Showing posts sorted by date for query renewable target. Sort by relevance Show all posts
Showing posts sorted by date for query renewable target. Sort by relevance Show all posts

Friday, January 13, 2023

Technical issues after all

It seems I have to humble brag, again, but there's an article up at The Guardian about the technical issues with the troubled Sun Cable project which indicates that my hunch that this idea wasn't likely to fly was correct:

The problems are technical, economic and even geopolitical. Giving some observers solace is the presence of David Griffin, Sun Cable’s founder and chief executive, who is a veteran of the renewable industry. “He’s very competent at these kinds of things,” said one industry insider. “He loves obstacles, he loves challenges.”

Griffin will have many of these. Georgious Konstantinou, a senior lecturer in energy systems at the University of New South Wales, said the length of the cable alone makes the project “extremely ambitious”.

Konstantinou said a global desktop study done three years ago researching the feasibility of building power links between different regions was not promising for Sun Cable.

“It ended up with the Australian connections being way more difficult and way costlier than any of the other links that you would have around the world,” he said, adding the depth of waters to be crossed – such a 2km deep Timor trench – was a key issue.

“So when Sun Cable says ‘we can actually do that’, it makes you think what are the differences do they see compared to what everyone else is thinking?”

Konstantinou estimates energy losses even with the best high voltage direct current technology would be at least 15%. Boosters would also be needed to ensure voltage is maintained for the end users, such as Singapore.

Singapore itself is yet to commit funds or sign up as a customer. Sun Cable would need to offer the island nation an ultra-low price if it’s to rely on one supplier for 15% of its electricity, not least because it would need back-up in case of sudden failure, Andrew Blaker, an energy expert at the Australian National University, said.

“If you, in the space of half a second, took out 15% of Australia’s electricity supply, Australia’s grid might have a few problems,” said Blakers, who describes himself as “cautiously sceptical” of Sun Cable’s prospects.

Singapore’s Energy Market Authority declined to comment on Sun Cable’s administration. A spokesperson, though, told Guardian Australia the authority had “received more than 20 proposals to import electricity from countries including Indonesia, Laos, Malaysia and Thailand”.

“We remain on track to meet our imports target of 4GW by 2035,” she said.

Blakers said Sun Cable’s going to face “very stiff competition from similar projects located in northern Indonesia or on hydroelectric reservoirs in Borneo because they are within 50 to 500 or so kilometres across the shallow sea from Singapore”.

While the solar resource is “not quite so good” in those regions compared with the Northern Territory, “it’s still pretty good”, he said. “I just wish they would turn the cable around and send [the power] south” to markets in southern Australia.

Dylan McConnell, an energy expert also with UNSW, said the estimated cost and timing of the venture of $30bn seem unrealistic compared with projects being developed in Australia.

The proposed Marinus Link, for instance, involves a 250km HVDC link across Bass Strait at an average depth of about 60m. The combined capacity in two stages would be 1.5GW with a total of more than $3bn. Stage 1, at 750MW, would be built by 2028 on current plans.

“Sun Cable, on the other hand, is set to be almost 17 times longer, about twice as much capacity , and is through the Timor Sea,” McConnell said. “It’s also between two countries and through Indonesia’s territorial waters, and was apparently targeting ‘first delivery ‘ to Singapore in 2027.”

“It’s difficult to imagine how you might deliver that, alongside about 20GW of solar and about 40GW-hours of storage for [$30bn],” he said.

OK, so it seems the project is looking technically and/or economically dubious.

Which raises the question, how reliable is the judgement of Infrastructure Australia, which ticked off on it 6 months ago:

Infrastructure Australia has provided its endorsement for the economic benefits of the Australia-Asia PowerLink (AAPowerLink), which would export solar power from the Australian outback to Singapore via a submarine transmission link.

The endorsement ensures that the project can advance to third-stage, “investment-ready” status on Infrastructure Australia's priority list, opening the door for government funding.

