View
220
Download
3
Category
Tags:
Preview:
Citation preview
PRME Seminar “Responsible Management of GHG Emissions”
Fri 14 October 2011Gujji Muthuswamy
Department of Management
Faculty of Business and Economics
The context for the presentation
• View Climate Change in three parts: – Climate Science (What is it, Why, How etc.) – Mitigation of Emissions (How shall we reduce it? Carbon pricing mechanism is
just one way of reducing Greenhouse gases (GHG)– Adaptation (How will we adapt to a more hostile climate?)
• Each part requires input from many disciplines: – Science / Engineering, – Economics / Finance / Accounting, – Law – Medicine, etc.
• The University has three major functions:– Research (building new knowledge)– Teaching (Disseminating knowledge and building new researchers)– Outreach ( contribution to public policy, consultancy, communication).
• Thus we have a 3-D matrix comprising 3 aspects, ‘n’ disciplines, and 3 functions.
The focus of this presentation
• It is a very broad canvass but provides a structure for our thinking both at the macro level (e.g. University’s overall strategy) and at Faculty / Department level ( e.g. what should XYZ Department do?).
• My presentation looks at a small part of this canvass:– A brief outline of the carbon pricing mechanism– Perspective of one Faculty, i.e. Business and Economics.
• A structure to look at the issue .
Pricing the carbon - Basics
• GHG emitted by many economic activities e.g. Power generation, transport, cement, steel, aluminium, chemical, refineries, agriculture, and households. – (e.g. burning coal in power station results in CO2 emissions from
the chimney).
• CO2 is now at zero cost So no economic incentive to reduce emissions Impact on Climate change.
• Australia burns coal for about 80% of its electricity needs.
• Electricity generation accounts for about 37% of our total GHG emissions.
This presentation is based on “Securing a clean energy future – The Australian Government’s Climate Change Plan”, July 2011
Pricing the carbon – (contd)
• If carbon is priced into the economic process:• Cost of power generation will go up; and hence• Cost of electricity to the consumer overall will go up • Also, cost of coal-fired electricity, now low, will go up more because
they emit more CO2 (compared to gas fired ), and • Renewable technologies will become even more competitive,
because they emit almost no CO2
• So, how do you create a price for carbon? – Direct mechanisms: Carbon Tax, Emissions Trading Scheme (ETS)– Indirect mechanisms: Regulations (e.g. Building and appliance
efficiency), Renewable Energy Target Scheme, Energy Efficiency Certificate scheme, Subsidies and incentives labelled “Direct Action” schemes.
Top 500 emitting
businesses
Australian total emissions = 542 Mil Tonnes
Tax / ETS affects only the Top 500 emitters in:
Electricity, waste, rail, domestic aviation and shipping, industrial processes, fugitive emissions,
GHG
Customers & Householders
Top 500 emitting
businesses
GHG emissions
Demand for Products & services
Customer demand, e.g. for electricity, drives the supply side and hence the GHG emissions.
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
Customers & Householders
Top 500 emitting
businesses
Permits
$
GHG emissions
Demand for Products & services
All other businesses
Need 1 permit to emit 1 Tonne of GHG
July 12: Issue about 337 Mil permits at $ 23/Tonne (set by Govt)
Collect $ 7.740 Bil.in 2012/13
Collect $ 24.5 Bil in 3 years to 2015.
ETS from 2015. Price determined by market forces.
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
Customers & Householders
Energy intensive trade exposed
Sector(EITE)
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Demand for Products & services
GHG emissions
Example of EITEs: Aluminium, Steel, Cement, Pulp & paper etc.
$ 9,2 Bil worth of free permits in 2012/15 period.
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Energy intensive trade exposed
Sector(EITE)
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Demand for Products & services
GHG emissions
Free permits to EITEs to minimise ‘carbon leakage’
94% for high intensity and 66% for moderate emission intensity activities.
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Energy intensive trade exposed
Sector(EITE)
High emissions power stations
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Pay $ to close some
Demand for Products & services
GHG emissions GHG emissions
$ 5.5 Billion worth of free permits over 6 years to generators emitting more than 1 Tonne/MWh.
Aust average is 0.88 Tonnes/ MWh
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Energy intensive trade exposed
Sector(EITE)
High emissions power stations
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Pay $ to close some
Prices go up Demand for
Products & services
GHG emissionsGHG emissions
Affected businesses will pass on costs to customers and householders.
