There are 2 'market based' mechanisms for reducing greenhouse gas emissions. One is to limit the quantity being 'traded' and let the market dictate the price (emissions trading schemes). The other is to set the price and let market mechanisms determine the quantity being traded.

Neither option is 'set and forget'. Both require politically driven changes over time. For trading schemes, the quantity being traded will have to be gradually reduced. The less gradual the reduction, the more the price will tend to fluctuate wildly. For tax schemes, the price will have to be increased, probably at a rate higher than inflation (though not necessarily), in order to bring about long term goals in emissions reductions.

The main advantage given for emissions trading schemes is that they put a clear and fixed limit on emissions. However, this is not what we actually want. We want emissions to go down gradually, as this will achieve our long term goals with minimum economic disruption. Furthermore, it is not the annual emissions that matter, but the cumulative emissions over the next half century or so. Getting the right level every year is not important, but the accumulated emissions over the years are. If you mandate a 5% reduction upfront, the price of electricity may skyrocket in the first year or two, then plummet back to the old price once the market adjusts and impliments cheap options for reducing emissions.

What is important over the short term is that the price of emissions does not fluctuate wildly. This would happen under an emissions trading scheme, but not with taxes. There is a strong chance that engineering and scientific advances will make it very cheap to reduce emissions over the long run. However, forcing a rapid response may see the price of electricity etc skyrocket in the short term. Even if this happens, the incentive to invest in technology to reduce emissions may not be there, as they may become worthless by the time the schemes are implimented. For a company wishing to develop or purchase technologies to reduce emissions, there may be 5 or ten year payback period. For the people making these decisions, there is a huge risk associated with the price fluctuations under trading schemes. So far, all trading schemes have seen the price of emissions plummet, so even if the price of electricity skyrockets in the short term, companies may still not invest in reducing emissions because they expect it to plummet a year or so later. Under trading schemes, financial investors speculating on the price changes will only add to the volatility of the price. This is bad for you, the consumer, bad for the economy, but gives no long term benefit to the environment. It may even make the problem worse if the public rejects the scheme completely and throws the baby (a price on emissions) out with the bathwater (cumbersome trading schemes).

In short, what matters more on an annual basis is not the rate of emissions, but that the price is steady and predictable for companies wanting to invest. What matters in the long term is the cumulative emissions. Carbon taxes get this balance right, but trading schemes do the opposite. What is often touted as the main advantage of trading schemes is actually a major flaw.

In practice, trading schemes are always modified to make them as similar as possible to a carbon tax, for example by putting a cap on the price of emissions and allowing companies to buy extra permits above the nominal allowance. The reason for this is that trading schemes are easy to sell to the public from a political perspective, because many people will stop paying attention as soon as they hear the word tax come out of a politician's mouth.

The European experience tells us that emissions trading schemes can be rorted and used to fill somebody's pocket.

Of course, the same can be said about a carbon tax. My view is that we should make a carbon tax as painless as possible and as effective as possible.

The obvious opportunity is to tax the profits from any coal or other fossil fuels that are exported from Australia (while we have the chance to do it) and to use that money to establish solar thermal and geothermal electricity generation projects that will help us in the future as resources dry up or become more 'expensive' to mine.

As a country, we should be benefiting from the exploitation of our natural resources and using the proceeds to value add, so that we don't have such a reliance on fossil fuels in the future.  

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The obvious opportunity is to tax the profits from any coal or other fossil fuels that are exported from Australia

We need to reduce our own emissions, not just those of other countries.

Also, taxing the profits alone misses many opportunities to reduce emissions. For example, if the price of coal drops due to increased production, emissions go up, but the tax revenue raised (and the disincentive to pollute) goes down. It is not profits that are the problem. These are good from an environmental perspective, as it means people are paying a higher price to pollute. The problem is the emissions themselves. To be effective, taxes need to be directed at the actual problem, rather than proxy measures of it. They need to address all possible sources of emissions, not just those from one sector.

In your own words:


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My view is that we should make a carbon tax as painless as possible and as effective as possible.

freediver wrote on Aug 8^th, 2010 at 10:24am:

Quote: The obvious opportunity is to tax the profits from any coal or other fossil fuels that are exported from Australia We need to reduce our own emissions, not just those of other countries. Also, taxing the profits alone misses many opportunities to reduce emissions. For example, if the price of coal drops due to increased production, emissions go up, but the tax revenue raised (and the disincentive to pollute) goes down. It is not profits that are the problem. These are good from an environmental perspective, as it means people are paying a higher price to pollute. The problem is the emissions themselves. To be effective, taxes need to be directed at the actual problem, rather than proxy measures of it. They need to address all possible sources of emissions, not just those from one sector. In your own words: [quote]My view is that we should make a carbon tax as painless as possible and as effective as possible.

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What I'm saying is that we should do something rather than nothing, and taxing the profits of coal exporting to build sustainable power generation projects won't hurt anybody in Australia.

It's a softly softly approach that could gradually displace coal fired power generation by providing a cheaper alternative, and in the short term, make more coal available for export. I'm talking about using the funds to establish subsidised solar and geothermal electricity projects. After all, that's consistent with our our goal. Eventually, we can start selling surplus electricity instead of coal.

- and I'd suggest that the revenues such an approach (remember total coal exports are around $20 billion a year) would generate would be greater than that generated by taxing domestic petrol, diesel and electricity consumption, and far less unpopular too.

Cheaper electricity would also benefit small and larger businesses alike, but we should start with the voting population. Once people get a liking for buying electricity at half price, they'll be much keener to back sustainable initiatives. I'm talking about a carrot rather than a stick approach.

As subsidised renewable electricity becomes cheaper, it will open the way for alternative automotive power.

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We need to reduce our own emissions, not just those of other countries.

This approach will do just that. In return for being the coal barons of the next 10 years, what could we be driving in the future?