   

 

 

   

Tuesday, October 12, 2021

Having a normal one in Aussie wingnut land (climate change and energy edition)

This comment appears at one of the offspring blogs of dead Catallaxy after a fairly ordinary (that is, by Rafe standards) post whinging about renewable energy:

Meanwhile, the rest of us are agog at how the Murdoch press has turned on a dime, no doubt confusing/dismaying its rusted on readers:

 


I haven't seen much on Twitter about how Sky News is covering this, only this, also from Kevin:

So, Murdoch is trying the tactic of populist anti-climate change advocacy on Sky News, while trying to convince readers in the most populist titles of print that its real and the government just has to act.  

How's that meant to make sense?   When can we expect the Sky News hosts to start attacking the editorial line taken by their companies print editors?    

And as for the government line, Katherine Murphy was nice and scathing on the weekend:

Keith Pitt, the resources minister, made headlines this week when he opened the boondoggle bidding on net zero. Pitt told Phil Coorey at the Australian Financial Review if Scott Morrison wanted agreement from the Nationals on a net zero target ahead of the Glasgow climate conference, he should put $250bn on the table.

Yes, that’s “b” for billion.

According to Pitt, if this transition was actually on, Australians taxpayers should bear the risks. Pitt floated a cartoonishly bad idea where taxpayers would underwrite the financing and insurance of fossil fuels – including for overseas-owned companies – all because naughty Australian banks weren’t inclined to make bad bets.

If you’ve missed Pitt’s parable of the bad banks, let’s recap that quickly: bad banks are now more interested in virtue signalling to their obnoxiously woke inner-city clientele than backing salt-of-the-earth fossil fuel projects in the regions.....

But before anyone could say Venezuela, Pitt’s Queensland Nationals colleague Matt Canavan – a former Productivity Commission economist now apparently estranged from capitalism – was out and about with a different parable.

Canavan told a mildly startled Kieran Gilbert on Sky News that Australians should be prepared to pay higher interest rates in order to stare down international financiers managing carbon risk in global markets. Canavan’s Big Idea™ was actually wilder than Pitt’s, but it attracted significantly less attention.


Wednesday, April 18, 2018

Tony was wrong? (Read as sarcasm)

Interesting:
Australia's renewable energy capacity is set to exceed a target the Federal Government said was impossible to reach by 2020, according to new research from Green Energy Markets.

In its quarterly Renewable Energy Index, GEM said the amount of renewable energy generated in 2020 was set to exceed the original 41,000 Gigawatt hour (GWh) Renewable Energy Target (RET) that was in place before being scrapped in 2015 by the federal government led by then prime minister Tony Abbott.

The original RET was put in place to help Australia meet its 2030 climate change commitment to cut emissions by 26 to 28 per cent from 2005 levels.

It was replaced by a less ambitious target of 33,000 GWh after the Abbott government characterised the original RET as impossible to achieve, while arguing there was already too much generating capacity.

The GEM study funded by activist group GetUp found estimated eligible generation would hit 41,381 GWh by 2020, not only exceeding the current RET, but the original RET as well.
Mind you, it is so hard to understand disputes about energy policy in Australia that I wouldn't be surprised if someone turns up pointing to some misleading aspect of this perhaps overly positive report.    I mean, you do get the feeling that each side exaggerates in their own self interest.  And as for what the Liberal's National Energy Guarantee even means, let alone an objective assessment of it - well, I have yet to see a good, clear explanation.


Thursday, June 08, 2017

As I was saying (about Red States and renewables)

Remember last week I said I was relatively sanguine about the consequences of Trump leaving the Paris Accord* because, surprisingly, Republican States were actually already taking up renewable energy despite their rhetoric on climate change?

Well, there's a full article in the NYT talking in more detail about this, and it's far more widespread than Texas.    Here's how it starts:
Two years ago, Kansas repealed a law requiring that 20 percent of the state’s electric power come from renewable sources by 2020, seemingly a step backward on energy in a deeply conservative state.

Yet by the time the law was scrapped, it had become largely irrelevant. Kansas blew past that 20 percent target in 2014, and last year it generated more than 30 percent of its power from wind. The state may be the first in the country to hit 50 percent wind generation in a year or two, unless Iowa gets there first.

Some of the fastest progress on clean energy is occurring in states led by Republican governors and legislators, and states carried by Donald J. Trump in the presidential election.

