And now it is time for a break.

After nearly 8 months of hammering it into a not too shabby format, SP is going to have a break from blogging.
Real life commitments are beginning to interfere with this hobby and must be dealt with first.
Volunteers are welcome to post guest articles or become authors, just contact Big Gav.

Trans Tasman ETS Challenge

Or the ACT as seen from NZ, a guest post from Robin Johnsons EWP making some comparisons between the New Zealand scheme and the proposed Australian Carbon Tax (ACT).


Securing a Clean Energy Future - how comprehensive?

I have to admit I recently rushed to conclude that the Australian carbon pricing scheme would be a "leapfrog" ahead of the NZ Emissions Trading Scheme (NZ ETS). Okay, I admit I generally think the NZ ETS is worse than nothing as a policy to reduce GHG emissions. So the Australian scheme must be more effective. So I have leapt to a conclusion without doing the number crunching.

Now I have actually read Julia Gillard's carbon pricing proposal and can offer a slightly more considered opinion.

The carbon price scheme has a name and obligatory website; Securing a Clean Energy Future. The full document is Securing a Clean Energy Future, The Australian Government's Climate Change Plan, Commonwealth of Australia 2011, ISBN 978-0-642-74723-5.

First of all, the 'Clean Energy Future' is not a carbon tax. It is a cap and trade emissions trading scheme with a safety valve. Page 25 says "Large polluters will report on their emissions and buy and surrender to the Government a carbon permit for every tonne of carbon pollution they produce." That's very much an emissions trading approach, but with a fixed carbon price for three years. The price is A$23 per tonne from 1 July 2012, then A$24.15 in 2013-14 and $AU25.40 2014-15 (p 26). From 1 July 2015, the carbon price will float within and upper and lower ceiling with the Government setting an overall 'Cap' or limit on GHGs (p 27).

The GHGs covered are; carbon dioxide, methane, nitrous oxide and perfluorocarbon emissions from the aluminium sector (p 28).

There will be 500 sources of emissions, which will be companies or sites with direct greenhouse gas emissions of 25,000 tonnes of CO2-e a year or more, Sectors covered will be; stationary energy, waste, rail, domestic aviation and shipping, industrial processes and fugitive emissions (p 27).

But not farming or land transport fuels.

So how comprehensive is 'Clean Energy Future'? To me, the comprehensiveness of a carbon tax or an emissions trading scheme is a good metric of likely efectiveness. And its a metric to use to make comparisons between policies.

Lets say the comprehensiveness is the proportion of total GHGs emitted that is either taxed or included in an emissions trading scheme. 'Clean Energy Future' claims half to two-thirds. The report states that more than half of Australia's GHG emissions will be directly covered by the scheme, and almost two-thirds of GHGs will be included when other measures are included.

'Clean Energy Future' includes an appendix of forecast revenues. In the year to 30 June 2013, the 'Clean Energy Future' scheme will earn A$ 7.74 billion (Appendix C, p 131). At the fixed price of A$ 23 per tonne, that gives 337 million tonnes of GHG (by CO2-e) that is taxed or priced. Thats 60% of Australia's 2009 GHG emissions (565 million tonnes) priced in 2013. That seems not a bad start, given that Geoff Bertram and Simon Terry have calculated that the NZ ETS, after free allocation, delayed start dates, only prices 3%, (12 million tonnes out of 378 million tonnes) of New Zealands GHG emissions between 2008 and 2012 (Bertram and Terry 2010, The Carbon Challenge, p 111).

But is there any free allocation of carbon permits to emitters in the 'Clean Energy Future' scheme? Yes, if you look carefully there is.

The revenue forecast in Appendix C lists costs of A$ 2.85 billion for "Jobs and competitiveness program" and A$ 1 billion for "Energy security".
Table 15 on page 114 notes that "Jobs and competitiveness" invloves the free "allocation of permits ...to new and existing entities undertaking an eligible emissions-intensive trade-exposed (EITE) activity". Table 16 Energy Security p 116 indicates that "Energy security" involves "allocation of permits and cash estimated at $5.5 billion over six years to assist highly emissions-intensive coal-fired generators" and "payments for the closure of around 2,000 megawatts of very highly
emissions-intensive coal-fired generation capacity by 2020".