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I might be missing something, but how is taxing coal going to make electricity cheaper?

It won't. It is supposed to make you feel better about paying more for electricity in the vain hope that countries like China and India will be guilted into doing the same.

Meanwhile they will go on business as usual while all our primary producers and exporters products are made more expensive on the world market and all for no benefit to the environment

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I'm talking about using the funds to establish subsidised solar and geothermal electricity projects. After all, that's consistent with our our goal.

Not exactly. Our goal is to reduce GHG emissions, not subsidise electricity. These apparently small variations between the target of tax changes and our actual goals can cause big economic problems and make it far more expensive than necessary to reduce GHG emissions.


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- and I'd suggest that the revenues such an approach (remember total coal exports are around $20 billion a year) would generate would be greater than that generated by taxing domestic petrol, diesel and electricity consumption, and far less unpopular too.

I suggest you come up with an example with real figures.


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Cheaper electricity would also benefit small and larger businesses alike

No it wouldn't, because the electricity would not actually be cheaper. Eventually someone has to pay for it. We need to avoid unnecessary churn where the government taxes one item and gives handouts with anothers. Your subsidies are unnecessary churn, nothing more.


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Once people get a liking for buying electricity at half price

Again, you really should try to come up with an example of how that would actually work. You'll find that the sums just don't add up. 20 billion may seem a big number, but so is the cost of these subsidies.

pjb05 wrote on Aug 8^th, 2010 at 7:26pm:

I might be missing something, but how is taxing coal going to make electricity cheaper?

You use the tax to subsidise renewable energy. If consumers pay less money for renewable energy, then they will be more enthusiastic about it.

Nobody likes paying money. While you continue to ask people to pay more moeny for something they will continue to resist.  

It's an interesting theory muso, but I don't think it would actually make electricity cheaper. Do the maths.

Even if it did, the harm to the eocnomy would be huge for a very small environmental benefit.

freediver wrote on Aug 8^th, 2010 at 9:39pm:

Quote: Cheaper electricity would also benefit small and larger businesses alike No it wouldn't, because the electricity would not actually be cheaper. Eventually someone has to pay for it. We need to avoid unnecessary churn where the government taxes one item and gives handouts with anothers. Your subsidies are unnecessary churn, nothing more.

Yes - it would be paid for by the nasty old coal producers who sell our natural resources to China (with next to nothing ending up in Australia by way of compensation for loss of resources), and who have already agreed in principle to a mining tax of sorts.

Subsidising renewable electricity removes the only objection that people have to it - that it costs more.

If you take the average mortgage holder with a family and ask them if they want to spend more money on electricity because it will benefit the Earth, they will be more concerned about their current finances.  

However, ask them if they'd be prepared to buy renewable energy at a lower price than fossil fuel generated electricity, and their answer will be completely different.

Make it a commodity that is in  demand, and then we might actually see some progress.

We need more carrot and less stick, and my suggestion is to do it now while we are still allowed to mine coal.  

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However, ask them if they'd be prepared to buy renewable energy at a lower cost that fossil fuel generated electricity, Their answer will be different.

Muso, people aren't that silly. They realise that the cost is not only what you pay for it. That is why they accept that electricity prices need to go up. That is why they also realise that if the government subsidises an item, you still end up paying the full price for it. In fact, once you take the waste into account, you end up paying more.

That is why you should never subsidise an item without a rigorous economic or moral justification. There is no such justification for renewable energy.

freediver wrote on Aug 12^th, 2010 at 9:19am:

It's an interesting theory muso, but I don't think it would actually make electricity cheaper. Do the maths. Even if it did, the harm to the eocnomy would be huge for a very small environmental benefit.

The harm to the environment is going to be huge anyway. All I'm suggesting is to capitalise on it. Do you see any coal mines closing down?

Sure, some are on their way down, but not for reasons that would make you happy.

There are plenty of ways to 'capitalise' on it. No point just choosing the first one that pops into your head. Like you said, we need to minimise the economic damage. Your idea does not do that.

freediver wrote on Aug 12^th, 2010 at 9:29am:

Quote: However, ask them if they'd be prepared to buy renewable energy at a lower cost that fossil fuel generated electricity, Their answer will be different. Muso, people aren't that silly. They realise that the cost is not only what you pay for it. That is why they accept that electricity prices need to go up. That is why they also realise that if the government subsidises an item, you still end up paying the full price for it. In fact, once you take the waste into account, you end up paying more. That is why you should never subsidise an item without a rigorous economic or moral justification. There is no such justification for renewable energy.

There is a rigorous moral justification. The purpose is to help build (or kick-start) a renewable energy infrastructure.

We're talking about a tax on profits of fossil fuel exporters only. These companies are doing very well indeed thank you. Business is booming.  I'm suggesting that Australia gets a cut and uses it to bolster up our future against a time when fossil fuels will be anathema.

It's not different to what the Emirates are doing. They are using their Oil revenues to value add as an insurance against future lean times.  They will have something to fall back on.

So should Australia. If we are in a position in the future that we have a strong Solar thermal power industry and can export electricity to China, then that objective would have been met.

freediver wrote on Aug 12^th, 2010 at 9:33am:

Sure, some are on their way down, but not for reasons that would make you happy. There are plenty of ways to 'capitalise' on it. No point just choosing the first one that pops into your head. Like you said, we need to minimise the economic damage. Your idea does not do that.

What other way do you suggest that will capitalise on it and use the money to build a renewable energy infrastructure for our future? If you have a better way, I'd be interested.

I'm all ears.

freediver wrote on Aug 8^th, 2010 at 9:39pm:

Quote: Cheaper electricity would also benefit small and larger businesses alike No it wouldn't, because the electricity would not actually be cheaper. Eventually someone has to pay for it. We need to avoid unnecessary churn where the government taxes one item and gives handouts with anothers. Your subsidies are unnecessary churn, nothing more.

