Worry grows over carbon trade flow-on
ONE of life’s more spine-chilling experiences is being on board an airliner making an emergency landing with the entire cabin crew chanting ‘‘ brace, brace, brace, brace.’’
Most of the passengers on airship Australia may not yet be aware of it, but the dirge-like chant of ‘‘ brace’’ is growing louder as we prepare to land in the new field of carbon-constrained energy supply.
One of the latest warnings of a potentially rough landing is from Roger Corbett, former head of Woolworths and a Reserve Bank board member. ‘‘ I don’t think it is beyond the realms of possibility that the cost of energy could go to five times the current level, or even more,’’ he said. ‘‘ I think we are looking at a five to 10-year time frame.’’
This view has been broadly reinforced by the Rudd Government’s key adviser on emissions trading, professor Ross Garnaut. ‘‘ One of the intended effects of the scheme is to make emission-intensive goods and services more expensive,’’ he says.
Corbett’s perspective finds support in widening areas of the Australian energy sector and among those dealing with policy, or seeking to influence it.
‘‘ Rather than greenhouse gas emissions costing $20 per tonne under carbon trading,’’ an adviser to government conceded in private conversation this month, ‘‘ it is beginning to look as if the scheme will require prices of $40 to $50 per tonne.’’
Across the economy, emissions trading at $50 levels would add about $25 billion annually to the nation’s energy costs, feeding in to the shopping shelves as well as the petrol bowsers and impacting on inflation and employment.
A $50 trading price will translate in to an increase in the annual cost of generated electricity of between $8 billion and $9 billion a year — and to a 50 per cent increase in consumer bills for power, which then roll on to the rest of the economy. Australian business consumes 72 per cent of the nation’s electricity.
To this can be added the impact on generation costs of the Rudd Government’s enlarged mandatory renewable energy target, proposed for introduction along with emissions trading, which is expected to add up to $2 billion a year to wholesale prices by 2020.
In the petroleum sector, the cost of emissions trading will land on top of the impact of international oil prices. In the Australian oil industry, explorers and producers are convinced that $US50 per barrel now represents a floor price in world trade — a figure that represented a prices, sales of thirsty SUVs actually rose 20-year peak in 2003 and that has been last year. surpassed in the past five years as oil One of the big goals of imposing carbon prices have averaged more than $US75 a costs is a sharp reduction in the growth of barrel — and some are expecting it to hold energy demand, most importantly in at $US100 or higher in the next few years. electricity consumption. Government and
The bottom line for consumers, upset a the environmental movement expect to year ago by bowser prices passing $1.30 a see power growth cut by a third by 2020 litre, is that they had better brace for $2
— representing an emissions growth per litre and more. This month’s annual conference of the
reduction but not a cut in actual greenAustralian Petroleum Production & Exhouse gases from today’s levels. ploration Association — which attracted a The minds of political party strategists record 2,600 delegates to Perth, making it should already be exercised by considerathe world’s third largest petroleum forum tion of how voters will react at the polls in — also saw much debate among partici2010, 2013 and 2016 to having to dig far pants about the price of Australian gas. deeper in to their pockets to buy petrol, Western Australian gas costs have soared power and other energy needs, as well as in the past three years as LNG export meeting other costs driven up by higher prices have fed in to the domestic market, energy prices. and there are now questions being asked All this while watching domestic emisabout the potential impact of liquefied sions rise — and global emissions soar on coal seam gas exports from Queensland the back of Chinese and other developing on the eastern States market. This in the nation demand — despite the strident next decade, at a time when it is hoped warnings about the imminent danger of there will be also a large increase in the use of gas for power generation.
global warming. One of the great unknowns of the If carbon costs in Australia also drive proposed shift in energy pricing is how it employment losses — energy intensive will change consumption patterns. Energy industries employing a million people use demand is notoriously ‘‘ unelastic’’ — a third of domestic electricity consumpunresponsive to price rises. As an example, tion — it may be some of the politicians despite the shrieks of anguish from who are shouting ‘‘ brace, brace’’ in a few Australian motorists over high petrol years.