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a forum for the discussion of issues concerning the natural environment

Peter Lang

Why the ETS will not Succeed: Peter Lang

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JUSTIFICATION for Australia’s carbon-pricing scheme assumes there will be a global carbon pricing system with our ETS a part of it. This assumption is probably wrong. It is unlikely a global carbon pricing system will be implemented, let alone sustained for the decades or even centuries that would be required. Abatement cost Medium

Without a global carbon-pricing system, national or regional carbon-pricing schemes would be prohibitively expensive if they are to achieve the projected benefits and, therefore, would not be sustainable. The high cost means that a scheme like the one Australia has legislated is not viable, and even regional carbon pricing schemes like the European ETS will not last. The ‘ball-park’ analysis presented here suggests Australia’s ETS would cost $12 for every $1 of projected benefit, to 2050.

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What the Carbon Tax and ETS will Really Cost: Peter Lang

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Tomorrow, July 1, Australia gets the carbon tax the Prime Minister, Julia Gillard, promised she would never introduce.   The nation’s 500 “biggest polluters” will start paying a $23-a-tonne carbon price.

Retired geologist and engineer, Peter Lang, calculates what this tax, and the Emissions Trading Scheme to follow, will really cost Australians:

Introduction

Popularly called the ‘Carbon Tax’, the CO2 tax and ETS will cost us more than the government claims.  Initial costs will be relatively small – a ‘honeymoon rate’ – but an accelerating rate thereafter will soon create much higher costs.  Some people will be partly compensated for a while, but after that we will all pay the full costs.

Actual costs are not easily derived – much depends on assumptions and estimates.  From Treasury estimates, for instance, the cost will be more than $13,000 per person (every man woman and child), or more than $26,000 per worker, total to 2050 (in today’s dollars).

However, the costs will most likely be much higher.  Firstly, while the ‘honey-moon rate’ includes only the 500 largest emitters, all CO2 emitters will eventually be brought into the ETS to make the scheme work as planned.

Secondly, emissions will eventually have to be measured, not just crudely estimated as is done now.  Not only CO2, but all the other twenty-three Kyoto gasses, from all sources, will have to be included.  The compliance costs are not included in Treasury’s estimates (see The ultimate compliance cost for the ETS).  Therefore, the actual costs the ETS will impose on us will inevitably be higher than we are being led to believe.

Below I explain the calculations of:

  • the benefit (total to 2050)
  • the cost (total to 2050)
  • the benefit to cost ratio
  • the cost per capita and per worker

Lastly, I list the assumptions that underpin the estimate of the benefits.

The cost and benefit analysis figures I used as inputs are chosen from sources well respected for reliability and credibility. The figures and subsequent analysis tell us, in effect, that Australia is planning to spend $10 dollars for every $1 of benefit it hopes to derive – provided the assumptions about the consequences of AGW are correct.  This suggests that our climate policies are flawed and need major change.

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Why the Carbon Tax? Peter Lang

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Dear Members of Parliament and Senators

Why is the government insistent on implementing a CO2 price, given that it will not make any difference to the climate, or to sea levels, and most certainly will not “lead the world by example” (as has been so clearly demonstrated at the Copenhagen, Cancun and Durban conferences)?

If the government had been given sound, objective advice it would realise that there is no point in implementing a CO2 price unless the whole world participates. Renowned world leader in all matter to do with CO2 pricing, Yale economist Professor William Nordhaus, says in his 2008 book “A Question of Balance” [1], p19:

“We preliminarily estimate that a participation rate of 50 percent, as compared with 100 percent, will impose an abatement-cost penalty of 250 percent. Even with the participation of the top 15 countries and regions, consisting of three-quarters of world emissions, we estimate that the cost penalty is about 70 percent.”

Treasury estimates [2] suggest the Government’s CO2 pricing scheme will cost about $1,350 billion cumulative to 2050 (undiscounted), or $390 billion (discounted at 4.35% per annum, the rate used in the Nordhaus Yale-RICE model (2012) [3]). This cost may be an underestimate; for example, the compliance cost for CO2 measuring and monitoring apparently has not been estimated.

However, the benefit of the Government’s CO2 pricing will be virtually nil.

Why is the Australian Government so insistent on damaging our economy (and our wellbeing) for no environmental benefit?

Peter Lang

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References:

1. William Nordhaus (2008) “A Question of Balance”, p19,
http://nordhaus.econ.yale.edu/Balance_2nd_proofs.pdf

2. Treasury (2011) “Strong Growth, Low Pollution – Modelling a Carbon Price”, [Chart 5:13]
http://archive.treasury.gov.au/carbonpricemodelling/content/chart_table_data/chapter5.asp

3. Nordhaus, Yale-RICE Model (as of March 20, 2012)
http://nordhaus.econ.yale.edu/RICEmodels.htm

Unbalanced Reporting on Solar Power: Peter Lang

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Peter Lang sent a complaint to the Australian Broadcasting Corporation (ABC) about last night’s 7:30 Report on solar power.  Here is a slightly reworded versions with hyperlinks added:

“The ABC 7:30 report has improved greatly since Leigh Sales and Chris Uhlmann took over from Kerry O’Brien.  However, there have been lapses.  Last night’s 7:30 report on solar power was atrociously biased.  ABC has been strongly biased towards renewable energy for over 20 years.  Last night’s program was unbalanced, lacked objectivity and presented wrong and misleading information.

They interviewed two of the extreme renewable energy proponents in Australia (Matthew Wright and Tristan Edis) but did not provide balance by getting a competent person to explain the cost of renewable energy and what the costs do to the price of electricity (and therefore to Australia’s economy).

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