Australia, the world’s biggest exporter of coal, is “at the back of the pack” of efforts to reduce carbon pollution and risks falling short of 2020 targets, the Sydney-based Climate Institute said.
Australia’s failure to impose a higher cost on carbon emissions has discouraged investment in renewable energy, according to a report prepared for the institute by London-based Vivid Economics and published today. Investment in cleaner energy in Australia was less than $1 billion last year, compared with $11 billion in the U.K, $18 billion in the U.S. and $35 billion in China, it said.
Australian Prime Minister Julia Gillard promised to restart a campaign to curb emissions and tackle climate change after replacing Kevin Rudd in June. Gillard set up a committee to explore ways to introduce a carbon price in a country where coal accounts for more than 80 percent of electricity production.
“The myth is that Australia risks moving ahead of other countries in making businesses responsible for the pollution they cause,” the Climate Institute’s Deputy Chief Executive Officer Erwin Jackson said in a phone interview. “The reality is that countries in Europe and China are moving to position themselves to gain the first mover advantages.”
The U.K.’s clean technology industry rivals health care and construction in size, and China has become “the global super power” in renewable energy, he said. “These are the benefits Australia is missing out from by sitting at the back of the pack,” he said.
Lower carbon price
Australia’s current policies, including a goal of sourcing 20 percent of power from renewable energy by 2020, imply a carbon price of $1.70 a ton for electricity producers, the study found. That compared with $29.30 in the U.K., $14.20 in China, $5.10 in the U.S., $3.10 in Japan and $0.70 in South Korea.
Greg Combet, Australia’s climate change minister, said the study may be the first to quantify the costs of carbon pollution in Australia compared with its competitors.
“The report indicates that the countries with which Australia trades, like China and like the U.S., already have implicit carbon prices within their electricity sectors,” Combet said in parliament today. “In our economy, a carbon price will not only provide incentives to reduce pollution, but will also provide certainty for investment.”
China, the world’s biggest polluter, said in July it may spend about $750 billion in the next decade developing cleaner alternatives to burning oil and coal. The country is replacing inefficient and high-emitting coal-fired power stations and spurring renewable energy with subsidies, the report said.
China ’Going Gangbusters’
“China is going gangbusters at renewables,” Gerard Dover, the chief financial officer of Australian wind power producer Infigen Energy, said at a conference in Sydney today. Uncertainty surrounding a carbon price in Australia has hampered investment in the industry, he said.
The country isn’t currently “on track” to meet its 2020 pollution targets, the study said. “Australia is also ill prepared to compete in the low pollution economy.”
While a lack of a carbon price hampers investment, it also makes the country vulnerable to potential tariffs imposed on polluting industries, the report said.
“Sometimes the world is not a friendly place, and putting in place direct pricing is an insurance policy against trade measures” by countries targeting high-emissions products, Jackson said.
Market approach
The Australian Labor Party proposed lowering emissions by 5 percent from 2000 levels within a decade and said it would increase that target to as much as 25 percent if a global agreement is reached. Rudd earlier this year deferred his cap- and-trade plan until after 2012 amid lawmaker opposition.
A market-based approach such as a cap-and-trade system is the cheapest and most efficient option for limiting carbon pollution, according to the report released by the Climate Institute, which describes itself as non-partisan and independent. The research organization is funded mainly by a A$10 million ($9.9 million) donation from the Poola Foundation, directed by Mark Wootton, its website shows.
Under emissions trading, the government sets a ceiling on emissions and allocates or sells companies permits to cover the pollution they release. Businesses that lower their emissions can sell surplus permits to those that don’t.
The Greens Party, which received a surge in voter support in the August election, said the country must “move decisively” to impose a carbon price.
“We are jeopardizing our long-term competitiveness by falling so far behind China, Europe and even the U.S. and locking ourselves into dirty, inefficient power,” Greens Party climate change spokeswoman and deputy leader Christine Milne said in an e-mailed statement today.
