Carbon
Trading Scheme
A Sop To King Coal
By Zoe Kenny
21 September, 2006
Green
Left Weekly
In
his documentary film An Inconvenient Truth, former US vice-president
Al Gore describes global warming as the greatest crisis humanity has
ever faced. Australia is singled out twice in the film, along with the
US, for not joining most of the rest of the world on climate change,
especially the Howard government’s refusal to ratify the UN’s
Kyoto Protocol.
The Kyoto Protocol includes
a “cap and trade” system that imposes national caps on the
carbon dioxide (CO2) emissions but seeks to promote reductions of emissions
through the capitalist market by creating “carbon-trading”
schemes.
On August 16, NSW Premier
Morris Iemma, South Australian Premier Mike Rann and Victorian deputy
premier John Thwaites launched a discussion paper on the possibility
of establishing a national CO2 emissions trading scheme that would aim
to cut Australia's CO2 emissions by 60% by mid-century.
While the scheme is an attempt
to differentiate these Labor state governments from the federal Coalition
government's inaction on climate change, it is based on a fundamentally
flawed approach which purportedly relies on “the market”
to solve the problem of greenhouse gas emissions but which, in fact,
continues in the Liberal-Labor tradition of government support for coal-fired
electricity generation.
The scheme would entail the
creation of a government body that would have a mandate to set up CO2
emission “caps” for a particular period, initially only
covering electricity generation plants, and then producing permits to
the value of the cap. The permits would then be allocated to the plants
covered by the scheme, with the permits equalling less CO2 emissions
than the plants are projected to emit. There would be penalties for
plants that emit more CO2 than they are allotted.
The logic of the scheme is
that high-emitting plants would have to out-bid each other for the excess
permits that low-emitting plants can sell. The proposed effect would
be that low-emitting plants, which would have invested in expensive
technology to reduce their emissions, would make enough money from the
sale of their permits to offset their investments. This would supposedly
make low-emitting plants more “competitive” with high-emitting
plants.
It was also claimed in the
discussion paper that if the cost of paying for extra permits became
prohibitive then high-emitting plants would have to invest in technology
in order to keep costs down.
The scheme has numerous loopholes.
Firstly, it assumes that the participating governments will set an emissions
cap that mandates massive decreases in CO2 emissions. Only then would
the scarcity of permits increase, pushing up their price and impacting
on the bottom line of high-emitting plants.
In one of the first major
tests of carbon trading, the European Union's Emissions Trading Scheme
(ETS) which began on January 1, 2005, was labelled a “major disappointment”
in an April 2006 assessment by the Climate Action Network-Europe, the
network of major environmental groups in the EU, as a result of member
governments setting lax national emission targets.
According to a May 15, 2005,
CAN-Europe press release, EU member states condemned Phase 1 of the
scheme to failure from the beginning by being too generous in their
allocation of permits so that the “actual emissions of installations
covered by the ETS in 2005 were several million tonnes below the granted
permits”.
As a result, by May 2006
the market price of permits had dropped to 10 euros per tonne, down
from 30 euros per tonne in April.
CAN-Europe criticised the
“lack of transparency in most member states processes” to
determine their national emission caps, highlighting the vulnerability
of carbon-trading schemes to manipulation by governments acting in the
interests of the big energy corporations.
On the other hand, a stringent
national emissions cap can be undermined by a lack of capacity to enforce
the regulations or by penalties that are easily absorbed by corporations
that make billions of dollars of profits.
Underlying the three Labor
governments’ discussion paper is a commitment to coal-fired electricity
generation far into the future. It states that coal “is expected
to be the dominant source of fuel till 2030". In fact, one of the
key aims of establishing a carbon-trading scheme is to “reduce
uncertainty” for capitalists who would otherwise be keen to invest
in energy production but are unsure how governments’ future climate
change policy will impact on their profit margins.
The continued reliance on
coal as the main means of electricity production will condemn Australia
to continued high levels of CO2 emissions. While the coal-mining companies,
and federal and state governments are investing great hopes in “clean-coal
technology” as a means to keep the coal industry viable, the technology
is far from being proven, and will be expensive and risky.
The main hope for this technology
is carbon geosequestration. This involves capturing CO2 gas emissions
before they enter the atmosphere, converting them into a liquidm and
then storing them in deep underground cavities.
Currently, there is one such
project being piloted in Australia — the Gorgon project, run by
Chevron-Texaco (Caltex) on Barrow Island, off the coast of Western Australia.
It is projected to be able to store 25 million tonnes of CO2.
However, there is widespread
agreement, even among “clean-coal” advocates, that the technology
is still in an early stage of research and will need vast amounts of
government and private investment to even ascertain if it is viable.
The August 28 ABC TV Four
Corners program “What Price Global Warming” interviewed
Dr John Wright, director of the CSIRO's Newcastle-based energy research
institute Energy Transformed, which hopes to build a $100 million carbon
capture and storage pilot plant.
Wright said: “If that
demonstration plant is successful, then I would imagine it would take
probably about another five years or so before we could demonstrate
that at a commercial size. So 10 years would be about the minimum”
before such a technology could be tested as being viable. He also estimated
that the technology, if it was viable, would double the cost of coal-fired
electricity production — a cost that would almost certainly be
passed on to ordinary consumers.
A September 23, 2004, ABC
Science Online report, “Greenhouse Gas Grave”, highlighted
other difficulties and expenses associated with clean-coal technology.
One was that the technology needed to capture the CO2 emissions from
any coal-fired power plant could only be fitted to new power plants,
which would make it unviable for the 24 coal-fired power plants currently
operating in Australia. These stations produce 50% of Australia’s
annual output of 570 billion tonnes of CO2.
To store the captured CO2
emissions, underground caverns would have to be found near the power
plants. These CO2 storage sites would have to be constantly monitored
for slow leaks or seismic activity leading to major eruptions into the
atmosphere. If either were to occur, the whole process would have been
a waste of effort.
Overall, the three Labor
states’ proposal for a national emissions scheme holds no vision
for tackling the huge problem of Australia's CO2 emissions, which are
the highest in the world on a per capita basis. The three Labor governments
have shown themselves to be as beholden as the Howard government is
to the coal-mining companies, which earned $22 billion in 2005,.
Instead of challenging the
Howard government's protection of the profits of the coal-mining companies,
the largest of which is BHP Billiton, by calling for massive government
investment into research and development of renewable energy sources
such as wind and solar power and then mandating that these replace coal,
the three Labor governments have simply fallen in behind the Howard
government’s subservience to King Coal.
The bankruptcy of relying
on big business and the capitalist market to solve the global warming
crisis is highlighted further by the vast potential of renewable energy.
A July 17 Canberra Times article quoted from a “confidential”
unpublished CSIRO report that makes the claim that solar-thermal technology
is so advanced that a 35 square kilometre installation in the Australian
desert “could produce Australia's entire current power demand”
and would be “cheap or cheaper than the cheapest wind-power technology”.
Instead government funding
for renewable energy research and development is falling. According
to a April 20 ABC Science Online report, there is not a single cooperative
research centre for renewable energy in Australia, while there are three
centres for coal and other fossil-fuel research. Whatever funding is
available, for example through the federal government's $500 million
Low Emissions Technology Demonstration Fund, is subject to competition
from clean-coal technology research, which already receives state government
and corporate funding.