So of the A$ 7.7 billion collected from the 500 emitters in 2012-2013, possibly some A$ 3.85 billion will be rebated to the dirtiest and most carbon-intense emitters, as long as they are trade-exposed. The definition of emissions-intensive-trade-exposed isn't exactly tied down and has a number of parts. One is being imports or exports as greater than 10% of production. Also, rather like the NZ ETS, any assistance to emitters will phase out at a very gradual 1.3% a year (Table 15, p 114).

Lets assume that 100% of these two categories is spent on free allocation of permits or is just given as a subsidy to some of the 500 emitters. If we have 337 million tonnes of GHG emissions (by CO2-e) that is priced, and subtract 167 million tonnes for the gifting and assistance ( A$ 3.85 billion divided by $23AU = 167 mt) we get 169 million net tonnes of GHG emissions priced in 2013 under the 'Clean Energy Future' scheme. Thats 30% of 2009 GHG emissions of 565 million tonnes.

Okay, I am comparing 2013 for the 'Clean Energy Future' scheme with 2008-2012 for the NZ ETS, but a minimum of 30% coverage of GHG emissions beats 3% of GHG emissions hands down. The 'Clean Energy Future' scheme is more comprehensive than the NZ ETS by a factor of 10. 30% of GHG emissions priced vs 3% priced. That certainly is a big "leap frog" ahead by our trans-tasman cousins, I would say.

Its the future with no polluter

Given the recent news that former Governor of the Reserve Bank of Australia Bernie Fraser will be the inaugural chairman of the soon to be established Climate Change Authority (CCA), I proffer the above tag line for the official motto¹.

Bernie Fraser to head climate change authority
SUN 10 JULY 2011
Prime Minister, Deputy Prime Minister and Treasurer, Minister for Climate Change and Energy Efficiency

The Gillard Government is pleased to announce that it intends to appoint the former Reserve Bank Governor and former Treasury Secretary Bernie Fraser as Chairman of the new Climate Change Authority (CCA).

The CCA is to be established by legislation as an independent body to provide expert advice on key aspects of the carbon pricing mechanism.

When the carbon pricing mechanism moves to a flexible price emissions trading scheme, the Government will put annual caps on the amount of carbon pollution that can be released into the atmosphere by entities covered by the carbon price.

The CCA will play an important role in the governance of the carbon pricing mechanism.

One of the CCA’s responsibilities will be to make recommendations to the Government on future pollution caps under the carbon pricing mechanism.

These recommendations will have regard to, among other matters:

• the Government’s announced medium and long-term carbon pollution targets;

• progress towards emissions reductions;

• the impact of its recommendations on the Australian economy, including on specific industries.

The Government will make final decisions on these pollution caps, based on the recommendations of the CCA.

The CCA will also provide advice on the performance of the carbon price and other climate change initiatives and will track progress towards Australia’s pollution reduction targets.

It will conduct regular public reviews and its reports will be made public.

The headline at The Age is,

$15 billion in tax cuts for low and middle income earners under carbon deal
Phillip Coorey
July 10, 2011 - 6:39PM

Low and middle-income families and singles pensioners and other welfare recipients are the biggest winners from the carbon price while those on generous incomes will bear almost the full brunt with next-to-no assistance.

Unveiled at midday today by the Prime Minister, Julia Gillard, a package of $15 billion in tax cuts and increased benefits mean 4 million households will receive more in compensation that the carbon tax will add to their cost of living.

A further 2 million households will be no worse off by being fully compensated, while another 2 million will receive something.

Of the nation's 8.8 million households, only 700,000 receive nothing.

The scheme will operate as a fixed carbon price of $23 from July 1 next year, and move to a full emissions trading scheme on July 1, 2015, when the market will set the carbon price.

It excludes petrol and is not revenue neutral as first forecast. It will cost the budget $4.2 billion over four years and will erode the forecast $3.5 billion return to surplus in 2012-13 by $530 million.