The five states that get the largest percentage of their power from wind turbines — Iowa, Kansas, South Dakota, Oklahoma and North Dakota — all voted for Mr. Trump. So did Texas, which produces the most wind power in absolute terms. In fact, 69 percent of the wind power produced in the country comes from states that Mr. Trump carried in November.


*  which is not the same thing as saying I think it was a wise decision - quite the contrary.  It was a stupid decision made only to get applause from rednecks at rallies and libertarian billionaires and those who they fund.



Thursday, December 22, 2016

Something vaguely optimistic

From The Guardian:
The Indian government has forecast that it will exceed the renewable energy targets set in Paris last year by nearly half and three years ahead of schedule.
A draft 10-year energy blueprint published this week predicts India will be generating 57% of its electricity from renewable sources by 2027. The Paris climate accord target was 40% by 2030.
The forecast reflects an increase in private sector investment in Indian renewable energy projects over the past year, according to analysts.
The draft national electricity plan also indicated that no new coal-fired power stations were likely to be required to meet Indian energy needs until at least 2027, raising further doubts over the viability of Indian mining investments overseas, such as the energy company Adani’s Carmichael mine in Queensland, the largest coalmine planned to be built in Australia.

Thursday, July 23, 2015

Renewables and energy costs

One thing has become pretty clear - the economics of government renewable energy targets are complicated, and modelling this type of policy's effects can be all over the shop, often seeming suspiciously prone to making assumptions that suit the interests of the modeller.

I would not trust any initial wildly negative reaction to Labor's apparent decision to increase the renewables target dramatically.   I don't even trust the Grattan Institute on this topic.  Wildly optimistic modelling is probably wrong too. 

Monday, April 20, 2015

Something useful out of the muck

It's extraordinary how the ratbaggery of marginalised Right wing opinion know as Catallaxy is intensifying over the years.   Alan Moran too much of an anti-Islamic extremist for the IPA?  No problem - let him continue his clean energy jihad at Catallaxy; and by the way, he's now an expert on Darling River water flows too - one of the most intensely scrutinised Australian environmental issues in which I thought there was a consensus amongst virtually every interested party in the land, except for shrill, climate change denial funded, independent researcher Jennifer Marohasy; oh, and Moran too.  (Actually, if I recall correctly, Judith Sloan has commented on it dismissively in the past too.  "Climate change - as if" is her considered position on anything related to the issue.)

Sinclair Davidson, quite possibly the only academic in the land who couldn't see how calling an aboriginal man an ape could be racist, also can't see the tackiness problem with Woolworths alluding to their advertising slogan in an ANZAC poster.  Even Andrew Bolt could see that one.

Judith Sloan discovered the bold function about a year ago and now can't stop shouting at everyone in every post.  She's an expert on caesarean birth rates too, apparently.

And yet, shouting, sarcastic Judith  has done some useful - shown in comments that Catallaxy favourite (well, except when it comes to gay marriage and the conservatives) David Leyonhjelm made up a policy suggestion in ignorance of the background.  Who could be surprised - it was about clean energy, something the Bald One thinks is completely unnecessary. 

The details are here:   Leyonhjelm had a suggestion published in the AFR as to how to "fix" the RET:
With this problem looming and negotiations between the Government and Opposition stalled, late last year I developed a detailed reform package for the RET. Since most opposition to reform is based on cuts to the 41,000 GWh large scale target, my plan is to maintain this but to recognise established hydro generation in the calculations – essentially Snowy Hydro and Hydro Tasmania – which together produce about 15,000 GWh.
But as Judith notes in comments:
David, I don’t think this is going to work. Hydro is defined as renewable (see Section 17 of the Renewable Energy (Electricity) Act 2000 and is already counted in the 16 to 17K of MWh being produced from renewables currently. It is already being counted.
 And then Leyonhjelm admits:
After this was published I was informed that “old” hydro had been counted when the original target was established under Labor. I was told the total electricity market was estimated at 300,000 GWh in 2020, of which 20% is 60,000. Deduct 15,000 for existing hydro leaves the target of 45,000. Of this, 4,000 was allowed for small scale solar (ie roof top panels) and 41,000 for large scale (mainly wind). It is reduction in the latter target that is now the subject of dispute.