Yup, with the rapidly-accelerating technological advances of the past 50-odd years, humanity is now effectively-addicted to high energy consumption...

Humans and businesses continue to feather their nests with high energy consumption goods - and parasitic energy suppliers know that addicts will go without other things to feed their addictions...

Clearly, without serious and sustained Govt intervention into profit-driven privatised markets, the supply/demand equation will result in spiralling fuel and electricity prices...

It is sheer folly for anybody to suggest otherwise!

freediver wrote on Aug 12^th, 2010 at 9:29am:

Muso, people aren't that silly.

Yes they are. You can gauge just how silly they must be by the calibre of the current election campaign,

Equitist wrote on Aug 12^th, 2010 at 9:40am:

freediver wrote on Aug 8th, 2010 at 9:39pm: Quote: Cheaper electricity would also benefit small and larger businesses alike No it wouldn't, because the electricity would not actually be cheaper. Eventually someone has to pay for it. We need to avoid unnecessary churn where the government taxes one item and gives handouts with anothers. Your subsidies are unnecessary churn, nothing more. Yup, with the rapidly-accelerating technological advances of the past 50-odd years, humanity is now effectively-addicted to high energy consumption... Humans and businesses continue to feather their nests with high energy consumption goods - and energy suppliers know that addicts will go without other things to feed their addictions... Clearly, without serious and sustained Govt intervention into profit-driven privatised markets, the supply/demand equation will result in spiralling fuel and electricity prices... It is sheer folly for anybody to suggest otherwise!

Prices can only increase so far before demand drops. Remember the GFC Part 1 ? Let's see if Parts 2 through 99 show the same pattern.

muso wrote on Aug 12^th, 2010 at 9:44am:

Equitist wrote on Aug 12th, 2010 at 9:40am: freediver wrote on Aug 8th, 2010 at 9:39pm: Quote: Cheaper electricity would also benefit small and larger businesses alike No it wouldn't, because the electricity would not actually be cheaper. Eventually someone has to pay for it. We need to avoid unnecessary churn where the government taxes one item and gives handouts with anothers. Your subsidies are unnecessary churn, nothing more. Yup, with the rapidly-accelerating technological advances of the past 50-odd years, humanity is now effectively-addicted to high energy consumption... Humans and businesses continue to feather their nests with high energy consumption goods - and energy suppliers know that addicts will go without other things to feed their addictions... Clearly, without serious and sustained Govt intervention into profit-driven privatised markets, the supply/demand equation will result in spiralling fuel and electricity prices... It is sheer folly for anybody to suggest otherwise! Prices can only increase so far before demand drops. Remember the GFC Part 1 ? Let's see if Parts 2 through 99 show the same pattern.

In theory, yes, but maybe not so in practice...or at least proably not for a long while to come...

Only a major global resource and/or economic shock could slow the current pace - and, let's face it: increased consumption has been deemed to be the panacea for all socio-economic ills and most of humanity has been insidiously-brainwashed to believe this...

Dunno about everyone else, but the number of electrical/electronic (especially rechargeable) devices used on a daily basis in my household has probably doubled in the past 5 years...

Think about it, folks - some people may be particularly surprised at how fast the consumption of rechargeable devices has accelerated with the advent of mobile phones, PDAs, laptops, digital cameras, handheld electronic toys - not to mention portable commercial and industrial telecommunications and data scanning/collection/transmission devices, etc...

As for the evolving GFC - I agree but I expect that any Govt responses will be designed to maintain the corporativist status quo as much as possible, with efforts most likely to be focussed on trading-out of the crises (to feed the insatiable and destructive Growth Fairy). Unfortunately, the permanent seizure of recklessly-privatised essential national infrastructure assets is likely to be a last resort option - especially if the Govt/s of the day are Conservatives...

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There is a rigorous moral justification.

No their is not. Access to cheap electricity is not a fundamental human right.


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The purpose is to help build (or kick-start) a renewable energy infrastructure.

That sounds like an attempt at an economic justification to me.


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We're talking about a tax on profits of fossil fuel exporters only. These companies are doing very well indeed thank you. Business is booming.  I'm suggesting that Australia gets a cut and uses it to bolster up our future against a time when fossil fuels will be anathema.

Whether we get a cut and what we spend it on are two completely different issues. You may have a point about getting a cut. But you cannot make a sound justification for spending it on subsidies for renewables.


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What other way do you suggest that will capitalise on it and use the money to build a renewable energy infrastructure for our future? If you have a better way, I'd be interested.

You are creating a false association there muso. There is a better way to reduce our GHG emissions that would do far less harm to our economy.


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Yes they are. You can gauge just how silly they must be by the calibre of the current election campaign,

So you think we should use your idea because people are stupid enough to accept it?


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Prices can only increase so far before demand drops.

That is the point muso. We want demand for GHG emissions to drop. There are plenty of ways to do this. Some of them (like yours) do massive harm to our economy. It is wrong to assume that we need to maintain or even increase our electricity consumption (and reduce electricity prices) at the same time as reducing our GHG emissions. You need to get this notion out of your head. It is preventing you from looking at the issue rationally. Our current price and rate of use of electricity is not some kind of magic number that we have to maintain in the face of economic reality.

As much as I agree, that humanity must make a paradigm shift in economic practice...I fear that the necessary socio-economic and environmental changes will be delayed for much longer than would be sensible...due to the pervading self-serving propaganda of unfettered omnipotent corporativist moguls, that promotes the irrational worship of money and what I have come to call the 'Growth Fairy'...

Meantime, there will be much self-serving disinformation and futile tinkering around the edges of our fatally-flawed socio-economic systems - and the problems faced by humanity (and our life-giving planet) will continue to become ever-more urgent...