It's fairly obvious how the Opposition/News Co. is probably going to play this. It will be some variation of economic doomsday-ism rolled up with "the politics of envy" style rhetoric coupled with a frenetic whisking up of the "green socialist agenda" - when The Greens aren't being compared to Fascists, that is.

As Crikey writes, like all such deals, its a compromise. Maybe not the best compromise but it hopefully breaks the inertia and resistance created by the climate denial spin machine.

Carbon tax: the policy and the politics
by Bernard Keane

This is a better package than the CPRS it is so closely modelled on, but not by a lot.

The key problem with the CPRS was that compensation for emissions intensive industries was so great and went for so long that it neutered the price signal...

The same levels of assistance will apply to big polluters again, but this time the Productivity Commission will be on the case to review whether the assistance is justified and there’s an in-built bias toward reduction in assistance to the levels proposed by Ross Garnaut in his updated report if the PC agrees. But big polluters have a guarantee that their assistance won’t be cut until at least 2018, although the PC can start its 2014-15 review early if it believes there are industries making windfall gains from compensation. Which, of course, they will be.

There will also be an independent body to examine the case for accelerating Australia’s laughably unambitious target of 5% by 2020. The Climate Change Authority could become a potent independent source of advice that will pressure future governments inclined to recalcitrance in the key issue of how quickly we proceed with decarbonising the economy.

So two independent sources of pressure on future governments to improve this scheme in its two critical features: how much the price signal is neutered by compensation, and how fast we should be reducing emissions.

The other key advantage over the CPRS is the use of tax cuts aimed at addressing EMTRs for low-income earners. This isn’t merely sensible policy, it’s actually consistent with the government’s own reform efforts so far under Julia Gillard, aimed at increasing workforce participation.

This tax break for 'working families' my also function as a 'pre-emptive' stimulus - given the direction of oil prices and signs that the US and Europe may be in for another bout of GFC.

The bad news is some of the worst polluters will get even more than they got under the CPRS. The coal industry will get a staggering $1.2 billion in handouts, in an outrageous cave-in to the industry that is responsible, more than any other, for Australia’s contribution to global warming. Compensating the coal industry for a carbon price is like compensating the local drug dealer for a crime crackdown.

So how does it stack up against the criteria Crikey suggested last week? Will it be seen as a serious contribution to the cause of an international agreement on climate change? Yes.

This is about as voter-friendly a package as you can get while still doing something about climate change. With tax cuts for low income earners, generous overcompensation for pensions recipients and handouts to rentseekers to mute claims of job losses, the package minimises the potential for scare campaigns and special pleading.

As we all know, this government is so inept it’s likely to botch the selling of the package and leave people convinced they’ll be ruined by it.

Still, by targeting assistance at the steel industry, the coal industry and the coal-reliant electricity sector, Labor is keeping one eye on its heartland, even if it will have trouble with the road transport industry (which is still getting a good deal under road pricing arrangements). The government wants to extend a carbon price to heavy vehicles in 2014 but this has not been agreed by the Multi-Party Committee on Climate Change (read, the independents).

And the package relies far more heavily than the CPRS did on tax cuts to deliver compensation, giving the government a potent selling point — two, actually, because the lift in the tax-free threshold will be over two years.

There are some very generous concessions.

Big polluters get $9.2b assistance
Business Age, 10th July

The federal government will provide $9.2 billion in assistance to support jobs and industries affected by the introduction of a carbon price.

The government released its long-awaited carbon price package on today, announcing an initial $23 carbon price that will be paid by around 500 big top polluters.

Over the first three years $9.2 billion of the revenue raised will be used for assistance by way of free carbon permits to manufacturers that generate over 80 per cent of emissions.

For manufacturing industries like aluminium smelting, steel making, flat glass making, zinc smelting, and most pulp and paper manufacturers, they will receive 94.5 per cent of industry average carbon costs.

Lower polluters, such as plastics and chemical manufacturing, tissue paper manufacturing and ethanol production will be eligible for permits to cover 66 per cent of carbon costs.

Liquefied natural gas projects will receive 50 per cent assistance. The steel industry will receive $300 million in assistance to encourage investment and innovation to assist in the transformation to a low-carbon economy.