Adding back old hydro (without attracting Renewable Energy Certificates) would bring us close to 20% renewable anyway (as we won’t be anywhere near 300,000 by 2020) so the case is still arguable, but I acknowledge it would be double counting.

Quite a "whoopsie".

So thanks Judith!   Can you give me a big, bold, shouty call out?   

Friday, August 29, 2014

A weird review outcome

Success. The Renewable Energy Target's greatest failing

So, everyone (including Dick Warburton) seems to agree now that the original claim of Tony Abbott (that the RET is killing everyone with its added cost to electricity) was wrong.

No no, the real problem is that it is reducing CO2 (and at the same time driving down wholesale prices), but at a higher cost than what something else would cost - with the only "something else" that the government will allow being "direct action", which has no specifics yet, and nearly everyone can't see achieving the goal at the low cost the government thinks.

The review therefore looks a bit of an embarrassment, but once again, I expect, we will see Greg Hunt selling his soul and making directly opposite claims to what he did a mere year ago.  (Or I could be wrong, but looking at his track record so far, I doubt it.)

I do not recall ever having a government so full of political, unprincipled opportunism. 

Anyway, Peter Martin's explanation of the review seems pretty spot on to me:
It's killing the coal-fired power generation industry. The panel doesn't put it that crudely. It refers instead to a "transfer of wealth among participants in the electricity market". If by 2020
retailers are required to buy 41,000 gigawatt hours from new pollution-free suppliers, the old polluting suppliers are going to sell 41,000 gigawatt hours less.

It would have hurt in any event, but a time when electricity use is sliding (thanks largely to the carbon tax) it means what was to have been 20 per cent is on track to become 28 per cent.

The abolition of the carbon tax gave coal-fired power generators a windfall. Kneecapping the Renewable Energy Target will give  them a second helping.

Taking business away from coal-fired generators was never an unintended consequence of the Renewable Energy Target as the report seems to suggest, it was a design feature. It has helped cut pollution.
Update:   John Quiggin notes this:
I can certainly see some ways in which the RET could be improved, but I won’t canvass them here so as not to commit myself in advance. I’ll observe however, that the Abbott government itself has removed the strongest argument against the RET, namely, that it duplicates the effect of a carbon price (there were valid counterarguments, which I’ve discussed elsewhere, but it was still an important issue)
And yet, as was reported last week, there was a push from within the government to leave open the option of its complete removal.   That certainly indicates you've got complete ideologues behind the scenes who do not want to see CO2 reduced at any cost...

Tuesday, August 26, 2014

How does Greg Hunt live with himself?

Renewable energy target in the spotlight

Excellent article by Peter Martin that effectively raises the question in the title to this post, without directly asking it.

Wednesday, August 20, 2014

RET worries

I see that IPA aligned economists are getting all aroused at the prospect that, having lost out on the fake and hysterical free speech crisis they tried to whip up because Andrew Bolt wouldn't apologise for mistakes made in a column, they may have an Abbott government "win" on the Renewable Energy Target.   (The rumour being that key figures in the government are wanting to have it killed off entirely.)  Julie Novak, for example:



From what I can make out, the economics of electricity production in this large country are rather complicated, and in an ideal world, all countries would price carbon with consistency and at realistic levels to wean the planet off burning carbon, and all electricity production, retail and transmission would work the same across our own country, and you genuinely could have a situation where you let energy companies work it out for themselves without the need for the additional spur of a government mandated RET.

However, given the world (and Australia) is not so simple, the RET is one element of a multi-pronged approach to energy, and letting it stay does not represent an economic problem of any significance.   Removing it now that it has been in place for so long is actually a lot more trouble than it is even theoretically worth. 

And one thing is clear - given that the free marketeer economists aligned with the IPA have no problem at all with it actively promoting pubic and political disbelief that there is even a problem to address regarding climate change, their opinion on the merit of the RET is not worth a pinch of poop. 

Julie Novak is, of course, completely and ludicrously wrong in this morning's tweet, in response to a rare column in The Australian supporting the RET:



Get real, Julie.  