One can but hope that we will not reach tipping point, before humanity wakes up to the dual folly, of wanton materialistic consumption and dogmatic accumulation of Mickey Mouse Monopoly Money, for the fundamentally irrational purpose of feeding the dangerous 'Growth Fairy'...

Unfortunately, one thing that is certain: future generations will not thank us, for recklessly-squandering their safety, security and prosperity!

I don't think the 'shift' will be quite that dramatic. There are plenty of precedents of changes brought about through taxation. There are plenty of examples of new technologies making big changes to our society - far bigger than where we get our energy from.

freediver wrote on Aug 12^th, 2010 at 10:13am:

I don't think the 'shift' will be quite that dramatic. There are plenty of precedents of changes brought about through taxation. There are plenty of examples of new technologies making big changes to our society - far bigger than where we get our energy from.

We can but hope that this scenario will transpire, by default - because the current global socio-economic, political and environmental trends are indicative of a pervasive reckless disregard for the fundamental risks of worshipping the 'Growth Fairy'...

freediver wrote on Aug 12^th, 2010 at 9:57am:

Quote: There is a rigorous moral justification. No their is not. Access to cheap electricity is not a fundamental human right.

I'm talking about the need to prevent damage to our future economy as a result of climate change. The cheap electricity bit is a means to an end only.


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That is the point muso. We want demand for GHG emissions to drop. There are plenty of ways to do this. Some of them (like yours) do massive harm to our economy. It is wrong to assume that we need to maintain or even increase our electricity consumption (and reduce electricity prices) at the same time as reducing our GHG emissions. You need to get this notion out of your head. It is preventing you from looking at the issue rationally. Our current price and rate of use of electricity is not some kind of magic number that we have to maintain in the face of economic reality.

We're stuck with the same silly people who are obviously influenced by the current election drivel.

How do you suggest that we motivate them to use less electricity? They like watching the AFL on their new Plasma TV's.

The key to this issue is managing thick people before they self-destruct.  The key is not technology. We already have that. The key is manipulating people so that they start to think about not jumping off the cliff with the other lemmings.

We need to think outside the box.

Muso, you need to get beyond the vague waffle. There are very good reasons why economists reject your solution, but you don't seem to have any interest in them.


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I'm talking about the need to prevent damage to our future economy as a result of climate change. The cheap electricity bit is a means to an end only.

Can you perhaps give an example of where subsidies have prevented rather than caused economic damage?


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How do you suggest that we motivate them to use less electricity?

The point is not to get them to use less electricity. The point is to get them to emit less GHGs. You do this by increasing the price of those emissions. That is all the government needs to do. How they go about reducing their emissions is best left up to the individual, not a micromanaging government.


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We need to think outside the box.

There is a difference between thinking outside the box and throwing common sense, or economics, out the window. There is nothing new about your ideas. They have been tried before, they have failed before, and they will fail again.

The best way can reduce emissions is to replace the very dirty brown coal generators in Vic & SA and replace them with 3rd or (preferably) 4th generation nuclear power plants.

freediver wrote on Aug 12^th, 2010 at 6:00pm:

The point is not to get them to use less electricity. The point is to get them to emit less GHGs. You do this by increasing the price of those emissions. That is all the government needs to do. How they go about reducing their emissions is best left up to the individual, not a micromanaging government.

The problem as I see it is complex, and made more complex by some of the preconceptions that we have in society, as well as those that are encouraged by industry lobbyists. We need to effectively eliminate greenhouse gas emissions by progressing to renewable technology, sure, but we have the additional task of gaining acceptance of this in the broader society so that it's given a priority.  

The major cost of the renewable technology are the financial hurdles involved in investing in a new project and the delays  caused by people who really don't have their hearts in it. For example the solar power project at Cloncurry came to nothing because of objections about glare in the local community. As a result, nothing has happened with this project.

We obviously have a great many people who have a stake in allowing coal mining (also Oil & Gas) to continue, but ultimately it will bring civilisation to its knees by continuing that reliance.

Nobody likes taxes, and no politician wants to institute an unpopular measure. That's why we need to look at something radically different.

It's not just about what is the most cost efficient process overall. There are many dimensions to it, and the inertia that will delay projects by 10 years is very much a part of the problem.  The maximum benefits will be derived from acting as soon as possible. The benefits start to dwindle as time goes on, and we lock ourselves into a progressively bleaker future by our inaction.

Part of our strategy must be to somehow motivate the general population to back sustainable strategies, and we have more chance of doing that by making it attractive for them.

Two examples where the incentive approach has been very successful are Germany and Alaska. You may be aware of the solar panel scheme in Germany and other parts of Europe, where Electricity providers must pay a premium for domestic power generation, and the government has a loan scheme that effectively means that the householder doesn't pay a Euro cent because it's paid for initially by the electricity generated.

OK, you might say that it's not very cost effective, but the advantage that it provides is the fact that it's quick to implement, so that there are cost savings down the line (if everybody else in the world does their bit)  

In Alaska, there is a simple carbon tax, but a portion of this goes back to  householders in the form of a green dividend.

Darwin wrote on Aug 12^th, 2010 at 8:26pm:

The best way can reduce emissions is to replace the very dirty brown coal generators in Vic & SA and replace them with 3rd or (preferably) 4th generation nuclear power plants.

I agree, but how do we sell that idea to the general public, who are largely opposed to anything with 'nuclear' in it?

muso wrote on Aug 13^th, 2010 at 9:45am:

Darwin wrote on Aug 12th, 2010 at 8:26pm: The best way can reduce emissions is to replace the very dirty brown coal generators in Vic & SA and replace them with 3rd or (preferably) 4th generation nuclear power plants. I agree, but how do we sell that idea to the general public, who are largely opposed to anything with 'nuclear' in it?

