Keep Thinking about Carbon

The Federal Government has come under intense criticism for “delaying” the Carbon Pollution Reduction Scheme (CPRS) and so it should. Anyone can be a follower, a waiter or a do-nothinger. The people want problems solved and they want leadership that can solve them.

No doubt there will be widespread fallout, and already the decision has led to reports of major energy investments being delayed or cancelled.

But not all cancelled projects will affect share investors.

For environmental, sustainability and ethical investors, probably the most immediate impact of the CPRS ‘delay” is in market sentiment - lowering expectations, reducing interest and taking some momentum and blue sky out of share prices, particularly clean energy stocks.

But the “delay” is more likely to affect sustainability and ethical investors than environmental investors.

Many large companies across the economy that would have cleaned up their acts and become more sustainable and more ethical may now continue as they were - though that depends on the quality and foresight of their management.

For environmental investors the impact is mostly limited to the small number of clean and cleaner energy stocks.

Despite the reduced sentiment, these stocks are still buoyed by the 20 per cent Renewable Energy Target. Renewable energies that are already competitive, such as wind, remain so. Geothermal exploration continues. Solar still benefits from a variety of government programs. Oil continues to blacken its name, this time with the huge oil spill off the US coast. Petrol remains expensive so biofuels still have a chance. And many people are still hanging out for an electric car.

We haven’t taken a step forward but we haven’t gone backwards either. We are where we were.

And while we stand and wait, the Government should seriously look at simplifying the CPRS so that, if it really is only a delay, the CPRS returns in as simple a form as possible. Future resistance would also be reduced if the CPRS addresses the legitimate concerns of industry.

Here’s one suggestion. At the moment emitters have two choices. Reduce emissions immediately or buy permits. A problem with this is that money spent on permits is gone.

Why not a third option - an opt out clause where companies can put that money into a trust fund for future capital expenditure within their own business, with the expenditure chosen from a government list of suitable emissions reductions measures.

At the moment, power stations have to pay for reduction measures upfront, and can balance this with free permits.

But opting to save their permit expenditure means companies can save up to pay for their emissions reductions measures rather than have to find the money immediately.

For example, a coal power station would be able to save up enough to replace, one by one, its coal units with whatever it likes, gas units, geothermal, solar, wave, carbon capture, or a mixture of these.

This way a dirty energy producer can worry less about going out of business and over time focus more on becoming a clean energy producer. And it can use its own money to do it, rather than have that money make someone else a clean energy producer.

With 1,000 big emitters affected by the CPRS, other sectors could also opt out if they come up with a better way to spend their own money. An aluminium smelter or cement maker with its own renewable energy farm next door? Who knows? But the important thing is to let the ideas roll.

The politicians may have wasted the public’s desire for change, but if we stop thinking about the CPRS we will also waste the next three years and make it easier for change not to happen.

Victor Bivell is editor of Eco Investor Magazine. See www.ecoinvestor.com.au