The coal sector will receive a $1.3 billion package to support jobs during the move to clean energy.

The government said most small businesses will not be materially affected by the carbon price, but will benefit from an extension in the small business instant asset write-off threshold to $6500.

And landholders will also see some financial benefits.

Farmers to reap $1bn windfall
The Australian, July 10.

FARMERS who plant trees and store carbon in their soil will share in $1 billion in carbon tax receipts under the package to be unveiled tomorrow.

Canberra will recruit country Australia to its cause by buying credits from landholders who make carbon savings or allowing them to sell those credits to polluters to cover their carbon bills.

It will also reinvest carbon tax revenue in land research and management programs, including funding for outreach officers and training for farmers who want to take part in the scheme.

Greens deputy leader Christine Milne yesterday said the deal struck by her party would end the "political interference" at cabinet and ministerial level in renewable energy funding programs.

"We're going to see now real support, consistent secure support for research and development, and demonstration and commercialisation projects," she said.

Mr Oakeshott said the latest bargain with the government offered landholders "significantly more" than was on the table under Labor's earlier carbon pollution reduction scheme.

Which should help prevent some farmers from joining or voting for silly front groups like The Climate Skeptics², who also seem to want to revive the "Tilt Australia" campaign.

[UPDATE]
It only took a few hours.

Tony Abbott slams 'veiled socialism'
TONY Abbott has accused Julia Gillard of using her carbon tax plan as a cover for a redistribution of wealth, savaging the new policy as "socialism masquerading as environmentalism".

The Opposition Leader also insisted the package would cost jobs, demanding the Prime Minister visit factory floors and mines to face workers whose jobs he said she had put at risk.

"We're against this," Mr Abbott said. "This is a bad tax. It can't be fixed. It has to be fought."

SURELY Tony Abbott didn't mean to let his Climate Change Denial Disorder (CCDD)come to the fore, again ... he needs to be prescribed some Realityne^TM.

Mr Abbott said. "This is a bad tax based on a lie."

Meanwhile, elsewhere in The Australian, others are looking to the business upside.

Biggest single investment ever made in renewable energy
The Australian, July 11, 2011

The Clean Energy Finance Corporation will start operating in 2013-14 with more than double the seed capital of its overseas counterpart, Britain's $4.5bn Green Investment Bank.

And green power projects -- excluding nuclear, biofuels from native forest woodwaste, and carbon capture and storage -- will take up at least half the fund's capital, after lobbying by the Greens.

Greens deputy leader Christine Milne said the dedicated funding represented the biggest single investment in renewable energy Australia has ever made.

"With a legislatively guaranteed stream of funding outside the budget, no future government will be able to undermine it without changing the legislation," she said.

The fund, which will be independent of government and run by a board of banking, investment management, clean energy and technology experts, aims to partner with business to maximise investment in the sector.

The government believes $20bn will be spent on renewable energy projects in Australia in the next decade and $100bn by 2050. "Treasury modelling shows that with a carbon price, energy from the renewables sector is projected to account for around 40 per cent of our electricity generation by 2050, a significant increase from its current level of around 10 per cent," it said yesterday.

Professor McKibbin was concerned by the scale of the package's subsidies for renewables.

"We know from the Productivity Comission report that that is a very high cost way of reducing carbon per unit . . . it has to be done in a way that is very carefully managed," he said.

"I would prefer that the carbon price system itself generates enough incentives."

1. Bernie Fraser achieved some celebrity in Australia for his role in promoting superannuation funds with the tag line "It's the super of the future", uttered in a distinctive monotone.
2. I've already linked to The Australian, I refuse to have links to two sites from the dark side in one post ;-).

Climate for Corruption

No this is not a post about those fiendishly clever climate change conspirators pulling a fast one on Claude or Ligna Coal Magnate.

The small Maldivan Newspaper Haveeru caught my eye, or rather my Google news feed, with the following interesting article about the potential for corruption in carbon markets and climate mitigation schemes.

Transparency Maldives launches Global Corruption Report on climate change

Haveeru Online, June 26.

MALE, June 28 (HNS) – Transparency Maldives Sunday launched the Global Corruption Report: Climate Change compiled by Transparency International.

