The Oil Drum: Australia/New Zealand | The Bullroarer

10 comments on The Bullroarer - Wednesday 16 July 2008

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Boof on July 16, 2008 - 4:50pm

Despite early stumbles Rudd is keeping his word. He has also pre-empted some critics by keeping the carbon scheme separate from other economic factors.

However because of freebies and handouts I suspect the scheme could end up in the black. They could hand out a lot more than say $8bn in likely revenue. I suspect that oil refiners will be more than a little pissed they have to pay top dollar while brown coal generators get cash.

The scheme has compromised itself out of its original principles in several ways. An initial set carbon price eg $20/tonne CO2e may not gel with the yet to be announced target ie it is not a cap or physical limit. Annual carbon reductions of around 2% would seem to be required and that may not happen barring recession.

While soft targets get the full treatment the biggest carbon villains seem to get an indefinite holiday. Both the free permits and the cash could be on the stingey side but they could go on for years longer than intended. By 2015 or so those industries may still be on assistance. Whether or not the clean tech boom fills the gap is hard to predict but we have to go down this path regardless.

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Neil1947 on July 16, 2008 - 7:04pm

If we accept that we need at least a 2% carbon reduction per year and most most of these cut will have to come from a reduction in coal fired electricity generation, this will mean an annual cut of about 4% in coal fired electricity. A $20/tonne cost for CO2e, will be equivalent to $80 /tonne thermal coal. This is double the long term contract price, so even if the industry gets 60% permits free, every additional kwh is going to be considerably more expensive to generate, so the industry will be keen to cut back on supplying off-peak power at 1.2-2 cents/kwh. With the rise in prices for export thermal coal, I can't see any new coal fired plants built until a workable and economic sequestration demonstration is up and running(if thats possible). It seems likely that in time CSM powered plants will displace all coal fired plants above the free permits. This will result in CSM prices rising to world LNG prices.
One outcome will be much higher off-peak or base-load prices for electricity which will benefit wind generated power.
The 16% rise in retail electricity prices seems low unless the carbon tax is much less than $20/tonne CO2e.

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