Sorry, nukes are neither a safe nor sustainable answer...
Sadly and ironically, the sooner that the next big nuke KABOOM happens, the sooner that humanity will dispense with this extraordinarily (infinitely) risky option...

Faith, hope and complacency are not reasonable options, when we are talking about the ever-present risk of unbridled nuclear reactions and contamination...

I doubt that many ever truly expected the multiplier effects of human errors by BP in the Gulf of Mexico - but the inherent risks were such that a global disaster was an inevitable 'accident' waiting to happen...

It is but a matter of time, before a major nuclear 'accident' - or deliberate terrorist attack - after which, the fallout will be global: nuclear shareholder values will evaporate; nuke operaters will declare bankruptcy; all existing plants will soon become redundant permanently-radioactive scars on the landscape (which will fall, by geographic default, under the costly and perpetual responsibility of the relevant Govt authorities)...

That's what I mean. How do we sell the idea to the general public? It's an emotive subject, yet even coal fired power stations have killed many more people than nuclear power.

You need to look at the real details and less on the "kaboom" emotive issues.

muso wrote on Aug 13^th, 2010 at 11:20am:

That's what I mean. How do we sell the idea to the general public? It's an emotive subject, yet even coal fired power stations have killed many more people than nuclear power. You need to look at the real details and less on the "kaboom" emotive issues.

My emotive delivery is a pragmatic reflection of the real and inherent risks involved - that some would inexplicably pretend do not exist...

I agree on the grave issues surrounding coal-fired power but some forces should never be unleashed - and IM(not-so)HO: toying with nuclear energy (and associated radioactive contamination) poses the single most dangerous and avoidable risk that humanity has ever faced!

Seriously, we already have the technology and capacity to develop infinitely less risky renewable alternatives - so there is no need to go there with inherently-risky nukes...

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Nobody likes taxes, and no politician wants to institute an unpopular measure. That's why we need to look at something radically different.

The Greens like them and want to implement them, not just for GHG's. Rudd's CPRS was so heavily modified it looked more like a tax than a trading scheme. Nobody likes to destroy the economy for political expediency, which is what your scheme would do. Even politicians shy away from that. We need to keep this up for half a century or more. People are going to realise if they have an inferior scheme, reject it, and put us back to the drawing board. How much time would that waste?


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It's not just about what is the most cost efficient process overall. There are many dimensions to it, and the inertia that will delay projects by 10 years is very much a part of the problem.

Tell me muso, how many hard nosed investors are going to make a ten year investment that relies on subsidies that are likely to be removed at the next election?


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The maximum benefits will be derived from acting as soon as possible.

Making the right choice is just as important as making it soon.


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OK, you might say that it's not very cost effective

Duh.


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but the advantage that it provides is the fact that it's quick to implement

But what has this cost Germany in terms of their overall strategy? Are they still moving ahead? Or are they now going backwards because the public is baulking at the cost of their fanciful schemes?

freediver wrote on Aug 13^th, 2010 at 12:08pm:

Tell me muso, how many hard nosed investors are going to make a ten year investment that relies on subsidies that are likely to be removed at the next election?

What you're failing to grasp is the fact that with solar thermal and geothermal power generation, most of the costs are up front capital costs. The actual running costs are minimal compared to fossil fuel based power generation. There is no transportation of the energy source involved for a start. Once established, solar and geothermal operations are quite competitive even now. There will be no need for a long term subsidy for that reason.

If we can kick start these projects, the economies of scale will start to come into place, which means that they will start to compete with more traditional power generation. It's not going to take much. We already have some solar projects in the US that  provide energy at current grid costings.

If there is no price differential to the consumer then they will buy the idea.

Germany has moved forward on Solar power to the extent that they are one of the leaders in solar generation in Europe. They have already invested in a sustainable future.

An alternative is to make  the fossil fuel producers to invest in their own renewable energy projects.  That way, they assure their own future and have less of an objection to phasing out of production.

Equitist wrote on Aug 13^th, 2010 at 11:27am:

muso wrote on Aug 13th, 2010 at 11:20am: That's what I mean. How do we sell the idea to the general public? It's an emotive subject, yet even coal fired power stations have killed many more people than nuclear power. You need to look at the real details and less on the "kaboom" emotive issues. My emotive delivery is a pragmatic reflection of the real and inherent risks involved - that some would inexplicably pretend do not exist... I agree on the grave issues surrounding coal-fired power but some forces should never be unleashed - and IM(not-so)HO: toying with nuclear energy (and associated radioactive contamination) poses the single most dangerous and avoidable risk that humanity has ever faced! Seriously, we already have the technology and capacity to develop infinitely less risky renewable alternatives - so there is no need to go there with inherently-risky nukes...

Let's discuss this over on Environment if you like. I would suggest that you're talking about a fear of the unknown, like most people in Australia, who don't have a clue about the nuclear industry .


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poses the single most dangerous and avoidable risk that humanity has ever faced!

Smoking carries several thousand times the risk of a properly designed (fail safe) nuclear power station. I'll tell you what the quantified risks are. They are expressed in fatalities per million manhours. Just let me make sure I have the figures right to start with.

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What you're failing to grasp is the fact that with solar thermal and geothermal power generation, most of the costs are up front capital costs.

I am not failing to grasp anything muso. A cost is still a cost. In fact it appears that you are trying to pretend that cost does not exist.


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There will be no need for a long term subsidy for that reason.

Wrong muso. Economists and business people have very simple ways of comparing upfront and ongoing costs. Sure, if you gave them a massive subsidy upfront that can be used instead of an ongoing subsidy, but it is still a subsidy either way. There is still a risk with a nominally ongoing subsidy that could be taken away after five years if the political winds change (which is inevitable with such subsidies).

Or are you eprhaps suggesting that the government gives massive annual subsidies enough to offset all the upfront costs over a epriod of ten years?