Transparency International officially inaugurated the report, first of its kind to comprehensively explore major climate-related corruption risks, in April of this year at Dhaka, Bangladesh.

International watchdogs identify that improper or poor governance paves the way to corruption especially in the area of climate change governance, as huge amounts of money flow through new and untested financial markets and mechanisms.
The Global Corruption Report: Climate Change focuses on this issue along with making climate governance work, strategies for reducing carbon emissions, building effective adaptation to climate change, actions for sustainable climate governance and recommended actions for governments, businesses and civil societies.
The report stresses the importance of protecting from corruption the estimated US$700 billion budget allocated for mitigation efforts by 2020. It also highlights the inequality of the current processes for individuals and groups most directly affected by climate change.

Well not nearly as much as the US spends on oil wars but more than the ADF wastes (ie a lot).

“The quality of climate governance – the degree to which policy development and decisions are participatory, accountable, transparent, inclusive and responsive, and respect the rule of law – will determine how well it addresses inherent corruption risks,”

However, it is noted that organisations and personnel in developing countries most affected by climate change lack the skills and expertise needed to observe and track the projects undertaken.

By 2009, the registered number of observer organisations to the United Nations Framework Convention on Climate Change (UNFCCC) from the United Kingdom, Canada, and the United States reached more than 400 while from the developing countries, India, China and Brazil were only able to recruit just more than 10 organisations.

“According to a recent study in the North Africa region, however, almost 70 percent of the potential investors interviewed considered regulatory risk, including corruption, to be likely – and a serious impediment to investment,” it says.
“As a critical mechanism for mitigation, carbon markets need safeguards to reduce the risk of corruption, as well as to ensure their sustainability and capacity to reduce greenhouse gas emissions.”

Transparency International notes that adaptation to climate change requires large-scale infrastructure development like flood control systems in Bangladesh, which received a 2.4 score on the Corruption Perception Index (CPI) of 2010.
“None of the 20 countries most affected by climate change scored higher than 3.6 on the Corruption Perception Index,” the report stresses.

From the introductory page at Transparency International

Carbon markets: Managing public assets transparently In international carbon trading schemes, individual governments can sell carbon credits when a country’s emissions are below their pollution targets. In an opaque market, the government mismanagement of credits can go unnoticed. Media investigations in Slovakia revealed that the government sold carbon credits at half their value to a company with links to officials in the ministry that made the sale. They made neither the contract nor the price public. The sale represented an estimated €75 million in lost revenue for the people of Slovakia.

What needs to be done

If climate governance is not prepared for corruption, corruption will undermine climate governance. The GCR does not just raise the alarm, it provides a risk map of ways to make climate change measures more effective.

Recommendations include:

• All conferences and meetings where climate change targets are set should be open to the people they impact and transparent at the international and local levels
• Experts monitoring and verifying projects must be independent and not paid from the budget of the project they are overseeing
• All climate measures should have strong, well-resourced oversight bodies
• Civil society must monitor government commitments to reduce emissions and be involved in development and oversight of national plans for mitigation and adaptation.

Downloads

Global Corruption Report: Climate Change (full download)

Parts 2 & 3

Part 4

Part 5

Part 6

This report appears to have been released earlier and may be having regional releases.

Green schemes are 'wide open to major corruption'

The Independent, Sunday, 1 May 2011

Corruption is threatening global steps to combat climate change, a new report from Transparency International (TI) warned yesterday. Billions of pounds will be plundered and wasted, it says, unless stronger measures are introduced against embezzlement and misappropriation.

The organisation warns that 20 nations most vulnerable to climate change – where millions in grants and aid will be targeted – are judged to be among the most corrupt in the world – and stronger oversight is needed to ensure the funds are properly spent.

"Corruption holds nothing sacred, not even our planet's future," said Huguette Labelle

Although you don’t have to be corrupt to perceive the world through a cash register – greed will suffice.

"Failure to properly govern climate change measures now will not only lead to misallocated resources and fraudulent projects today, but also hurts future generations," …

"Where huge amounts of money flow through new and untested financial markets and mechanisms, there is a risk of corruption," [the report] says.

