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June 10, 2011
The Productivity Commission's Carbon Emission Policies in Key Economies, which is a snapshot of a moment in time, undercuts the ground of the fossil fuel industry and its allies who are opposed to both a price on carbon and the emergence of the solar power industry.
The Report shows that Australia is lying in the middle of the cohort of countries the Commission was asked to compare; and that an emissions trading scheme was the most efficient way of achieving abatement.
So the Gillard Government's position that a market-based carbon pricing system is the lowest cost way to decarbonise the economy has been vindicated. It stands on firm ground.
The Commission also found that the cost of the subsidies for renewables had a high abatement cost:
Emissions trading schemes were found to be relatively cost effective, while policies encouraging small-scale renewable generation and biofuels have generated little abatement for substantially higher cost.
Though some of the state tariffs for rooftop solar have been generous and badly coordinated, grid parity (without subsidy) is approaching as early as 2014-15, and so the cost of abatement from public policy for future systems will be zero.
In theory a carbon tax or emissions trading scheme raises the price of "dirtier" products, effectively subsidising "cleaner" alternatives. The key is that, in responding to this price signal, the multitude of consumers and businesses - that is, the market - makes its own assessments about the costs and benefits.
However, what we know is that the policy problem for the Gillard Government is that it cannot legislate a carbon price that's high enough to drive a major shift into non-carbon energy sources. So it will deliver a low carbon price of $20 to $30 a tonne and then try to drive a major shift into non-carbon energy sources through using tax dollars (subsidies in the form of feed-in tariffs and rebates) to bring down the price of renewable energy to levels that consumers find attractive.
The price of photovoltaics is falling rapidly because of technology improvements, economies of scale and, most importantly, the falling cost of polysilicon [the key raw material in solar cell manufacture].The boom in the global PV industry once grid paritywas achieved--and solar can stand on its own two feet---means that Australia could become a "significant player" in the industry because of its "world-class" research institutes.
Is encouraging the emergence of the sunrise industries a goal of the Gillard Government?
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I wonder what the Australian Petroleum Production and Exploration Association will say. Or the Australian Coal Association. Or the Minerals Council of Australia
How are they going to spin their opposition to the Commissions findings that an emissions trading schemes was found to be relatively cost effective?