In an Abbott Government, the Secretary of the Climate Change Department, Blair Comely, might find himself unravelling much of the green tape he has advised upon and administered.
Meanwhile, in the context of the future policy of linking the Australian price with that of the EU, he told a Senate that it was not “inconceivable” that the price in 2015 could be $50. He said, “When you look at what the Treasury modelling was trying to do, it is still the best information we have available. You are talking about a price which is three years away. There are reasonable arguments that [$29] is not an implausible estimate in 2015.”
He would say that wouldn’t he? Having been head of the department that argued for a fixed price a few months later he declared for a procedure likely to mean a flexible price of under $10 per tonne.
A $50 price increases wholesale electricity costs by 120 per cent and household costs by 50 per cent.
Unfortunately, Canberra policy agencies have failed to offer estimates of what we are actually forking out for climate change measures. I have a piece in The Australian today on this, which was cut down a bit from the following.
There are four families of such measures in place: the carbon tax, the Renewable Energy Target (RET), direct budgetary expenditures, and standards on a range of products.
The carbon will cost energy users $8 billion a year in its present format. Linking it to the EU, price effects aside, will also gift about $1 billion a year from Australian consumers to EU businesses.
The RET, currently requires 20 per cent of electricity by 2020 to be derived from a mix of large scale sources, dominated by wind, and small scale installations, which include solar water heaters, heat pumps, and solar panels. Wind requires a price of over $110 per megawatt hour to be economically viable and small scale systems at least twice that. Coal generated electricity costs $35-$40 per megawatt hour.
Together, the RET schemes, including the need for back-up systems, mean an impost by 2020 of around $5 billion a year.
The third family of costs comprises direct budgetary expenditures, which in the current year are $2.7 billion, plus the incidental expenditures that every department, including Treasury, must incur to addressing climate change. Added to these costs is the $10 billion “Clean Energy Fund” under a board of worthies who, as with those selecting the departmentally favoured expenditures, fill in the gaps that a myopic market fails to see!
Finally there are regulatory measures incorporated into product standards that force suppliers to incorporate energy saving features in the products they offer. Many of these standards started life as measures to conserve energy and stemmed from a previous scare – the now discredited forecasts that the world was running out of fossil fuels. Energy conservation regulations morphed into greenhouse gas mitigation measures, which are mandatory standards on domestic appliances and buildings.
Few of these standards are costed, but the 6 Star standard on new housing has been subject to considerable scrutiny. The Victorian Competition and Efficiency Commission accepted a cost estimate for this of at least $5,000 per new house, an estimate that would translate into an annual Australia-wide cost of over $500 million for that regulation alone.
The combinations of greenhouse emission measures therefore impose a cost in regulations and taxes of at least $15 billion a year and perhaps considerably more than this.
Yet the debate on the issue has been largely confined to the carbon tax. The Opposition seeks to replace through “Direct Action” measures that select and target the most promising emission reduction sources.
“Direct Action”, which also features in the government policy arsenal, suffers from its very selectivity. Thus, while it might appear cheaper to target a particular source of emissions, emissions are fungible – closing down one source may see something very similar replacing it.
Moreover, “Direct Action” costs can be far in excess of those estimated. For example, the government’s proposed replacement of the Hazelwood Power brown coal station by a gas station aims to halve the current facility’s annual 16 million tonnes of carbon dioxide emissions. At a cost of $3 billion if the life of the existing facility is 20 years, that translates into a carbon price of around $50 per tonne. Not only is this well above the carbon tax but the operations of the National Electricity Market higher cost new facility would bring an increase in price for all electricity.
Why, in spite of the massive resources allocated to developing and analyzing the policy alternatives, does the government not provide public estimates of the combined costs of these imposts? Could it be that it is no longer proud of these expenditure levels and doesn’t want people to know their true extent?
Every $ spent on ‘green’ energy is wasted; every $ spent on ‘green’ solutions to AGW is wasted; and Australia has spent $billions.
But it is not just that huge fraud and waste of primarily government money with consequent debt because all of it has been borrowed, which is the problem; it is the distortion of resources and the corruption of the economic process and the bureaucratic structures which is bankrupting this country and which will be the legacy for the new federal government, just as it handicaps the new governments in Victoria, NSW and QLD.