Saturday, July 12, 2014

"Say anything" Clive

No, Tony Abbott, nothing about the Senate negotiations was 'normal' | World | The Guardian

As Lenore Taylor notes:

This is, after all, the bloke who said this week, while launching a
publication on the renewable energy target:, “When it comes to fighting
climate sceptics you have to persevere.”


But before the election, asked on the ABC whether he agreed that
global warming would have a big impact on Australia, he said: “No, I
don't believe that's so. There's been global warming for a long time. I
mean, all of Ireland was covered by ice at one time. There were no human
inhabitants in Ireland. That's how the world has been going over
millions and billions of years and Ross Garnaut knows that's true, so I
think that's part of the natural cycle.”
Surely this wild inconsistency has to sink in soon through the skulls of the unengaged voters who got him in?

Monday, February 17, 2014

Typical

Climate sceptic to head Abbott review into renewable energy target
The Abbott government has launched a formal review of Australia's 20 per
cent renewable energy target, choosing senior business figure Dick
Warburton – who has been sceptical about mainstream climate change
science in the past – to head it.

More pathetically poor judgement from this lousy PM.

Monday, July 01, 2013

Carbon pricing seems to be working

Is carbon pricing reducing emissions?

A good analysis at the link of whether carbon pricing, and not just a drop in demand, is behind reduced carbon emissions in making Australian electricity.  Here is one crucial part:

Although it’s difficult to point to concrete short term changes in the electricity market, the carbon price is having an impact on long term investment decisions, which is where the real benefits will start to play out. The economics of power systems mean that it’s much easier to materially affect the investment decisions for a new plant than to affect the short-term dispatch decisions of an existing plant. It has been argued that this already means wind is now cheaper than coal if you’re building a new plant, due to the very large impact of the carbon price on financing costs for emissions-intensive generation options.

The market is clearly responding to long term investment signals towards lower emissions generation. The vast majority of new plants in the planning stages are either renewable or gas-fired. Here again we must acknowledge complexity and the contribution of many factors – much of the investment in renewables is driven by the Renewable Energy Target scheme, and could not be supported by the carbon price alone at this stage.

But the lack of proposals for significant new coal-fired plant is a good indication that the carbon price is having an influence over investor decisions. This is where the real pay-off lies – by avoiding the installation of more coal-fired generators we avoid the very significant greenhouse emissions that would result from those power stations over their 30-year-plus lifetime.

Monday, May 07, 2012

An interesting analysis

We need to talk about energy, not rates - The Drum (Australian Broadcasting Corporation)

Alan Kohler is upset that badly needed investment in electricity in Australia is being stalled due to uncertainty, caused in large part by the Tony Abbott "must revoke the carbon tax" policy.

I'm sure Kohler is not alone in this view.   But where are the economists who feel this way?   Are they just going to sit on their hands, or wait until an election is looming and then say that dismantling the governments carbon pricing scheme, and replacing it with Abbott's second rate "direct action" really doesn't make sense?

Anyway, here is Kohler's depressing conclusion:

If they're all thrown out, as promised, then the new minister will have to start the process all over again. By the way, the shadow minister is Ian Macfarlane, who came within a bee's willy of negotiating an emissions trading scheme in 2009 with the then minister, Penny Wong.

Presumably he no longer believes in that crazy stuff.

Anyway, aside from whatever carbon abatement costs are imposed by either political party (they both have the same reduction target of 5 per cent by 2020), electricity prices are already set to double by 2017 because of chronic under-investment in east coast transmission and distribution over previous decades.

This price increase cannot be avoided – it is already locked in. In fact, it will be greater than that if the 20 per cent renewable energy target is to be met because renewable generation is always further away, so that transmission costs more.

The only antidote to the huge, looming increase in the price of electricity, not to mention the possibility of brownouts caused by the lack of investment in base load power, including nuclear, is energy efficiency.
Unless urgent action is taken, the rising price of power will destroy manufacturing and retail businesses far more effectively than the internet and the currency, which has a tendency to go down as well as up.

Tuesday, November 16, 2010

Why electricity is going up

Michael Stutchbury gives an account of why electricity prices have been going up, and why a carbon tax would not add to that process as much as people think. Here’s a key section:

Sims's key point is a carbon price won't lift household electricity bills as much as typically figured. A modest carbon price has been estimated to push up wholesale prices by 60 per cent or so, translating into a 24 per cent or so rise in household retail bills.

