Australia faces two choices as to how we can clean up our environment and play our part in reducing global emissions. The real debate in Australia is not about action versus inaction. It is about whether electricity prices or ”direct action” is the best method to reach our targets.
The first option is to increase electricity prices still further to try to force demand down by driving up prices. We have been told that this method - which is preferred by Prime Minister Julia Gillard - is likely to see a 25 per cent increase in electricity costs within three years and a doubling effect over the next eight years.
The Garnaut report acknowledges that the effect of either a carbon tax or emissions trading scheme will be to drive up electricity prices: “A major part, if not all of the costs faced by electricity generators, will be passed down the chain from electricity generators, distributors and retailers and finally to households through higher electricity prices.”
The actual rise in electricity prices was quantified this year when then prime minister Kevin Rudd informed Parliament that Treasury modelling showed that in the first year of an ETS, prices would rise by 7 per cent, followed by 12 per cent in the second year, making 19 per cent in just two years.
The New South Wales independent regulator went further in March. He approved electricity price rises of 35 per cent over three years where there was no ETS, but 60 per cent where there was an ETS. In other words, there will be electricity price rises without an ETS because we are expanding the network to cope with a bigger population, but there will be an additional 25 per cent rise solely as a result of an emissions trading scheme.
As ALP powerbroker Paul Howes recently noted, “the whole point of putting a price on carbon is to make things more expensive so you don’t use them”. That means pensioners facing increasing concern about whether they can use heating in winter and cooling in summer. It generally does not mean that the same anxiety is faced by the wealthy.
The alternative approach, and one which I believe to be both more equitable and more optimistic, is to find the cheapest option such as capturing carbon in our landscape or cleaning up Hazelwood and the other brown-coal power stations. The heart of this ”direct action” is through a carbon buyback, which holds an auction to find the lowest cost emissions reductions.
It is very similar to the systems in place in NSW, Japan and Switzerland and is almost precisely the way in which the federal government buys back water. It is also the way to give a real chance of converting Hazelwood from coal to gas or renewables without disrupting Victoria’s power supply.
The other possibility that comes into play through this is the prospect of harvesting the carbon dioxide from our power stations and using it as the feedstock for creation of algal biofuels.
In the United States, there is a dramatic push to invest in clean energy security. The Obama administration has invested $200 million in algal energy research, Exxon has invested $600 million to commercialise the stripping of carbon dioxide from coal-fired power plants as the basis for algal petroleum, and Bill Gates has invested heavily as well.
Mehrdad Baghai, who has advised the US government on strategies for energy security, believes that Australia is one of the two best candidates to become a global hub for algal energy derived from waste power station carbon dioxide.
Australia possesses the vital combination of land, waste gas, sun and nearby sea water, coupled with an adaptable workforce. The US-based Sapphire Energy believes Australia has the potential to produce 500,000 barrels of algal energy a day in a $20 billion industry. Brilliant Australian innovators such as MBD are already partnering with Australian power stations to test the stripping of carbon dioxide for conversion to algal biofuels.
The triple benefit is that we help drive Australian energy and economic security, we can clean up rather than close down our existing energy sources and we can reduce emissions by up to 200 million tonnes per annum over time.
The technology path through incentives is, in my view, both more optimistic and a more reliable guide to the future than the smaller path of a regressive attack on the living standards of the lowest income earners through still higher electricity bills.
In the long search for bipartisanship, this vision of a technology-led clean energy revolution could be a point of unity. If the government is willing to make common cause towards energy independence through incentives, then the door is open for discussion.
Greg Hunt is federal shadow minister for climate action, the environment and heritage.