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Energy intensive trade exposed
Sector(EITE)
High emissions power stations
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Financial Compensation $$
Pay $ to close some
Prices go up Demand for
Products & services
GHG emissionsGHG emissions
About $14.9 Bil of assistance to householders out of $24.5 Bil permit revenue in 2012-15.
Tax reduction and cash assistance.
ASSISTANCE NOT LINKED TO PERMIT PRICES.
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Investment in Renewable
Technologies----------
Investment in R&D
Energy intensive trade exposed
Sector(EITE)
High emissions power stations
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Uses permit revenue $$
Financial Compensation $$
Pay $ to close some
Prices go up Demand for
Products & services
GHG emissionsGHG emissions
Invest $ 10 Bil over 5 years plus other assistance
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Investment in Renewable
Technologies----------
Investment in R&D
Energy intensive trade exposed
Sector(EITE)
High emissions power stations
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Uses permit revenue $$
Financial Compensation $$
Pay $ to close some
Prices go up
Incentive to reduce permit costs by reducing GHG emissions.
Demand for Products & services
GHG emissionsGHG emissions
Expect investment by industries in low emissions technologies
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Investment in Renewable
Technologies----------
Investment in R&D
Energy intensive trade exposed
Sector(EITE)
High emissions power stations
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Uses permit revenue $$
Financial Compensation $$
Pay $ to close some
Prices go up
Incentive to reduce permit costs by reducing GHG emissions.
Demand for Products & services
GHG emissionsGHG emissions
Investment inEnergy
efficiency
Promotes energy efficiency
# 23 Mil over 5 years
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Investment in Renewable
Technologies----------
Investment in R&D
Energy intensive trade exposed
Sector(EITE)
High emissions power stations
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Uses permit revenue $$
Financial Compensation $$
Pay $ to close some
Prices go up
Incentive to reduce permit costs by reducing GHG emissions.
Demand for Products & services
GHG emissionsGHG emissions
Investment inEnergy
efficiency
Promotes energy efficiency
$
$
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Investment in Renewable
Technologies----------
Investment in R&D
Energy intensive trade exposed
Sector(EITE)
High emissions power stations
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Uses permit revenue $$
Financial Compensation $$
Pay $ to close some
Prices go up
Incentive to reduce permit costs by reducing GHG emissions.
Demand for Products & services
GHG emissionsGHG emissions
Investment inEnergy
efficiency
Promotes energy efficiency
$
$
Carbon Farming Initiative
(creates ACCU)
Promote carbon sinks
$ 1.2 Bil in 5 yrs
Government issues permits.
Fixed price: “Carbon tax”Variable price via ETS.
Gets $
GlobalCompetitors to
Aust EITEs
Overseas customer
Customers & Householders
Investment in Renewable
Technologies----------
Investment in R&D
Energy intensive trade exposed
Sector(EITE)
High emissions power stations
Top 500 emitting
businesses
All other businesses
Permits
$
GHG emissions
MostlyFreePermits
No$
Maintain Exports
$
Uses permit revenue $$
Financial Compensation $$
Pay $ to close some
Prices go up
Incentive to reduce permit costs by reducing GHG emissions.
Demand for Products & services
GHG emissionsGHG emissions
Investment inEnergy
efficiency
Promotes energy efficiency
$
$
Carbon Farming Initiative
Promote carbon sinks
Forward Estimates: Total for 2012-15 ($ Bil)Ref: Appendix C “Securing a clean energy future”
Permit + other revenue 27.3
Household assistance 15.4
Support for jobs (EITEs)
10.3
Clean Energy Finance Corporation
0.9
Energy security (assistance to generators)
3.1
Land & bio diversity 1.2
Governance 0.4 31.2
Net Impact (3.9)
Governance
• New regulatory agencies– The Climate Change Authority– Clean Energy Regulator– Productivity Commission Reviews– Energy Security Council– Australian Renewable Energy Agency
• Other agencies– Clean Energy Finance Corporation
• New programs– Carbon Farming Initiative (aimed at the farming sector)– Energy Savings Initiative (applies to energy retailers only)
• Existing major program– Renewable Energy Target Scheme (applies to energy retailers only) – Energy Efficiency Opportunities program (applies to all big energy users).
Implications for AcademiaMajor topic: GHG mitigation via Carbon pricing
Department : XYZ
Sub topics Research Teaching Outreach
GHG measurement & reporting
Investment in mitigation projects
Carbon and energy markets operation
Accounting, auditing
Compliance with regulations
Pricing and Risk Management
Cash flow management
Recommended