The ‘green’ blight is not just an existing disease, it will leave its symptoms and scars long after the ‘green’ cause has been surgically removed.
cohenite
17 Oct 12 at 7:30 am
I think it is the greatest ‘legislated’ theft that has ever occurred in Australia.
And it is the theft that will accelerate.
When the coalition gain government the first item on their agenda should be to reduce all green imposts to zero….including rebates.
Anyone that is putting solar panels on their roof, gaining RET’s or otherwise gaining a subsidy is participating in the theft of real money from the Australian taxpayer.
It is in fact a fraud and a deception.
NoFixedAddress
17 Oct 12 at 8:00 am
A: The ‘government’ does not have a sufficiently sophisticated understanding of the real effects of the various imposts and policy settings.
At the big ‘G’ government level the focus is almost wholly on the short-term political effects. In small ‘g’ government, policy analysis is at a macroeconomic aggregate level – which misses the technical detail needed to predict and manage the issues that go to emissions fungibility, satisficing and rent-seeking behaviour.
In short, none of the government actors has a fucking clue what they are doing. (And nor does the Coalition, if they think their direct action policy approach has any merit.)
Dr Faustus
17 Oct 12 at 8:28 am
How do you get to 50%. If $23/tonne increased household prices by 10%, would not $50/tonne increase by about 22% ?
SteveC
17 Oct 12 at 9:07 am
SteveC
The costs differ between wholesale electricity and the retail price paid by a household
Alan Moran
17 Oct 12 at 9:17 am
Look what green policies have one to the USA–power bills so hig that in 2011, 200,000 unemployed couldn’t pay for power!
Hello Australia, meet America on the way to Greece!
Why are the MSM getting away with hiding truths from us and why are so amny Ausies so silly and complacent they will take it all uncomplainingly?
Jazza
17 Oct 12 at 9:20 am
Yallourn has just shut one of its 4 generators due to the carbon tax. This just weeks after the same thing happened in Queensland.
Enron closed generators to spike the price. We are creating the same effect here by legislation, and the consequences will be the same.
People have to start talking about blackouts in Summer, something we haven’t seen in decades.
Barry
17 Oct 12 at 9:29 am
@Jazza
because they are brainwashed to believe that politicians know what they are doing.
NoFixedAddress
17 Oct 12 at 9:45 am
Sure Alan, I see that. But if $23/tonne carbon price adds 10% to household electricity, how do you get to 50% increase in household price from a $50/tonne carbon price?
My electricity costs about $200 per MWh. One MWh electricity creates about one tonne C02. So add $23/tonne, is about $23/MWh = 11%. add $50/tonne is about $50/MWh is about 25%.
So I think your 50% increase in household cost is totally unrealistic.
SteveC
17 Oct 12 at 9:49 am
it’s all about you Steve, isn’t it? Actually I think Alan is underestimating at 50%; see here.
cohenite
17 Oct 12 at 10:08 am
Abbott supports the stupid RET.
We have a local council here is Brisbane that is as demented as any greenslime about so called “green” energy and “emissions abatement”, as well as “sustainability”.
Oil Shrill
17 Oct 12 at 10:49 am
Alan, what an excellent summary of the carbon tax impact on power generation costs.
Of course these costs flow through to almost everything.
The real kicker is, no matter how much they tax us and how much the flow on costs are, the temperature of the planet will continue to do what it’s always done, prior to and after introducing this stupid tax.
terrarious
17 Oct 12 at 11:12 am
Alan, what an excellent summary of the carbon tax impact on power generation costs.
Of course these costs flow through to almost everything.
The real kicker is, no matter how much they tax us and how much the flow on costs are, the temperature of the planet will continue to do what it’s always done, prior to and after introducing this stupid tax.
terrarious
17 Oct 12 at 11:13 am
Thanks for the irrelevant link cohenite. Alan specifically talked about the carbon price, not RET, CEFC, etc. So now you try:
Please explain the carbon price model and arithmetic that yields the above statement.
I’ve already explained how $50/tonne results in a household increase of about 25%. Please show why that is wrong.