Carbon markets, the main financial tool for combating climate change, have already been hit by fraud, the report points out. In January, the European Union's carbon market was shut down after it was attacked by cyber-hackers. More than three million carbon credits were stolen from government and private company accounts.

The system has also been hit by repeated tax frauds. One scheme to meet all of Europe's power needs from concentrated solar power plants covering 1 per cent of the Sahara desert was undermined after experts said bureaucratic complexity and corruption in north Africa raised the risks and costs of investment there. After an investigation by Spanish officials, it was discovered that more than one in 10 of its solar parks was falsely registered as operational, despite making no contribution to the energy grid.

Illegal logging, an industry estimated to be worth more than $10bn a year, is fuelled by corrupted customs and other officials, the report says. Some countries have already claimed carbon credits for fictitious forest plantation projects. In Kenya, deforestation is exacerbated by corruption among under-resourced forest guards. TI estimates that in 1963 Kenya had about 10 per cent forest cover; by 2006, it was less than 2 per cent.

But its not just developing nations.

All countries are vulnerable: Britain is criticised for its failure to deal with so-called "greenwashing" marketing techniques used by companies to misrepresent how environmentally friendly their products are.

Also highlighted is America's failure to curb the influence of the "brown lobby" – the 2,000 registered oil, gas, coal and electricity lobbyists who spent an estimated $400m in 2009 compared with the green lobby's $22m.

And from Reuters – Africa,

Corruption must be cut to protect climate –report

Reuters, April 30 2011

MARKETS

Carbon markets, the main financial tool for combating climate change, continue to be shaken by fraudulent activity.

Over the past couple of years, the European Union's $134 billion emissions trading scheme has been blighted by the re-sale of used carbon offsets, hacking, theft and continuing value-added tax fraud. [ID:nLDE70J1KT]

The integrity of the U.N.'s Clean Development Mechanism (CDM), which encourages emissions cutting schemes in poor nations, was dented after some project developers were accused of exploiting the system. [ID:nLDE6AI1A3]

"Creative accounting can lead to the double counting of emissions by companies of their own reported mitigation efforts, (...), thus nullifying the environmental integrity of the emissions reductions," the report said.

Corruption risks also exist in political decision-making and climate financing and through the mismanagement of public funds, the report said.

We need only remember this fiasco…

                                                            … in a supposedly well regulated economy to see what flies are attracted to a shit load of money.

[UPDATE]

In a good move to avoid political interference in clean energy decisions in Australia,

New body to control clean energy grants

The Age, July 5, 2011

RESPONSIBILITY for handing out about $1 billion in clean energy grants will be taken out of government hands under a compromise with the Greens as part of a carbon price deal to be announced on Sunday.

The Age has learned that clean energy programs such as the $1.5 billion solar flagships program - designed to help build Australia's first large solar plants - will be removed from Energy Minister Martin Ferguson's control and run by an independent statutory body.

The new statutory body running clean energy grants is expected to take over responsibility for some of the $5 billion clean energy initiative announced in 2009, including the remaining $730 million in solar flagship funding.

And the West Australian also reports,

Rules to rein in carbon cowboys

July 2, 2011

Trade in international pollution permits will be strictly limited under the Gillard Government's climate change package to prevent so-called "carbon cowboys" from scamming the multibillion-dollar scheme.

In a significant departure from Labor's abandoned carbon pollution reduction scheme, international permit purchases are likely to be restricted to high quality sellers such as the European Union and the US State of California. The concern under the CPRS was that low-quality carbon abatement could be bought by Australian polluters from places such as equatorial Africa and South-East Asia through hard-to-verify and dubious projects such as tree plantations.

It is understood the Government agreed to "qualitative and quantitative controls" under its emissions trading scheme at the insistence of the Greens who opposed unlimited access to international permits under the CPRS.

Although Tony Abbott sounds increasingly like he is running for the Republican nomination in the US rather than as opposition leader of Australia, viz;

Opposition Leader Tony Abbott, who yesterday blasted the Government's planned carbon tax as "socialism masquerading as environmentalism"…