Broadening the Carbon Pollution Reduction Scheme

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Submission To Carbon Pollution Reduction Scheme - Green Paper (Australia)

Submission from: Lighter Footprints climate change action group, Surrey Hills, Victoria, Australia


  • Carbon Pollution Reduction Scheme
  • Department of Climate Change
  • Canberra ACT 2601, Australia

Proposal to add design in relation to: Future coal export

Australia is now the world’s biggest exporter of coal.

We export nearly 4 times as much coal as we use domestically.

In 2006, Australia’s net greenhouse emissions were 576 million tonnes of CO2 equivalent. Australia is forecast to export 260 million tonnes of coal in 2008 (Source: ABARE June 08), which will generate emissions from combustion of the exported coal estimated at 526 million tonnes CO2 equivalent.

However, companies exporting coal WILL:

  • profit from carbon pollution emitted elsewhere (outside Australia)
  • profit by selling more coal, not less coal
  • create ‘carbon leakage’ i.e. enable coal users overseas without similar carbon pollution cost to become comparatively more competitive

Coal exporters will NOT:

  • directly contribute to ‘clean technologies’ being developed
  • have incentives to develop ‘more efficient’ or ‘less polluting’ coal technologies
  • have incentives to develop those solutions that will in the long term potentially contribute to a viable non-polluting coal future, within and outside Australia.

Under the Green Paper’s ‘Carbon Pollution Reduction Scheme’ Australia will begin the transition to a low carbon society. Individual Australian taxpayers and residents will indirectly pick up the cost passed on from carbon permits, and indirectly fund ‘clean technology’ development and efficiency development.

In other words, Australians will bear the burden of financing transition to a low carbon future, whilst allowing coal exporting companies to avoid their responsibility. To ensure equity, coal exporters must contribute nationally in a serious and compelling manner. It is noted that coal export is now a low cost, high margin industry, and has recently enjoyed very high increases in sales and profit. As such the proposed tax/levy would not threaten the viability of the businesses that would contribute it.

This proposal provides greater equity to all Australians. It increases the possibility of finding a low-carbon future for coal. It provides a financial mechanism to part-fund the transition domestically and globally to "clean technologies" that may include "low polluting" coal technology.

Australia has a responsibility in exporting coal from NSW and Queensland, to places such as China. Because of Australia’s increasing coal exports, and its position as number 1 world coal exporter, this country is in a strong position to fund the required developments of clean technologies for transition to a low carbon economy, whilst also funding mitigation and adaptation to climate change.

This proposal advocates the addition of two key features:


[edit] 1. A tax or levy on export coal.

(Whilst we have broad acceptance of the mechanism of a ‘carbon pollution permit’ for Australia’s emissions, we propose a separate levy or tax permit for exported carbon pollution. This would reduce the complexity associated with interdependency between a cap on carbon pollution emitted domestically, and tonnes of carbon pollution emitted outside Australia).

[edit] 2. Fund "clean technologies", efficiency technologies, mitigation programs and adaptation programs

The revenue from the tax or levy on export coal be used to fund ‘clean technologies’, efficiency technologies, mitigation programs and adaptation programs in Australia.

Page 29, 3rd last paragraph, Green Paper Summary, states:

"However, the imperative to develop clean coal options is not purely domestic. Coal is the most plentiful and broadly distributed energy source on the planet. As a major coal exporter, Australia has a key interest in supporting the development of CCS to be used in a way that does not compromise the global climate change objective.”

Proposed addition to “Summary of Preferred Positions”:

3 Carbon Markets

3.1 Recognizing Australia as currently the world's biggest coal exporter, effectively exporting 526 million tonnes of CO2 pollution, coal exporters surrender the equivalent of 0.5 carbon pollution permits per one tonne of carbon dioxide. This mechanism will be in the form of an ‘exported pollution levy’.

(The 526 million tonnes CO2 equivalent recognizes thermal black coal and metallurgical coal have different carbon pollution emission rates).

If the coal use can be proven to be at an accredited carbon capture and sequestration site , then similarly to Section 2.9, that carbon sequestered would be netted out of the coal exporter’s ‘exported pollution levy’.

Page 50, ‘Green Paper Summary’ states:

10. Assistance for strongly affected industries: Section 10.3 “The Australian Government has made significant contributions to progress the commercial deployment of carbon capture and storage (CCS). These contributions, and any further support, should recognize the technical and institutional hurdles to the development and deployment of carbon capture and storage technologies, and reflect Australia's significant domestic and international interest in the development of this technology”. Proposed addition to “Summary of Preferred Positions”:

10.3 The Australian Government will continue to fund various “clean energy”’ projects. The Australian Government will, in addition, fund “clean energy options”, and related adaptation and mitigation projects, from the revenue raised from coal exporters (refer 3.1 addition above).

Note: We have focused on Australia’s coal export, our biggest carbon-based export industry. We are the world’s biggest coal exporter.

The same ‘pollution export levy’ principle applies to the export of natural gas (and oil) from Australia. Australia is now the 18th largest producer of natural gas, the seventh largest exporter of LNG (liquid natural gas) in the world and the third-largest LNG exporter in the Asia-Pacific Region. The outlook for Australia’s LNG industry is for continued high growth, with exports forecast to rise dramatically from 7.8 million tonnes in 1999 to 20 million tonnes by 2010.

The CO2 emissions from burning gas are 40% of those of coal and the levy could readily be extended to gas (and oil). Counter-balancing the need to also levy gas is the fact that gas is seen by many as a ‘transition’ energy source. That is, in the short medium term while ‘renewables and clean energies are being developed, gas could be used in preference to coal, whilst emitting 60% less carbon pollution than thermal coal. Therefore, because of arguments about gas being less carbon intensive, and about the need for ‘transition’ to a low carbon economy, we do not wish to be distracted on the debate whether to include or exclude gas in the “exported pollution levy”.

[edit] Conclusion

We believe the proposed additions score very highly on all assessment criteria in 1. Framework, section 1.2 In particular,

  • Environmental integrity: it assists the reduction of carbon pollution through raising revenue from exported coal pollution, and using that revenue to fund cleaner technologies as well as adaptation and mitigation programs.
  • Economic efficiency: It is a simple add-on to the design in the Green Paper. It is low cost to implement and generates significant revenue which can contribute along with domestic permit monies to those areas set out in the scheme.
  • Fairness: it means coal exporters share the burden with Australian residents and taxpayers as we transition to a low carbon future. It means that Australia, as the world’s biggest exporter of coal, can be more extensive in reducing global carbon pollution, through the Government’s carbon reduction scheme.

Competitiveness of traded and non-traded industries: it is aligned with reducing ‘carbon leakage’ across traded industries. It provides a more equitable funding model for non-traded industries because the transition to low carbon economy can be better funded from all Australian-based businesses.

[edit] References

BARE project 1163 ABARE © Commonwealth of Australia 2008 June Quarter 08.2, ABARE project 1163

McKinsey : An Australian Cost curve for Greenhouse gas reduction, Feb 2008

Fernando et al. Capturing King Coal, Deploying Carbon capture and storage systems in the U.S. at scale, ISBN 978-1-56973-684-5

Lockwood, M. After the Coal Rush : Assessing policy options for coal-fired electricity generation. July_2008 ©_ippr_2008A

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