Australia’s businesses would be wrong to think an earlier-than-planned shift to a floating price for carbon dulls the urgency to improve energy productivity and reduce emissions, The Climate Institute said.
A report commissioned by the institute and General Electric, Boosting Australia’s Energy Productivity, argues that an extra 1 per cent improvement in energy efficiency per year would cut bills and generate $8 billion in additional economic activity by 2020. By 2030, the economy would be $26 billion better off.
According to the International Energy Agency, Australia lags with annual efficiency gains in energy use of 0.5 per cent – roughly half that of developed nations, and less than the gains in the US and Canada, at 0.9 per cent and 1.4 per cent, respectively.
Business bodies, such as the Australia Industry Group, have welcomed the Rudd government’s decision over the weekend to bring forward by one year the start of the emissions trading scheme and its floating carbon price to July 1, 2014. Since the ETS would be linked to Europe’s market – where prices are currently trading at less than $6 per tonne versus Australia’s $24.15 – many firms now expect a lower carbon price to flow through to their operations.
John Connor, chief executive of the Climate Institute, said the potential of a lower carbon price made it even more important that the government maintain complementary policies supporting energy savings.
His group’s report highlights the short payback period firms already demand for energy efficiency investments as a significant obstacle for their implementation. That barrier may become harder to clear if the carbon price component of energy bills is reduced.
Still, such reaction to expected lower carbon costs from next year – assuming the Rudd government is re-elected and it can change the legislation on the ETS timing – would be “rather short-term thinking”, not least because future energy and emissions prices are likely to rise, Mr Connor said. Gas prices, for instance, are likely to soar in coming years.
“Companies that aren’t heading in this direction by improving both energy and carbon productivity are taking a gamble on inaction on climate,” he said.
Economic boon
The research found the economy grows an additional 0.1 percentage point for every 1 per cent increase in energy efficiency.
The mining industry, for instance, could cut 11 per cent off its annual energy use, saving $650 million, and slash emissions by 3.3 million tonnes. Those savings could come from such measures as reducing fuel use by improving the slope of truck access to mines, for instance.
Manufacturing could also cut its energy use by 12 per cent, saving $1.7 billion a year, the research found. Carbon emissions could drop by 11.3 million tonnes in the sector, based on improvements such as better blast furnace operations.
