Where next for climate policy in Australia?

David Fogarty Reuters 8 Jul 10;

SINGAPORE (Reuters) - Australia faces an election within months and new Prime Minister Julia Gillard has said she will announce additional steps on fighting climate change before the poll.

Climate change will be an election issue and analysts say Gillard must do something to win back voters angry over the government's shelving of an emissions trading scheme in April.

Gillard has said Australia needs to place a cost on planet-warming carbon emissions from industry, transport and households. A national consensus on how to do this is crucial.

Here is a look at what might come next in the government's fight to preserve its voter base and recapture disgruntled green voters ahead of elections.

A COMPROMISE EMISSIONS TRADING SCHEME OR CARBON TAX?

Very unlikely.

The political debate on emissions trading has become so polarized that Gillard will want to avoid anything that gives the opposition or powerful industry lobbies reason to attack her, particularly after a bruising debate on a planned mining tax.

"A carbon price is completely off the agenda. I can't see the government going anywhere near that in the lead up to the election. They don't want to fight a great big new tax," said Andrew Macintosh, Associate Director of the Center for Climate Law and Policy at the Australian National University.

Gillard will want to shore up the existing voter base by trying to resolve other outstanding issues, such as the mining tax deal and changes to immigration and refugee policies.

But she needs to restore public trust in the fight against climate change, so she might announce some form of public consultation on carbon pricing prior to the election with a view to having legislation come back to the parliament next year.

MORE STEPS TO BOOST RENEWABLE ENERGY AND ENERGY EFFICIENCY?

Likely.

Gillard has said she will announce steps in these areas. She might announce additional funding of big-ticket renewable energy projects, such as offering tax relief or other incentives. She might also opt for energy efficiency measures for households and small-to-medium enterprises to help them cut power costs.

Analysts say much more can be done to boost energy efficiency in Australia to curb the growth in demand for electricity.

Plans for households and businesses could include subsidies, revolving funds or marginal tax rate benefits. But the key is to avoid a repeat of a botched government-backed home insulation scheme that led to fires and the deaths of four people.

Analysts say Gillard also needs to find a way to reach to out to farmers, even if it is simply discussing ideas on helping on climate change, land productivity and drought tolerance.

DO NOTHING?

Possible but risky.

"My feeling at the moment is that she will continue the rhetoric on concern about climate change, but we won't hear much in terms of substance," Macintosh said.

Gillard faces a delicate dance in being seen to be doing something while not angering blue-collar workers who fear higher costs from climate policies.

"My take-home message is the government has a major credibility gap in this policy space," said Peter Christoff, lecturer in climate policy at the University of Melbourne, adding the government needed to revisit the carbon pricing debate to regain that credibility.

Q+A: Why Australia needs a price on carbon
David Fogarty Reuters 8 Jul 10;

SINGAPORE (Reuters) - Australia is the world's top 2coal exporter, relies on coal to generate more than 80 percent of its power, transports most goods by road and cars clog its cities.

Still, one of the world's top per-capita emitters of planet-warming carbon pollution is determined to cut its emissions, even as a growing population and booming economy make achieving this a major challenge.

Following are some questions and answers on tackling Australia's greenhouse gas emissions:

WHY THE NEED TO ACT?

Australia's economy, and particularly its power generation sector, has been driven by access to nearly limitless supplies of cheap brown and black coal, and gas. Coal, the most polluting fossil fuel, still remains the cheapest source of power.

Australians also love their cars. In a nation of 22 million people, there were 15.7 million vehicles registered in 2009, up from 13.5 million in 2004, government figures show.

Between 2008 and 1990, the base year for the U.N.'s Kyoto Protocol climate pact, net emissions grew by 31.4 percent.

Over the same period, emissions from the power generation sector rose 52.1 percent, while transport emissions increased 29.2 percent. Overall, emissions from the energy sector, comprising three-quarters of the nation's greenhouse gas pollution, rose 44 percent.

A growing population, expanding at roughly two percent a year, and rising incomes mean greater demand for energy.