Either way, you really should do the maths rather than just waving your arms in the air and insisting it will all work out fine if we subsidise electricity.

freediver wrote on Aug 14^th, 2010 at 4:30pm:

Quote: What you're failing to grasp is the fact that with solar thermal and geothermal power generation, most of the costs are up front capital costs. I am not failing to grasp anything muso. A cost is still a cost. In fact it appears that you are trying to pretend that cost does not exist. [quote]There will be no need for a long term subsidy for that reason.

Wrong muso. Economists and business people have very simple ways of comparing upfront and ongoing costs. Sure, if you gave them a massive subsidy upfront that can be used instead of an ongoing subsidy, but it is still a subsidy either way. There is still a risk with a nominally ongoing subsidy that could be taken away after five years if the political winds change (which is inevitable with such subsidies).

Or are you eprhaps suggesting that the government gives massive annual subsidies enough to offset all the upfront costs over a epriod of ten years?

Either way, you really should do the maths rather than just waving your arms in the air and insisting it will all work out fine if we subsidise electricity.[/quote]

What I'm suggesting is that the subsidies are used to get the projects off the ground, and I'm just talking about sufficient subsidy to put them on a level playing ground with Coal fired power stations.  Once operational, they can take care of themselves.

The biggest financial risk is always in establishing a new project. That's why investors need to be scrutinized carefully to ensure that they are capable of following through and delivering the project before being given a grant.

Muso we understand how subsidies work and what they do. There is no need to repeat that as nauseum. What we disagree with you on is whether it is a good idea and whether it is better than the alternatives. So far the only time you've even come close to arguing that point is when you said the government should do it because people are stupid enough to accept it.

I have also suggested many times that you do the maths and put up the numbers, rather than just insisting that a bit of money handed out here and there will make the difference. How can you expect people to take you seriously if you don't even know what your proposal would cost? Do you think the cost is irrelevant?

freediver wrote on Aug 14^th, 2010 at 5:08pm:

Muso we understand how subsidies work and what they do. There is no need to repeat that as nauseum. What we disagree with you on is whether it is a good idea and whether it is better than the alternatives. So far the only time you've even come close to arguing that point is when you said the government should do it because people are stupid enough to accept it. I have also suggested many times that you do the maths and put up the numbers, rather than just insisting that a bit of money handed out here and there will make the difference. How can you expect people to take you seriously if you don't even know what your proposal would cost? Do you think the cost is irrelevant?

The actual costings will depend on the project. It starts to get quite detailed. I'll try to give some broad costings and outcomes first.

Currently the lowest cost option with lowest emissions outcomes (Option 1)  relies on Nuclear plus CCGT (Solar plus natural gas).

Total cumulative capital for this option are of the region of $200 billion by 2050, achieving a drop from a current 200te/a CO2-e emissions (Australia) to 40te/a by 2050.

If we drop nuclear and just go with solar, wind and gas (Option 2), the cumulative costing increases to $500 billion by 2050. The emissions would drop to 100te/a by 2050. This is the most expensive option.

Coal decommissioning needs to start as soon as possible at a rate of 1GWpa for black coal and 0.4GWp.a. for brown coal, resulting in total decommissioning of coal by 2040.

Profits from coal production are expected to peak around $100 billion by 2016. The ALP were proposing a 30% tax on mining profits, so you can see that even for 100% funding of Option 1, it's doable. In terms of timing, we need the first $20 billion by 2020, about $90 billion between 2020 and 2030 and the remaining 90 billion between 2030 and 2050.

The disadvantage of this option is that the supplies of Uranium will run out around 2080, so there will have to be ongoing construction of solar thermal CCGT power stations after that date.

An emission level of 40te/a by 2050 is sustainable as long as the rest of the world  keeps on track.
 

So that is a starting price of $500 billion? What would you get for that?

freediver wrote on Aug 14^th, 2010 at 7:11pm:

So that is a starting price of $500 billion? What would you get for that?

I'll go with $200 billion over 40 years. I prefer the option with nuclear power.

What would you get for that? Current cost of generating electricity is around $40 per MWhr. Using this technology, we'd expect that to increase to $60 per MWhr by 2050.

That's working to the ABARE assumptions for Energy consumption in Australia to 2030 projected linearly to 2050.
http://daff.gov.au/abare-brs

So your scheme costs the government $200 billion, whereas carbon taxes raise revenue and can be used to lower other taxes.

Doesn't sound like a good choice to me.

freediver wrote on Aug 14^th, 2010 at 8:32pm:

So your scheme costs the government $200 billion, whereas carbon taxes raise revenue and can be used to lower other taxes. Doesn't sound like a good choice to me.

No. That's the total cost. My scheme is still a carbon tax, but it's a highly targeted carbon tax.

You'll have to explain that a bit more muso.

Well I thought I had. The original CPRS applied across all fossil fuels commensurate with CO2 equivalent. That scheme and any general carbon tax basically means that the government that brings it in shoot themselves in the foot because it costs voters money.

If we substitute a scheme which doesn't cost the end users of electricity, but taxes profits on coal exports instead, there is less pain involved for the general population and it allows us to establish a sustainable electricity generation industry in Australia.

The calculations assume a rise in demand from 280TWhrs /a (TeraWatt hours per annum) in 2010 up to around 550TWhr in 2050.

If the energy demand is reduced during this period, then the costs become progressively less.

The capital injection is required during the first 10 years. Thereafter, the source of revenue dwindles because it depends on phasing out all coal production by 2040. (Brown coal by 2035)

Now in terms of the replacement technology, this is commissioned at the rate of 1 GW per year from 2020 to 2025, then at 1.5 GW per year to 2030, then at 2 GW per year up to 2050.

This has been done before. For example, the French commissioned nuclear power stations at a rate of 3GW per year for a full 20 year period.

So the retail price stays the same, you tax coal profits and use the money to build solar plants?

