Worry grows over car­bon trade flow-on

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Keith Orchi­son

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.

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