SteveC
17 Oct 12 at 11:20 am
The link is not irrelevant; it shows that a direct comparison between the amount of the carbon tax and the price of electricity underestimates the effect of the carbon tax because the other expenses such as the RET and the infrastructure necessary to accommodate the useless ‘green’ energy add greatly to the impact on electricity prices.
The real cost may not even be able to be quantified since it is inevitable that fossil power will close down, which is the point of the tax, and electricity shortages are likely to occur.
How about you doing a calculation of the cost of having NO electricity for say 3 hours of the day, or 2 days of the week.
You are not an honest broker about this issue, the CO2 tax, and your ridiculous example, while in itself showing a great effect of the CO2 tax, still greatly underestimates the effect from this tax.
cohenite
17 Oct 12 at 11:35 am
Thanks cohenite, I’ll take that to mean you agree this statement
is incorrect.
Note Alan did not say the carbon tax and other associated carbon reduction measures which is what you are now claiming is what he meant.
SteveC
17 Oct 12 at 1:11 pm
Regarding the Yallourn closures cited above.
The sooner Melbourne is subjected to frequent blackouts and brownouts, preferably on stinking hot days, the better.
Sow the wind, reap the whirlwind…
Rabz
17 Oct 12 at 1:11 pm
SteveC
Wholesale electricity price with no carbon tax is ~ $35-$40 per MWh.
Carbon tax of $50 adds about $47 to the wholesale price. i.e on one set of assumptions becomes $87 per MWh
Energy cost component for households is at least 33%but about 40%.
The numbers fall out arithmetically
Alan Moran
17 Oct 12 at 1:22 pm
The arrogance is simply staggering.
Why are people putting up with this?
Rabz
17 Oct 12 at 1:35 pm
Piss off Steve; I know what Alan said; my point is I think he is too conservative; that a CO2 tax will be worse because you can’t seperate the tax from the other issues like the RET and ‘green’ subsidies, as the witless and gutless coalition will find out.
The reason for this is that the subsidies which feed the scam of ‘green’ energy depend on the money raised by the tax; you can’t have an RET without a CO2 tax.
The point of the tax is to get rid of the fossils; that’s right isn’t it? So, do the cost calculation for no power like I asked and don’t tell me what I fucking agree with.
cohenite
17 Oct 12 at 1:42 pm
“you can’t have an RET without a CO2 tax.”
The RET is more than a decade old.
Jarrah
17 Oct 12 at 1:51 pm
Not in these forms and magnitudes, numbnuts.
cohenite
17 Oct 12 at 3:58 pm
Alan, that’s very worrying arithmetic for an economist. Are you saying that if i increase ONE input, the proportion of the final price due to that ONE input won’t change?
Why would a flat price impost have a multiplier effect on the supply chain?
You haven’t explained what is wrong with my calculation:
I accept the carbon price is not actually the main thrust of your post, but if you make spurious claims in the introduction, it makes me suspicious about the rest of your claims as well.
SteveC
17 Oct 12 at 5:36 pm
Why don’t you do a costing based on the price per MWh of production of electricity?
What is the price of production of electricity in Australia per MWh in 2012?
About $29.
cohenite
17 Oct 12 at 6:44 pm
Sorry; that should be the sale price, not price of production cost.
cohenite
17 Oct 12 at 6:45 pm
There are a bunch of other costs as well, especially at local government level. Everyone’s rates have gone up to pay for things like recycling, increased tip fees and a range of other ‘environmental’ measures and the associated bureaucracy. The overarching rationale for these pointless imposts is so-called climate change.
johanna
17 Oct 12 at 9:10 pm
“Not in these forms and magnitudes”
So you’re changing your story to, an RET is possible without a CO2 tax, but not to the same degree? Fine.
Jarrah
17 Oct 12 at 9:30 pm
No, the magnitude of the funding now for RET is a paradigm shift; the prior RET and the current one are linked only by name only; although I suppose with MacQuarie dictionary redefining words to fit in with the left narrative, this distinction will also be removed, along with the change in meaning of misogyny.
And as I said to Steve, kindly refrain from telling me what I fucking agree with.
cohenite
17 Oct 12 at 9:44 pm