Australia is on track to undercut its Kyoto protocol carbon target by 125 million tonnes, a leading analyst says, creating a handy buffer to meet its 2020 greenhouse target in the event the carbon price fails to deliver.
Tim Jordan, a carbon analyst at Deutsche Bank, said the surplus would be worth up to $830 million if Australia chose to sell the carbon as credits to other countries. But it could more prudently be banked and used to meet the 2020 target if the carbon tax doesn’t push down the nation’s emissions as much as the government hopes in the first three years, Mr Jordan said.
While stressing that Australia got away with a ”pretty unambitious target” under the Kyoto negotiations, Mr Jordan said the good news was that the nation had begun to decouple its economic growth from its greenhouse emissions growth.
But he added: ”We are still a very carbon-intensive economy. Unambigiously we need a price on carbon if we’re serious about reducing emissions.”
The projected 125 million tonne surplus, which assumes Australia continues on its current emissions trajectory, represents about a quarter of one year’s worth of carbon output. Australia produces about 560 to 580 million tonnes of carbon a year.
Australia was given a generous target of 108 per cent of 1990 emissions under the Kyoto protocol. Other reasons for better-than-expected carbon reduction was a drop in electricity demand because of the weather and as people responded to higher power prices by cutting their consumption.
Also, changes to land use laws during the 1990s had reduced deforestation, making it easier to meet the target based on 1990 emissions.
The finding comes amid a debate over the starting price of $23 per tonne under Labor’s carbon tax, rising to about $25 by 2015, when it becomes an emissions trading scheme with a floating price. With the current international carbon price closer to $10, business groups are arguing $23 is too high.
Mr Jordan said that if the international carbon price fell as low as $5 towards the end of the decade, as was reportedly forecast by Bloomberg New Energy Finance, the government would need to take action, perhaps extending the fixed price period. Such a low carbon price would not change behaviour or encourage investment in low-carbon energy sources.
The debate came as a budget submission from the peak energy body expressed ”deep concern” that the design of the carbon price is geared more towards raising revenue in the early years to meet budget surpluses than sensible carbon mitigation.
The Energy Supply Association of Australia warned the design of the carbon price would allow the government to change the scheme in future to maintain revenue levels.