But a carbon price world shouldn't be contrasted with the old status quo world. Instead, it should be compared with the actual alternative of carbon price uncertainty and the high-cost renewable schemes that are driving electricity bills higher anyway.

A carbon price could actually ease pressure on household electricity bills, assuming we're serious about hitting our target of cutting emissions by 30 per cent on business-as-usual levels by 2020. "A carbon price will see electricity prices increase by less than they would by pursuing a given greenhouse gas reduction target by the current greenhouse schemes," Sims told the committee.

This of course requires the Greens to accept that expensive renewables should no longer be mandated because they cost more than a carbon price to do the same emissions-reduction job. This extends to Gillard's own expensive $400 million "cash for clunkers" scheme which, like the Coalition's greenhouse direct action, shifts the problem on to the budget.

I was also interested to note this earlier part:

The recent surge is mostly driven by "network costs", which will account for two-thirds of the rise in regulated NSW power prices in the five years to 2012-13.

These distribution costs are rising in line with increasing peak demand, such as on hot days, and reflect our vigorous population growth and modern prosperity. Three out of every four Brisbane homes have air conditioners, compared with one in four only a dozen years ago.

Tuesday, June 29, 2010

Clean energy blues

A few items of interest about clean energy:

* Technology Review has a pretty balanced report on the German experiment in boosting solar power generation by generous "feed in" tariffs for your domestic solar cells. On the one hand:
The German grid now gets more than 16 percent of its electricity from these sources, and the government has raised its target for 2020 from 20 percent to 30 percent. The country avoided pumping about 74 million metric tons of carbon dioxide into the atmosphere in 2009. The German environment ministry also touts a side benefit: nearly 300,000 new jobs in clean power.
But on the other hand, some say:
..the German policy is a government boondoggle. "It's not surprising that if you throw enough money at a certain technology, people will use it," says Severin Borenstein, codirector of the Energy Institute at UC Berkeley's Haas School of Business. Yes, the incentives triggered a frenzy of renewable-power installations, but at "very high prices," says Henry Lee, director of the Environment and Natural Resources Program at Harvard's John F. Kennedy School of Government. The spending on photovoltaics has been especially cost-inefficient in terms of producing power, Lee adds, because "Germany is the cloudiest country in Europe." Despite the weather, Germany now accounts for half the world's 20 gigawatts of installed solar capacity. "What that gets you," says Lee, "is high prices for electricity, locked in for 20 years, from technology that will be out of date within three years." Concludes ­Borenstein: "That's a failure of public policy."
I do find it particularly odd that cloudy old (northern) Europe is the part of the world really going for solar. I remain sceptical of the wisdom of the program, although I presume it would all make more sense in places like the top half of Australia.

* Technology Review also has a long article about Zhengrong Shi, the Chinese businessman (but Australian citizen) and his hopes for improved solar cell efficiency in the not so distant future. Still no real talk in the article about how you store the electricity once the sun goes down, though.

* The 7.30 Report featured a story about an Australian company which is going off to Europe to build its ceramic fuel cells. These seem very promising, yet are getting little support from the Australian government because they run on natural gas. This seems pretty silly to me, especially if these claims are true:
Ceramic Fuel Cells claims its Blue Gen unit is much more efficient than the current power grid where up to 80 per cent of the energy can be lost in transmission and it says the unit produces two thirds less carbon dioxide emissions than coal fired generators.
Interestingly, the Greens think fuel cells should get feed in tariffs, and Senator Nick Xenophon points out that if the government is going to not pay feed in tariff for energy from natural gas, why do they pay renewable energy money on heat pump hot water systems, which run on electricity from coal? Fair point, and it certainly seems true that no single party has all the answers to sensible clean energy policy in Australia.

I first mentioned this Australian company here 2 years ago. Seems that they are moving slowing towards large scale production.

Tuesday, September 01, 2009

Trouble ahead

UK could face widespread seventies style blackouts - The Independent

The UK faces widespread power cuts for the first time since the 1970s, according to the Government's own predictions.

