Carbon pricing in Australia

Reuters on the Australian carbon pricing scheme due to go into effect in a few months:

While carbon taxes and cap-and-trade programs are meant to provide long-term price signals away from high carbon energy sources and reduce risk for investors in clean technologies, this confidence-building effect goes away when the opposition party vows to repeal the policy!  It will be interesting to watch how this shakes out, and to think about implications for decarbonization policy here in the US where the public has become increasingly polarized on the issue in recent years.

It seems like the first phase of the Australian plan is a fixed-price tax, followed later by a floating-price emissions trading scheme that would include farming and land use; compare the Australian carbon tax price, A$23/ton CO2 (~US$24) initially, with a carbon abatement cost curve that McKinsey & Co generated for Australia back in 2008: 

Their analysis suggests that:

  • There’s ~75 Mt CO2eq of carbon abatement possible by 2020 that would pay for itself in savings, namely efficiency increases in the building and transport sectors
  • An additional ~50 Mt CO2eq abatement  comes on line at costs of around A$23/ton, largely in the agricultural and forestry sectors
  • Large-scale changes the power sector capable of reducing emissions 30% below 1990 levels only start to happen at >A$50/ton

So it will be very interesting to see where the carbon price settles in the emissions trading phase of the regulation, assuming the policy is still in place then!

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4 Responses to Carbon pricing in Australia

  1. Pingback: Carbon pricing in Australia Energy and the Future | | Pollution News | reporting on pollution solutions in 2012Pollution News | reporting on pollution solutions in 2012

  2. John says:

    “Assuming the policy is still in place by then” apparently was a bad assumption- it looks like Australia is abandoning their plans for a national emissions trading scheme in favor of a merger with the EU ETS:
    http://rogerpielkejr.blogspot.com/2012/08/not-with-bang-but-whimper.html
    I haven’t really digested the details of this yet, but a quick skim suggests that it’s a dramatic weakening of the policy, abandoning a $15/tonne carbon price floor for a very slow merger with the European system. EU ETS price trends here for reference:
    http://bettingthebusiness.com/2011/12/21/duality-and-uncertainty-lessons-from-the-carbon-market/

  3. Paul says:

    I wonder how much of that was driven by politics? They knew they were probably going to lose bad in this election..

  4. Pingback: So much for the Australian carbon tax | Energy and the Future

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