Can you tell me what percentage of profits you would have to tax to achieve this?

freediver wrote on Aug 14^th, 2010 at 9:59pm:

So the retail price stays the same, you tax coal profits and use the money to build solar plants? Can you tell me what percentage of profits you would have to tax to achieve this?

Nuclear and Solar Thermal, plus some natural gas (CCGT technology).

Based on the capital projections, and the projected coal export profits of 100 Billion by 2015, it should only amount to 5%. Certainly a lot less than the  30% the ALP is proposing.

I'm not talking about underwriting the entire upfront capital here - just providing an incentive to make the project attractive for investors.

The objective is to establish a sustainable energy infrastructure. Once the power stations are being built, economy of scale starts to kick in. It's just a question of getting over the hurdle in a way that is not going to meet with opposition from voters.  Democracy is ironically the biggest obstacle to economic survival.

Talking of obstacles, we still have to invest in nuclear energy generation, at least for the first 50 years or so. Around 2050, we could transition to more efficient technology such as Thorium based reactors, or possibly Solar thermal. The market will still determine the most cost effective technology, because we're just talking about a kick start. Coal revenues will dwindle to zero by 2040 by this plan, so the new technology will have to be viable.

So only part of the $200 billion cost comes from subsidies?

How much?

How did you get the 5% figure?

freediver wrote on Aug 15^th, 2010 at 9:48am:

So only part of the $200 billion cost comes from subsidies? How much? How did you get the 5% figure?

From the capital expenditure projections. Based on total expenditure over a 5 year period, it starts around $10 billion, increases to $28 billion in 2025, peaking at $37 billion in 2035 falling back to about $30 billion by 2025.

I've already discussed the build rates that result in those capital estimates. Even at the peak of $37 billion, this equates to $7.4 billion per year, so even if we allow (say) a 30% construction grant, that equates to  $2.2 billion per year. Working on the basis that  a $100 billion profit by 2015 is too optimistic, and taking a figure of $50 billion, that equates to about 5% (well 4.4%). As you can see, there is a lot of contingency in there.

Now, you tell me how a 10% tax on coal exporting is going to harm Australia when our competitors already have higher tax rates?

I'm interested if anybody else thinks that this approach is a good one. As I see it, our main barrier is selling a tax system that will cost the general public. This approach doesn't cost the general public.  

So you give a 30% subsidy on the construction costs? Is that enough to make it competitive?

At projected $ per MWhr costs for 2020, yes it is.  There is more to it than that. Part of the justification is the fact that the competition will ultimately be forced out of business. Now if the Rio's and BHP Billitons have any sense, they will hedge their bets and go with renewable technology in order to stay in business.

So nuclear is less than 30% more costly than coal?

What is the price difference when you take both upfront and long term costs into account?

freediver wrote on Aug 15^th, 2010 at 10:14am:

So nuclear is less than 30% more costly than coal? What is the price difference when you take both upfront and long term costs into account?

You have to take the 5% tax on profit into consideration and project current cost trends to 2020. I'll post on this further. The construction needs to be modular and constructed overseas, because Australian engineering costs are prohibitive.

So we need to use cheap Chinese nuclear plants?

freediver wrote on Aug 15^th, 2010 at 10:31am:

So we need to use cheap Chinese nuclear plants?

They would be built in China, in the same way that most new industrial plant for Australia is constructed in China today. I'm talking about the equivalent of US Generation III nuclear power plants with a design lifetime of 60 years.

There is an interesting cost comparison (US data)
http://nuclearfissionary.com/2010/04/02/comparing-energy-costs-of-nuclear-coal-gas-wind-and-solar/

Did you see the first sentence in that link?


Quote:

The only financially valid way to compare the costs of different sources of energy production is to calculate the per kilowatt-hour (kWh) cost.

In other words, no point confusing yourself over whether they are upfront or ongoing costs.

freediver wrote on Aug 15^th, 2010 at 12:32pm:

Did you see the first sentence in that link? Quote: The only financially valid way to compare the costs of different sources of energy production is to calculate the per kilowatt-hour (kWh) cost. In other words, no point confusing yourself over whether they are upfront or ongoing costs.

I realise that upfront costs are generally capitalised. The reason I split the costs was to illustrate the difference between Solar Thermal and Coal. With coal, there are ongoing transport and raw material costs. With Solar, the vast majority of the costs  are upfront, and the balance (edited so that the post makes sense) mainly relates to maintenance and operational aspects.

So if the subsidies on Solar energy were lifted by a new government coming into power, it would be less of a deterrent for investors, because they would already have received their grant before commissioning.

muso wrote on Aug 15^th, 2010 at 10:21am:

freediver wrote on Aug 15th, 2010 at 10:14am: So nuclear is less than 30% more costly than coal? What is the price difference when you take both upfront and long term costs into account? You have to take the 5% tax on profit into consideration and project current cost trends to 2020. I'll post on this further. The construction needs to be modular and constructed overseas, because Australian engineering costs are prohibitive.

OK, I'll wait till you post more.

all of the above

I'll give you 15 black coal thingies for a slightly damaged nuclear "idea".

Do you really think that the Yanks are not scheming about being the first Nuclear power in the world.  8-)  Get bloody real. Only CHINA is scheming more.  :)

huh?

Muso, you keep insisting that the public simply won;t accept carbon taxes and that we must therefor adopt models that are inferior from an economic perspective.

How do you respond to this?

http://christine-milne.greensmps.org.au/content/media-release/greens-welcome-carbon-tax-support-alp-mps


Quote:

The fastest and most effective way to do this would be to adopt the Greens' proposal for a levy on the biggest polluters, developed from Professor Garnaut's recommendations and supported by economists, unions, the environment movement and 72% of voters.

