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How will we be affected by Carbon Pricing? What can we do? ‘Contraction and Convergence’ model for globally equitable greenhouse gas emissions: Per capita emissions allowances for 450 ppm (From Garnaut Supplementary Draft Report (Sept 2008)). Note 2012 EU and Aust emissions level assume Kyoto compliance, others BAU emissions levels) Alan Pears AM RMIT University Sustainable Solutions Pty Ltd

Alan Pears - slides - price on carbon forum Aug 2011

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Page 1: Alan Pears - slides - price on carbon forum Aug 2011

How will we be affected by Carbon Pricing? What can we do?

‘Contraction and Convergence’ model for globally equitable greenhouse gas emissions: Per capita emissions allowances for 450 ppm

(From Garnaut Supplementary Draft Report (Sept 2008)). Note 2012 EU and Aust emissions level assume Kyoto compliance, others BAU emissions levels)

Alan Pears AM RMIT University Sustainable Solutions Pty Ltd

Page 2: Alan Pears - slides - price on carbon forum Aug 2011

Carbon Pricing Myths Busted • No forms to fill out, ‘tax returns’, GST-like BAS etc:

only 500 large organisations must comply

• No need to calculate carbon footprints

• No ‘carbon police’ except for the big 500, who have lots of similar compliance issues

• Pass-through costs we’ll see are mostly small and:

– Most people compensated

– Scope for most to take action to avoid costs

• House prices won’t rise by $6,000 – maybe $700

• Food prices won’t skyrocket due to C price

Page 3: Alan Pears - slides - price on carbon forum Aug 2011

AEMC estimates of residential electricity price increases to 2013 and contributions to them (AEMC 2011 p.iv)

Impact of retailer and network charges bigger than C price.....

Page 4: Alan Pears - slides - price on carbon forum Aug 2011

Treasury estimates of economic impacts of different abatement scenarios: small differences in costs between -5% and -25% scenarios for CPRS! (Australia’s Low Pollution Future, Treasury 2008)

Ignores benefits of reduced climate change and other benefits not able to be modelled (see Garnaut)

Page 5: Alan Pears - slides - price on carbon forum Aug 2011

Why is the economic impact of massive carbon prices so small?

• Energy a fairly small cost in the economy

• Revenue from carbon price flows back through economy via tax reductions, government services – C price is a signal, not a cost to society

• Shifts to lower greenhouse impact fuels and cost-effective energy efficiency improvement cut costs, create net jobs

• ‘winners’ gain more demand for products, services

• ‘losers’ are high greenhouse intensity industries and suppliers of high greenhouse impact product (assumes no adjustment support and high C price) – but they’re less than 10% of economy – and they can change

• Active policy can increase benefits, cut costs

Page 6: Alan Pears - slides - price on carbon forum Aug 2011

Range of future costs of emission permits for 450 and 550 ppm scenarios showing impact of accelerating technological change –

average of 9 models (IPCC WG3 Contribution to 4th Assessment Report, Cross-sectoral

chapter, Barker et al (2007)

Arrows show effects of accelerated technological change (ETC= Endogenous Technological Change!)

Innovation cuts carbon price

Page 7: Alan Pears - slides - price on carbon forum Aug 2011

Impact of CO2 prices on household price of various energy types – indicative only, excluding taxes and profit margins. Note: prices

assumed 20c/kWh for electricity & cogen; Green Power 26c/kWh, gas 1.3 c/MJ, Diesel $1.50/L, Petrol $1.40/L

0

50

100

150

200

250

300

Victorian

electricity

($/MWh)

Cogeneration

($/MWh)

Green Power

($/MWh)

Natural gas

($/GJ)

Diesel

(cents/Litre)

Petrol (c/L)

0 $10/tonne CO2 $30/t $50/t

Page 8: Alan Pears - slides - price on carbon forum Aug 2011

‘Pass-through’ impacts of emission price

• Examples of impacts on prices of material and service inputs (NIEIR, 2007) for $25/t CO2 if suppliers do not cut emissions, ignoring free permit allocations and including transport fuel: – Sheet metal products +3.7%

– Household appliances +2.1%

– Bakery products +1%

– Fruit and vegetables +1.3%

– Clothing 1.8%

– Health services 0.3%

– Average 1.6% (Treasury estimate is 0.7% cost of living impact)

• Impact varies with greenhouse intensity – eg best bricks cost increase is 1/3 of worst, etc

• Choose low emission suppliers

Page 9: Alan Pears - slides - price on carbon forum Aug 2011

Installed PV capacity Australia (APVA 2011) – 2011 expected to be at least as big as 2010 (+275 MW to end May)

In Melbourne 1 kW PV avoids approx 1.5 tonnes CO2 pa

0

100

200

300

400

500

600

1990 1995 2000 2005 2010

Me

gaw

atts

Cap

acit

y

Page 10: Alan Pears - slides - price on carbon forum Aug 2011

Household energy efficiency savings for an efficient ‘average’ household per annum: using less energy offsets higher price/unit

when C price is added (from Energy and Equity) – saving electricity at 23c/kWh = saving $175/tonne CO2 avoided(Vic)

to $230/tonne (Aust average)

0

200

400

600

800

1000

1200

1400

1600

1800

2000

EE h'hold BAU

h'hold

EE h'hold BAU

h'hold

An

nu

al

co

st

($) Carbon cost

Cost of energy efficiency

measures

Energy Cost

CO2 at

$30/tonne

CO2 at

$50/tonne

(a)

(b)

(c)

Page 11: Alan Pears - slides - price on carbon forum Aug 2011

Energy labelling and new technologies (eg LED backlighting) have slashed TV power consumption

0

50

100

150

200

250

300

350

400

0 20 40 60 80 100 120 140 160 180 200

wa

tts

Screen size (centimetres diagonal)

Operating Power (watts vs screen size) March 2011

Large traditional (CRT) TVs used

99 watts (68cm), 114W (76cm)

and 127W (80cm). These would

also require a set top box (using

around 13 watts)

76 cm traditional TV + set-

top box=127 watts

Page 12: Alan Pears - slides - price on carbon forum Aug 2011

Useful to prepare a time-line of major opportunities to act to cut energy use/ghgs and drive action – for example:

0

0.2

0.4

0.6

0.8

1

1.2

0 1 2 3 4 5

YEAR

To

nn

es

CO

2 p

er

ye

ar

Year 2 -

No

changesYear 1 -

low cost

savings

Year 3 - change

to fuel-efficient

car

Year 4 -

buy

efficient

fridge

Year 5 - energy-

efficient home

renovation

Page 13: Alan Pears - slides - price on carbon forum Aug 2011

Example of a personal zero emission strategy for household energy-related emissions – some or all of remaining emissions can

be offset each year

0

5

10

15

20

25

0 1 2 3 4 5

YEAR

To

nn

es

CO

2 p

er

ye

ar

GHGs ignoringGreen Power,offsets

GHGSincludingGreen Power,offsetreductions

Baseline Year 2 -

No

changesYear 1 -

low cost

savings

Year 3 - change

to fuel-efficient

car

Year 4 -

buy

efficient

fridge

Year 5 - energy-

efficient home

renovation

Effect of Green

energy

Offsets

Page 14: Alan Pears - slides - price on carbon forum Aug 2011

www.epa.vic.gov.au

Page 15: Alan Pears - slides - price on carbon forum Aug 2011

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