Demand for electricity from homes and businesses is set to exceed the available supply within eight years....

The latest figures cast doubt over the Government's pledge that renewable sources can make up for lower output from nuclear and coal.

They were slipped out in an appendix to the Low Carbon Transition Plan, which was launched in July. The main document set out a target for "clean" technology - such as wind, wave and solar - to supply 40% of the country's power by 2020.

But the extra section suggests that there will be a shortfall by 2017, when the "energy unserved" level is predicted to reach 3,000 megawatt hours per year...

By 2025 the situation is expected to worsen, with the shortfall hitting 7,000 megawatt hours per year.

That would be equivalent to an hour-long power cut for half of Britain over the course of a year.

Actually, in some recent stormy summers in Brisbane, we've had a lot more than an hour-long power cut in a year.

Sunday, February 22, 2009

Why defend emissions trading?

An argument for emissions trading at John Quiggin

I don't understand why an economist on the left of politics like John Quiggin is still arguing for an emissions trading scheme as being preferable to a carbon tax.

Surely, the recent experience of financial markets ought to make anyone very cautious about a proposed new scheme which is welcomed by those who can see that there is money to be made in a potential novel market. I expected it would make Labor types especially skeptical.

In the post linked above, Professor Quiggin argues boldly that the recent collapse in the price of the European emissions permits is not a warning against using ETS:
Most commentators have seen this as a strike against emissions trading, but actually it’s a positive. The big concern about price uncertainty arises when we are very uncertain about the cost of reducing emissions. Under cost uncertainty, setting the emissions target too low could impose unexpectedly high costs on the economy.

What’s happening here is that we are uncertain about the rate of growth of the economy. An emissions target is countercyclical since it imposes a relatively high cost when the economy is strong, and a much smaller cost when the economy is weak. This is a Good Thing.

There are many comments following which contest that view, and I find some of them very convincing. TerjeP argues, for example:
If the focus of the carbon emission policy is to reduce carbon emissions by ushering in new energy technology then the key business sector that needs price certainty from a carbon tax is the renewable base load energy sector. They are after all the ones in need of new capital and who must persuade investors and bankers that things will work out as planned.....

However dealing with the volatile carbon price that an ETS would deliver makes investment in such unproven high risk commercialisation a far less certain venture.
And besides which: doesn't a hell of a lot depend on whether the US goes down the ETS path as well? If Obama actually goes for a carbon tax, wouldn't it be wise to follow?

UPDATE: How convenient. Penny Wong has column space in the Australian this morning in which she explains why an ETS is preferable to a carbon tax. Her key point:

Arguments around the merits of emissions reductions policies can be complex, but the core explanation for why emissions trading is superior to a carbon tax is simple. A carbon tax does not guarantee emissions reductions. A cap-and-trade scheme does.

Delivering a target is a key part of domestic and international efforts to reduce carbon pollution.

Cap and trade gives us certainty that targeted reductions will occur, whereas a carbon tax gives no guarantee over the quantity of reductions. Under a cap-and-trade scheme, the government issues permits for each tonne of carbon up to the total cap. Under a carbon tax, the government needs to estimate how emissions levels would respond to a carbon tax rate, introducing uncertainty about whether the target would be reached.

But Penny: that assumes that the ETS actually works. She claims:
Emissions trading gives businesses and the community more certainty.....While the carbon price will fluctuate under a cap-and-trade model, there is a capacity for firms to use market instruments to help manage movement in the carbon price.
Yes, market instruments have been working so well, lately. (Disengage sarcasm mode.)

More Wong claims:
Emissions trading opens up the prospect of sharing the burden of reducing emissions with other countries through linking the CPRS to schemes overseas. A carbon tax would take Australia out of this emerging international market.
But problems with the credibility of credits claimed for reductions in other countries has been one of the major issues of the European ETS, hasn't it? And wouldn't common sense suggest that there is always going to be an incentive for businesses engaged in quantifying the effects of overseas mitigation to be biased towards overstating the benefits of schemes? I mean, that keeps all potential customers happy.

I would have thought that one of the benefits of a carbon tax is that you can cut out that part of an ETS and just worry about accurately assessing what is going on in your own country.

