Federal Energy Minister Martin Ferguson has released a report
this week which suggests a carbon price of $40 per tonne is
necessary to move to the first stage of a low emissions energy
Here, Partner Michele Muscillo and Solicitor Ben Ricketts
discuss the findings of the report and how those findings sit with
other papers released on the topic.
The report, which was prepared by Deloitte, states that $40 per
tonne will allow gas fired electricity to compete with cheap black
coal power generators at least on the east coast of Australia. A
price of $70 per tonne has been suggested for Western
The second stage of renewable energy would be for gas fired
electricity generation to be replaced by or compete with
alternative energy sources such as photovoltaics, wind farms and
tidal. However, no price has been suggested for that second stage
Key climate change adviser Professor Ross Garnaut has previously
indicated that a carbon price of between $20 and $30 per tonne
would be sufficient. The Greens has argued for a minimum of $25.
The mechanism for pricing carbon is expected to be settled by July
this year and implemented the year after in July 2012.
The key points
Professor Garnaut has recommended a carbon price of between $20
and $30 per tonne, whilst The Greens (who will hold power in the
Senate from 1 July this year) have maintained that a minimum of $25
a tonne is necessary
The report released this week indicates that in order for gas
fired electricity producers to compete with black coal on the east
coast of Australia, a minimum of $40 per tonne will be necessary.
However Minster Ferguson has already indicated that $40 is not a
starting price, just what is necessary for gas to compete
The Price Floor report from ANU (detailed below) states that
certainty can be given to businesses and investors by providing a
minimum floor price (without necessarily recommending what price)
with a mechanism that allows for a tax to be added to the price of
carbon permits under an emissions trading scheme
So what is a price floor?
Released by the Centre for Climate Economics and Policy at ANU,
the Price Floor report recommends that whatever the carbon price, a
floor must be provided to give assurance that the price of a carbon
permit will not drop below a certain level. By doing so, certainty
would be provided for investors and businesses. This will allow
investment in alternative energy sources without the concern that
the price of carbon permits will drop unnecessarily low.
The paper, released by Dr Frank Jotzo and prepared on behalf of
the Multi Party Climate Change Committee, argues that a floor price
will help to manage cost uncertainty, will reduce price volatility
and will improve investment certainty for low emission
technologies. The paper considers three possible mechanisms for
such a floor price (the first two have not been considered
a buy back by the government (when the price drops to the floor
a minimum reserve price for auction permits;
a further tax on a emissions trading scheme (regarded as the
most desirable option).
In an emissions trading scheme, an emitter would have to buy
permits and then surrender those permits in order to emit CO2.The
mechanism proposed would see a further tax added for each tonne of
carbon emitted. The carbon price then becomes the total of the
price for the permit plus the extra tax.
For any advice in relation to climate change or carbon pricing
please do not hesitate to contact HopgoodGanim's Climate Change
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