuters.com/article/2011/11/08/us-australia-carbon-view-idUSTRE7A70IV20111108
http://www.reuters.com/article/2011/11/07/us-australia-carbon-idUSTRE7A60PO20111107