Penny doesn't want to wait, though, and that's a worry:
Now is the time for getting on with the job not kicking around theories.
It's not the theories we want discussed, Penny; we're saying it's the practicalities that need to win out over theory.

Monday, December 15, 2008

Rudd's targets, and other problems

It's hard to know what to say about Kevin Rudd's greenhouse gas targets today.

In fact, the whole CO2 issue is an ugly mess at the moment.

On the one hand, I would like to see CO2 emissions tackled seriously, and it sure sounds like Rudd's plan is one that largely avoids taking the hard decisions. As Robert Merkel said over at LP, industry has sounded so happy with the target that it looks clear that it is too generous to them.

On the other hand, countries announcing high targets which don't appear to have any realistic hope of success under emissions trading schemes similar to those already in place are just selling false hope, and a more modest target at least has the benefit of realism.

On the third hand, CO2 sequestration seems obviously a crock that the coal industry has latched onto to try to save its skin. Yet it has seemingly captured the imagination of Rudd and (probably) the Liberals. Kevin Rudd touring a new, but tiny, solar power plant for a small outback community also gives out the wrong impression about how fast solar is advancing here.

As a whole series of posts here recently has indicated, the fundamental problem seems to be increasingly recognised: there is strong reason for believing that emissions trading schemes are a hopelessly flawed way of trying to address the issue, especially if offsets are allowed. Offsets will always be at the core of the potential for corruption, unintended consequences, and a huge and difficult verification process.

It also seems that some people on all sides of the greenhouse fence (Lomborg, Lovelock and Hansen, for example) are being more forthcoming in arguing that concentrating on ETS is a bit of a sideshow: it's more important for governments to push directly for the technological developments that will generate lots of power and actually reduce CO2 emissions. To worry too much about ETS elevates process over results, and this has been at the heart of my long standing scepticism about Kyoto. (Stories of Kyoto's failures often remind me of the "Yes Minister" episode in which a new hospital completely devoid of patients, but full of busy administrative staff, is said to be operating very successfully.)

The anti-CO2 advocates emphasising innovative nuclear technology as a key feature of reduced CO2 includes Hansen. I was surprised to see that the Australia greenhouse website BraveNewClimate has also taken to posting about new generation nuclear. Meanwhile, Obama's new Energy Secretary Steven Chu is a physicist with a lot of sympathy for nuclear over coal.

Yet the Green movement is going to resist all such talk; they all give the impression they were spooked by nuclear as children and can't grow out of it. All their talk of renewable energy as being able to save the day is just not very believable.

The best hope is probably that Steven Chu will come up with a detailed, direct and innovative plan for dealing with greenhouse in a way that has a significant role for new types of nuclear power. Obama will then have to sell it to the American public and Congress.

In Australia, the truly brave but proper thing for the Liberals to do would be to argue that they will commit to higher targets, but only on the basis that nuclear is to be an essential part of the mix. Personally, I would argue for some direct involvement in the nuclear pebble bed development going on in South Africa and China. (The timetable for getting a demonstration plant in South Africa up and running just keeps on getting extended; surely there is scope for more international involvement in funding this? The technology is not dramatically new, but has the good PR feature of not being able to melt down, and should be modular in design for easy international deployment.)

I actually think that nuclear power will soon be sell-able to the Australian public, but whether the political will is there or not is yet to be seen. (Certainly, if Obama comes out strongly pro-nuclear, it will be easier for the Liberals to adopt such a policy too.)

But for the moment, there are no strong grounds for optimism that anyone has worked out the best way forward.

UPDATE: In light of what I wrote last night, I would say that Tim Colebatch in The Age gets to the heart of the problem with Kevin Rudd's scheme here:
Ross Garnaut envisaged a rigorous emissions trading scheme with few exemptions, and raising $4 billion a year to speed research, development and commercialisation of clean technology. The Rudd model spends everything on compensation, and has nothing left over to help solve the problem.
In The Australian, George Megalogenis looks at the strange decision to pay families and pensioners more than anyone expects them to lose due to the scheme. But, as was to expected from Paul Kelly's recent article, the editorial supports Rudd and calls critics of his plan "deep Greens". Hmmph.