A carbon price alone will not be enough for Australia to meet its target of a dramatic cut in greenhouse gas emissions by mid-century, an analysis by the Grattan Institute has found.
In a report published today the institute says extra policies will be needed if clean-energy technologies are to develop to a point where they can replace fossil fuel-generated power on a major scale.
The report analyses the potential of seven clean-energy technologies: wind, solar photovoltaic panels, large-scale concentrated solar power, geothermal, carbon capture and storage, nuclear and bio-energy.
The report says it is possible none will produce power at a similar cost to that paid today. “In other words, existing policies will not on their own produce the transformation we need,” it says. “The carbon pricing scheme, while a good start, is not enough.”
The institute found that wind and solar photovoltaic energy — the most developed clean technologies — would not meet more than half Australia’s power needs unless it became viable to store the energy they generated. The commercial viability of storage technologies was uncertain. Carbon capture and storage and nuclear energy were assessed as being unlikely in Australia in the near future unless governments paid for most of the material risk.
Labor’s carbon price scheme begins on July 1, at a price of $23 per tonne of carbon dioxide emitted. The government has also promised a $10 billion clean energy finance corporation, due to start in 2013-14, and Australia has a target of 20 per cent of energy coming from renewable sources by 2020.
But the Grattan Institute found government was responsible for several barriers preventing the development of clean-energy technology. They could be removed by changing the rules governing the electricity network, improving mapping of solar and geological resources and giving potential investors greater certainty by releasing annual emissions limits for well into the future.
The institute found it was justified for governments to offer some support for research and development and early roll-out of some technologies, but that any intervention should not compromise central policies such as carbon pricing.
Reductions of existing subsidies to fossil fuels at both a federal and state level — ranging between $8 and $9.3 billion a year on some estimates — was also recommended.
Opposition Leader Tony Abbott this week will argue that real wages will fall under a carbon tax.
On the basis of analysing government statistics, he will say the carbon tax is expected to cause real wages to be almost 1 per cent lower than they would otherwise be by 2020. For someone on current average adult full-time wages of about $70,000 this would be equivalent to a cut in salary of about $600 a year.
Treasury’s estimate of the impact of the tax on real wages rises to almost 6 per cent by 2050 — equivalent in current terms to an annual pay cut of about $4000 a year for a person on average full-time wages.
The Coalition will argue that the carbon tax will cause a large and growing fall in GDP, with a cumulative loss of output being $32 billion in today’s dollars by 2020 and $1 trillion by 2050.
