Flaws in the Carbon Pollution Reduction Scheme

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Comment by Lee Stewart on March 9, 2009 at 9:29am

There is an interesting article posted this morning by ABC News and will be a segment on ABC Four Corners Tonight at 8:30pm with an interview with Garnaut who is expressing his disappointment with the scheme. So it may be worth watching.

Comment by Stuart Ritchie on March 7, 2009 at 9:21am

Erin, thanks for the comment. There indeed have been advocates of border adjustment mechanisms (including us), which would easily address this problem. However, there has not been a mature debate on this with common statements being that such mechanisms run foul of WTO rules. We have undertaken research that indicates that such mechanisms are on at least an equal footing in relation to WTO concerns as the EITE assistance package proposed.

You assumption about 1990 levels is not correct in relation to the CPRS. The permit liability of a particular company will be based on their production levels for the prior 2 years and is not assessed against a 1990 benchmark or a greenhouse efficiency standard. I work for the cement industry which is an import-competing, emissions intensive industry. Companies determined to have trade-exposed activities will be eligible for an allocation of permits - in our case a nominal 90%, which the government is busy whittling down to 80% on the argument that only certain activities we undertake are emissions intensive - unfortunately it is actually the product that is trade-exposed. While 80%/90% seems generous, remember that this is a highly price sensitive market - at least 2 degrees removed from the end consumer (did you specify Australian or low emissions cement when/if you last built a house?) and our importing competitors will not carry a carbon price.

Comment by Erin Horbach on March 4, 2009 at 2:03pm

Building on Stuart Ritchie's comment, have their been discussions on the table to add import taxes to imported products from the types of industries regulated under the Australian scheme? This would offset some of the incentive to move production abroad, at least for products which will return to Australia. I assume Stuart Ritchie works for a mining corporation or another large process industry but not a utility.

Furthermore, if you are at your 1990 emissions levels and have increased production as successfully as you write, I assume you don't anticipate further growth at your current plants (whether a utility or some other type of manufacturing facility). If that is true, the best option for your company would be an auction of credits. Assuming emitters under the new trading scheme will have to reduce to emissions levels around the 1990 levels, your company has already reached this goal and will therefore require no credits at the auction.

Kind Regards, EH

Comment by Stuart Ritchie on March 4, 2009 at 10:04am

I agree there is an issue with individual action, but it shouldn't be forgotten that there will still (eventually?) be a financial payback from individuals taking action. The reality here is that it is early action by leaders that inevitably goes unrewarded when government moves to regulate by whatever means - sounds suspicously like an early industry campaign for credits for early action which was shown the door at a very early stage.

I'm with Vince and by way of a declaration, work for a big polluter. There is still a real flaw that exists in relation to the "abolish free credits for the biggest polluters" point above. The inherent flaw is that an emissions production based scheme will not work in isolation. The geographical structure of the industry I work in is such that the additional cost impacts of the CPRS will simply move our production offshore to equal or lower greenhouse efficiency producers - with a net seriously perverse outcome for global CO2 emissions. and lets not forget that we only produce to meet a demand from consumers (wouldn't they be individuals?).

How does this relate to the individual incentives issues. We undertook our abatement over the last decade and were able to keep emissions at 1990 levels while increasing production by 50%, (and yes we did it to remain competitive with imports) - we are as greenhouse efficient as anyone in the world - and what do we get for that? No further abatement opportunity, a tag as a "big polluter", and a government more interested in domestic emissions that's happy to show us the door.

Have a nice day!

Comment by Chris Rodowicz on March 4, 2009 at 9:19am

Hi, it is an interesting albeit challenging scenario we have here. I think that we should support ANY system that starts us off in the right direction. It easier to amend or adjust something that is already in place. In the end the real challenge is with consumer behaviour and a general unwillingness to compromise on our lifestyle of conspicuous consumption that we have created in this country. The "big polluters" are an easy target but is it not about supply meeting demand? We can effect dramtic change on the big polluters by consciously seeking out products that use sustainable renewable energy etc but we baulk when it costs more. As consumers collectively we really lack the courage to make this happen and happen asap. And at the corporate level it is more about "green washing" than wanting to save the planet. Anyway that is my 2 cents worth.

Comment by PATTY DOW on March 3, 2009 at 10:11am

Just curious....does Australia have any sort of legally-mandated Commuter Trip Reduction Programs? When implemented correctly, these programs can help to reduce auto emissions generated from employee trips to and from the workplace.

Comment by Erin Horbach on March 3, 2009 at 8:24am

Hello,
Do you or your readers believe that Australia will look to change the proposal to an auction of carbon permits in light of the new US-Obama proposal for 2012 that promotes an auctioning of all permits?
Thanks, Erin

Comment by Terence Jeyaretnam on February 27, 2009 at 1:16pm

Hello Vince,

Been a long time.

Certainly not looking to offend anyone. If you read my blog, it is referencing ten well-known economists and their comments - I happen to agree with their view. And by 'bigger polluters' I mean anyone who is a liable party - not anyone who uses electricity.

Hope all is well, Terence.

Comment by Vince Chaplin on February 27, 2009 at 12:57pm

Just for clarification:

1) The "biggest polluters" are the coal-fired power stations, not the users of the electricity they generate. For that matter, anyone who uses electricity sourced from a coal-fired power station reading this article, should feel offended such remarks.

2) Comments such as these have the potential to maim one of these 'biggest polluters' who also just happens to be one of the biggest consumers of recovered scrap metal in Australia, producing a product which is highly exposed to imports from countries who produce their product with a far higher carbon intensity than the average carbon intensity of an Australian EAF steel mill, not even taking into account the additional transportation to get that product here.

By all means, have a spray at 'big polluters' but be careful of the collateral damage caused when you don't realise that one of these, is actually the largest user of a secondary (recycled) product with one of the highest levels of embodied energy - which of course, displaces energy demand by 75% over (most likely manufactured-route) imports.

Comment by Leon Young on February 26, 2009 at 7:29pm

GetUp have started a petition. www.getup.org.au/campaign/PermitMeToMakeADifference

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