Wednesday, December 16, 2009

Getting rid of carbon 8 - the series ends

The Copenhagen discussions really seem to be something of a dog's breakfast just at present if the media reports are to be believed.

In the meantime, in NSW the the Independent Pricing and Regulatory Tribunal has approved electricity price increases of around sixty per cent over the next three years. Part this is due to need to build capacity, a result of previous under-investment, part is based on the projected impact of the Australian Government's emission trading scheme should this come into effect.

In Getting rid of carbon 6 - emissions trading I started trying to tease out the possible shape of an international arrangement. I was doing this independent of what was actually on the table since my objective in this series of posts is to try to advance my own understanding. At the end of that post I said that I would discuss how such an international arrangement might work in Australia.

In thinking about this, I decided to look again at the current proposed Australian scheme. In doing so, I realised that my original description of cap and trade was greatly over-simplified. Rereading the Garnuat report, I found that I did not actually understand just how the Australian scheme might work in practice.

Perhaps the simplest explanation I have found is on the Australian Parliament House site. This refers to an earlier version of the Bill, but still sets out structures and principles in a way that is, I think, understandable to the lay reader.

With the end of Copenhagen just a week away, I have decided to put this series of posts on hold for the present. It seems more sensible to wait until we know the results.

In the meantime, I have achieved my immediate objective of advancing my own understanding!

I remain of the view that the whole debate has suffered because people moved to solutions too early and too rigidly without reviewing all the alternatives.

I have also decided as a side-effect, to increase my reporting on this blog on Australian rural and regional issues. There is, I think, a real problem here because of the increasing disconnect between metro Australia and the rest of the country. I also think that some of my international readers might find this interesting simply because it is different.


Anonymous said...

Dear Jim

From an article cut severely for length, but not for meaning:

The Indian conglomerate Tata has recently closed its Redcar, UK steelworks with the loss of 1700 jobs.

Under the European ETS carbon allowances this may give Tata a gain worth up to £600 million over the three years before current allocations expire.

Meanwhile, in India, Tata, plans to increase steel production from 53 million tonnes to 124 million over the same period. By replacing inefficient old plants with new ones which emit only “European levels” of CO2, Tata could claim a further £600 million under the UN’s Clean Development Mechanism

Thus, at the end of the day, Redcar will lose its biggest employer and one of the largest manufacturing plants left in Britain, and Tata, having gained up to £1.2 billion from “carbon credits”, will get its new steel plants – while the net amount of CO2 emitted worldwide will not have been reduced a jot.

Now Jim, I ask myself the following:

1) is this true?
2) is this a likely (or even a possible) outcome/model of an ETS?
3) who pays the 1.2Bn?

Thanks for your series.


Anonymous said...


Sorry, we live in a grey world, (there being no simple black and white) so I would like to rephrase my questions:

1) If this statement of facts was accurate, would this surprise you?
2) If this was a possible outcome of a global ETS, would it surprise you?
3) no change.


Jim Belshaw said...

KVD, I cannot comment on the details of the Tata case because I do not have the facts. However, the material that you provide does not surprise me.

One feature of most emission trading schemes are what are called banked credits. You acquire them, and then you can sell them in a specified period. So if Tata has banked credits it kight well be able to sell them for a substantial credit.

On the other side of the equation, the mechanisms designed to encourage more efficient production in developing countries might well give Tata a reward of the type you describe because Indian production is bcoming more carbon efficient.

All this bears upon one of my constant points, the need to avoid unforseen side-effects.