The projected impacts of climate change on Australia also worry many. Rising sea levels, greater extremes of droughts and floods, higher temperatures, more intense bushfires, water shortages, and warmer and more acidic oceans in coming decades collectively point to a tougher future.

WHAT HAS THE GOVERNMENT DONE SO FAR?

Not much. It is has developed an emissions trading scheme but twice failed to win political support and has since shelved it.

The government has also set a target of cutting emissions by 5 percent by 2020 from 2000 levels and by up to 25 percent if there's a strong global climate agreement.

Europe has a more ambitious target of cutting greenhouse gas emissions 20 percent below 1990 levels by 2020 and by 30 percent if there's a strong global climate pact. Britain is targeting a cut of 34 percent below 1990 levels by 2020.

The Australian government has had better luck winning parliamentary approval for a scheme that mandates a target of 20 percent renewable energy generation by 2020 and has also laid out a A$4.5 billion initiative backing investment in clean energy.

IS A CARBON PRICE BEST?

Yes. An emissions trading scheme that sets a clear reduction target and lets the market set a price for each tonne of carbon dioxide emitted is seen as the best way to drive greater energy efficiency and investment in cleaner energy.

The renewable energy target (RET) laws just passed by parliament, while boosting investment in wind farms and some other renewables, won't lead to significant emissions reductions, analysts say.

Instead, the RET will promote the addition of generating capacity that will largely meet the projected annual growth in consumption of about 3 percent.

The RET is unlikely to displace coal-fired generation to any significant degree but is likely to encourage fast-start gas-fired generation needed to meet baseload power demands when wind power output dips.

Generators say a CO2 price that effectively makes coal-fired power more expensive is needed to push a greater shift to cleaner gas and new-generation renewables, such as geothermal.

WHAT ARE THE RISKS IF THERE'S NO CARBON PRICE?

Increasingly, investors are demanding certainty on CO2 pricing to ensure financing for investment plans.

Some companies and the government also say the longer the delay, the higher the costs to the power generating sector, other industries and households in meeting the minus-5 percent target.

(Editing by Michael Urquhart)

Factbox: How will Australia's RET affect power generators?
Reuters 8 Jul 10;

(Reuters) - Australia's approval of an expanded green energy scheme will underpin a multi-billion dollar boom in wind farm construction, analysts and investors say.

The scheme mandates 20 percent renewable energy generation by 2020 and will go a long way to satisfy the growing thirst for electricity of Australia's expanding economy and limiting growth in greenhouse gas emissions from the power sector.

It is expected to lead to an additional 7,000 to 9,000 megawatts of wind power on top of about 2,000 MW now.

Following are some of the scheme's key points and likely impacts on power generators.

HOW THE SCHEME WORKS

The renewable energy target (RET) scheme mandates the creation of 45,000 gigawatt hours (GWh) of green power by 2020, with 41,000 GWh to be met by large-scale investments and the rest by smaller domestic solar hot water and solar panels.

The large-scale target will step up from 10,500 GWh in 2010 to 41,000 GWh within a decade.

To underpin investment, clean-energy projects earn tradeable renewable energy certificates (RECs) per megawatt-hour produced.

The RET scheme legally obliges wholesale power retailers and some generators to buy RECs from green power providers at negotiated prices, so creating demand and supply. The RECs are traded online and held in a registry.

IMPACTS ON COAL-FIRED GENERATORS

Coal remains Australia's cheapest form of power generation. Black coal makes up 57 percent of all fuels used, brown coal 25 percent and gas 16 percent, based on 2007/08 government data.

Coal generators include International Power, TRUenergy Holdings Ltd, state-owned Macquarie Generation and AGL Energy.

Analysts and power firms say the RET will not displace coal and only a carbon price via an emissions trading scheme will speed the closure of brown and black coal power plants or refitting with cleaner gas burners.

But the RET will nonetheless put an extra squeeze on coal-fired generators, who already realize a price on carbon is coming and their polluting product will inevitably become more costly and less desirable, says WWF Australia CEO Greg Bourne.