I don’t see why we need to go down the ETS road, since all it does is lower the standard of living as people are forced too choose between power and food. Per country Australia's levels of pollution is quite low. Sure we don’t have the numbers of people other countries have so per capita our level might be high. but never the less we should not be selling our self’s short due to other countries over population problems. After all we do not get a say in governing them. But what we could do is hold them accountable. Countries like China and India have the highest pollution in the world. Australia is in a position to take advantage of these nations to clean up our own act and also increase our own manufacturing.
What we need too do is start charging a pollution tax on all imported product. This will make 'Australian Made' product more completive and all money made from the tax could then go toward creating a cleaner industry.

Quote:

but never the less we should not be selling our self’s short due to other countries over population problems.

That does not make sense. Gross population and overpopulation are not the same thing.


Quote:

What we need too do is start charging a pollution tax on all imported product. This will make 'Australian Made' product more completive and all money made from the tax could then go toward creating a cleaner industry.

We need a good agreement between a lot of countries before we start doing things like that. Otherwise they just respond with tariffs on our goods.

Quote:

We need a good agreement between a lot of countries before we start doing things like that. Otherwise they just respond with tariffs on our goods.

That’s the thing most people do not realise, many of them still do apply tariffs. China for one is a country that charges an internal tax on imported products that has the same affect as a tariff. Its not like our product export market will be affected because just about everything is imported mostly from china, we are even importing food that we don’t need that we produce more then enough for our self’s.
So if China was to apply another tariff on Australian product because we introduced a pollution tax we could easily wack a pollution tax and a tariff. I'm sure china will be more effected then us. And china will still be needing resources.
But I do not see a problem is all countries in the world implemented a pollution tax on imported products as its quite stupid for a country to source a product from other nations when they can produce these products them self’s.

freediver wrote on Aug 22^nd, 2010 at 10:00am:

Muso, you keep insisting that the public simply won;t accept carbon taxes and that we must therefor adopt models that are inferior from an economic perspective. How do you respond to this? http://christine-milne.greensmps.org.au/content/media-release/greens-welcome-carbon-tax-support-alp-mps Quote: The fastest and most effective way to do this would be to adopt the Greens' proposal for a levy on the biggest polluters, developed from Professor Garnaut's recommendations and supported by economists, unions, the environment movement and 72% of voters.

I agree with it, but the majority of people in Australia did not vote for the Greens.

Therefore it's not going to happen, so it's totally pointless talking about it. The question is one of how can we get a favorable outcome? (preferably in the next 10 years)

I still maintain that in order to get the electorate to accept it, we need to sweeten the pill - similar to the UK's decision not to apply the carbon tax to domestic consumers.

Quote:

I agree with it, but the majority of people in Australia did not vote for the Greens.

Voting for the greens and supporting a price on carbon is not the same thing. Labor supports the principle, they just made it too complicated in practice. The opposition leader for a while supported carbon taxes. The majority of economists support it. It is hardly a fringe movement.

If they can get it through, they should. If they can't get anything working within 10 years, they should look at wooing the electorate. I just can't see it happening with a minority government.

I think a Carbon tax is a real possibility if we see a Gillard led minority government.

I think they would ditch the stupidly convoluted ETS that cost them so dearly, and with input from the Greens, and the Independents, they may get a small Carbon Tax in place, as well as a strong renewable energy policy, and if they could do that, then we will all be the better off for it.

If we see an Abbot and Independents minority, I can only imagine that he would sidetrack any moves toward Carbon Pricing and Renewables, as he really does believe they are unnecessary, and doesn't care that the majority of aussies, and the world's scientists disagree with that opinion.

a leftard tax or a more leftard tax.

lucky you got 36% bullyboy, only cause of judass lies and a HUGE budget.

Sprintcyclist wrote on Aug 23^rd, 2010 at 9:27am:

a leftard tax or a more leftard tax. lucky you got 36% bullyboy, only cause of judass lies and a HUGE budget.

Maybe you should keep track with your mates in the USA and what they are doing. Your politics is more in line with the US Republicans than the Australian Liberals, Sprint.

http://politifi.com/news/Republican-lawmakers-back-carbon-tax-yes-thats-right-878997.html


Quote:

Bob Inglis of South Carolina and Jeff Flake of Arizona on Wednesday became the first Republican lawmakers to introduce Legislation imposing a Carbon Tax on producers and distributors of Fossil Fuels.

mozzaok wrote on Aug 23^rd, 2010 at 9:17am:

I think a Carbon tax is a real possibility if we see a Gillard led minority government. I think they would ditch the stupidly convoluted ETS that cost them so dearly, and with input from the Greens, and the Independents, they may get a small Carbon Tax in place, as well as a strong renewable energy policy, and if they could do that, then we will all be the better off for it. If we see an Abbot and Independents minority, I can only imagine that he would sidetrack any moves toward Carbon Pricing and Renewables, as he really does believe they are unnecessary, and doesn't care that the majority of aussies, and the world's scientists disagree with that opinion.

I agree with what you say. However let's just suppose that there is a Gillard led minority government. They would have problems getting it through the House of Reps with the current Independants, unless we get some Liberals crossing the floor.

They would have no problem getting it through the Senate with all the Greens there and a sizeable number of ALP senators from the previous election. However as soon as there was a no-confidence motion, we'd have another Election, and the Libs would be running on the platform of removing the Carbon Tax.  

mozzaok wrote on Aug 23^rd, 2010 at 9:17am:

If we see an Abbot and Independents minority, I can only imagine that he would sidetrack any moves toward Carbon Pricing and Renewables, as he really does believe they are unnecessary, and doesn't care that the majority of aussies, and the world's scientists disagree with that opinion.

I would expect them to come up with some scheme involving paying farmers large sums of money to do very little.


Quote:

and the Libs would be running on the platform of removing the Carbon Tax

I doubt that. Turnbull and a few others would cross the floor. Whatever gets in, we will be stuck with it.