carbon price and the energy sector june 2011 kane thornton director of strategy & operations
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Carbon Price and the Energy Sector
June 2011
Kane Thornton
Director of Strategy & Operations
Agenda
• Carbon and the Australian energy sector
• Energy Sector Objectives
• Carbon price impact
2
The Clean Energy Council
• Peak body representing Australia’s renewable energy and energy efficiency sector.
• Represents more than 500 member companies involved in developing and deploying renewable energy and energy efficiency.
3
Carbon Emissions
5Emissions Reductions
Source: Stern Review, 2007
Implicit carbon price 6
7
Australia’s Abatement Challenge
(DCC, 2009)
8Abatement Challenge
(Garnaut Review, 2008)
9Australia’s Emissions
Energy Sector Objectives
11
Energy Sector Objectives
1. Demand side response
2. Accelerate renewable energy
3. Support low emission generation
4. Encourage new technology
5. Phase out high emission generation
12
Australia’s Renewable Energy
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Renewable % 20% RET target
Original MRET target
13
14
Proportion of Renewable Energy
(International Energy Agency, 2009)
0102030405060708090
100
Korea
Luxe
mbo
urg
United
King
dom
Irelan
d
Japa
n
Belgium
Nethe
rland
s
Czech
Rep
ublic
Russia
n Fed
erat
ion
United
Sta
tes
Slovak
Rep
ublic
Hunga
ry
Greec
e
Austra
lia
Germ
any
Poland
Spain
Franc
e
OECD tota
lIta
ly
Mex
ico
China
Turke
y
Wor
ld
Portu
gal
Denm
ark
Canad
a
Switzer
land
Austri
a
Finlan
d
Sweden
New Z
ealan
dIn
diaBra
zil
Norway
Icelan
d
Australia
World Average
Carbon Price
16
“Climate change is a result of the
greatest market failure that the
world has ever seen”
Sir Nicholas Stern, 2007.
17Objective of a price on carbon
• Places a cost on emissions• Cost to produce greenhouse gas
intensive products will increase. • Financial incentive to reduce emissions:
– Polluters: • produce less greenhouse gas intensive products
or• invest in activities or technologies which can
reduce their emissions. – Consumers:
• purchase lower greenhouse gas intensive products (such as renewable energy)
18Alternatives
• Carbon tax• Emissions Trading
– Cap and Trade– Baseline and Credit– Hybrids (Frontier Economics, McKibbon)
• Direct Government intervention
19How it works
• The quantity of emissions produced is monitored and audited (NGERS).
• Polluters need to acquire a ‘permit’ for every tonne they emit.• The number of ‘permits issued by the Government in each
year will be limited (cap).• Firms compete to purchase the number of permits they
require.• Firms that value the permits most highly will be prepared to
pay most for them (trade).• For some firms, it will be cheaper to reduce emissions than to
buy permits.• Certain sectors and firms might receive some permits for free,
as a transitional assistance measure. These firms could use these permits or sell them.
20Key Design Elements
• Liable parties• Scheme abatement target• Use of revenue• Compensation• Offsets• International Links
21Electricity Prices
(Garnaut Review, 2008)
22
Energy Sector Objectives
1. Demand side response
2. Accelerate renewable energy
3. Support low emission generation
4. Encourage new technology
5. Phase out high emission generation
Conclusion
• Carbon price is inevitable• Australia’s competiveness is at risk• Must reduce emissions from energy
generation• Carbon price is critical
23
