Survey: more Australians want climate action now than before the carbon tax

Deborah Cotton, University of Technology Sydney

In April 2011, not long after Julia Gillard was returned to power in the 2010 federal election, I asked a representative sample of Australians about their attitudes to climate policy.

Climate was a water-cooler issue at the time. The carbon tax legislation had been introduced into Parliament in March, paving the way for a subsequent emissions trading scheme.

That scheme bit the dust in 2014 after becoming a hotly debated issue during the rancorous 2013 election campaign, but carbon policy has not had the same high profile during the current campaign. My colleagues and I decided to repeat our survey and see whether attitudes really have cooled on global warming.

Despite climate policy being something of a sleeper issue in this election, our results suggest that concern about the climate is more widespread now than it was five years ago.

We found that 75% of people surveyed believe it to be an important global issue, and 74% see climate as an important issue for Australia.

As to what we should do about it, we found that 57% of people want Australia to act on climate change irrespective of whether other countries do or not. This is significantly more than in 2011, when 50% of people were in this category.

A further 28% in our new survey think that action should be taken only if there were concerted international policy action, whereas just 15% would prefer that Australia take no action at all. When asked why they did not want to proceed, 34% of them stated that they only wanted to proceed if global action was taken.

These are fairly clear indicators that Australians are not complacent about the need for climate action.

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What policies do voters want?

Both of the major political parties have committed to emissions targets: the Liberals have a target of a 26-28% reduction relative to 2005 levels by 2030, whereas Labor has pledged a 45% cut over the same time frame. Both are modest in comparison with the Climate Change Authority’s recommended cut of 40-60% by 2030 relative to 2000 levels.

As for the policies needed to meet these targets, Labor has proposed an emissions trading scheme, but some details are still vague. The Liberal Party is persisting with its Direct Action plan to “auction” emissions reduction projects to the cheapest corporate bidders.

Our survey, however, suggests that many voters’ preferred policy is a mixture, potentially including a carbon tax, an emissions trading scheme and other direct action policies. Some 40% of respondents preferred this policy mix, up from 31% in 2011. Support for carbon taxation or emissions trading as standalone policies both fell relative to five years ago.

When divided according to voting intentions, all groups preferred a policy mix to any of the other choices. This preference was strongest for “unsure voters”, who made up nearly a quarter of our respondents. For Labor and Greens voters, the most favoured second-choice option was a carbon tax, while no single policy (not even Direct Action) came a close second among Liberal voters.

The numbers get even more intriguing when we split them by gender, age and income. We found that 82% of females see the issue of climate change as important at a global level, and the same proportion described it as important at a local level; this was 15 and 16 percentage points, respectively, greater than among their male counterparts. There was a similar 15-point gender difference in the desire to proceed on climate policy irrespective of global action.

This desire for climate policy irrespective of global action was the dominant view in every age group, although we found that it declined among older groups. The 55-59 age group was the weakest in its support for climate action and the most likely (at 36%) to select “no policy” as the desired climate response.

In our 2011 study, higher incomes were associated with less desire for climate policy. This was replicated in 2016, as can be seen in the graph below – note the significant increase in support for “no climate action” among those with salaries over A$110,000.

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As these stats show, concern about climate change is relatively steady until we get to the highest income bracket, where it drops off significantly. There are several potential explanations, including the suggestion that those with higher incomes will be less adversely affected by climate change because they can afford to ameliorate its impacts.

But if there is a take-home message for politicians in these numbers, I would suggest it is this: even in those groups with the lowest levels of climate concern, a majority is still worried about the issue and wants to see action.

Perhaps, in the midst of the longest election campaign since the 1960s, it might be worth finding a bit more time to acknowledge that.

Deborah Cotton, Lecturer in Finance, University of Technology Sydney

This article was originally published on The Conversation. Read the original article.

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Why is the business world suddenly clamouring for a global carbon tax?

Peter Burdon

Among the various interests at the Paris climate talks, it is arguably the voice of business that has emerged most clearly. Many business leaders are now saying that if the world is intent on reducing greenhouse gas emissions, there must be a worldwide price on carbon and a framework for linking the 55 schemes that exist in areas such as China, the European Union, and California.

Momentum has been building since May, when six of Europe’s largest oil and gas companies, including Royal Dutch Shell and BP, issued a letter calling for global carbon pricing system. That month, leaders from 59 international companies also signed a statement calling for carbon pricing to feature in the Paris agreement.

Advocacy has continued during the Paris negotiations. For example, Patrick Pouyanné, chief executive of French oil and gas giant Total, argued that the shift from coal to gas “will not happen without a carbon price”. He suggested that a price of US$20-$50 in Europe was required (well above the current price).

Oleg Deripaska, president of the world’s largest aluminium producer Rusal, put the issue in stronger terms, describing the idea of voluntary national emissions commitments (upon which the Paris agreement largely hinges) as “balderdash”.

Asked what success would look like from the Paris negotiations, Deripaska replied:

A success [for most people] would be lunch at a nice French banquette with foie gras and oysters. But no, seriously, it is carbon tax or die.

Carbon tax on the menu?

It is not clear whether a carbon price will figure in the Paris agreement. But it is important to consider what is motivating some of the world’s highest-emitting companies to advocate for a carbon price. And what other, perhaps more intrusive plans for tackling climate change would be taken off the table?

Businesses have a stronger presence at COP21 than at any previous climate negotiation. They know which way the wind is blowing and realise that governments might require painful and complex interventions to reduce emissions. Moves are afoot to decarbonise the world economy some time after 2050 (see Article 3 of the latest draft text, and there has been strong advocacy for a moratorium on new coal mines.

Helge Lund, chief executive of British oil multinational BG Group, argues that a carbon price reduces government intervention and attempts at “pick[ing] winners in terms of energy technologies.” Instead, he argues: “the market will dictate the most efficient solution”.

Forecasts from the International Energy Agency suggest that fossil fuels (including coal) will provide the bulk of energy demand for developing countries going into the future. Companies intend to meet that demand. Thus, Shell can simultaneously advocate putting a price on carbon and make plans to drill in the Arctic where production will not begin until 2030.

While that might sound perverse, there is actually nothing inconsistent about those two positions.

One way for energy companies to maintain economic growth in a carbon-priced economy is to shift investments gradually away from coal and oil, and towards gas. That is why Shell has paid US$70 billion for the BG Group.

Of course gas might come under similar pressure in time, but as the Financial Times has reported:

…oil companies’ skills and assets mean that finding and extracting gas is a short and natural step. Moving into renewable energy is a much bigger leap.

This can be seen in the many examples where energy companies have struggled to develop other forms of energy, such as BP’s ill-starred attempt to brand itself as “beyond petroleum” and invest US$8 billion over ten years in renewable energy. The company has since backtracked on that goal, has left the solar market, and has no plans to expand its onshore wind investments.

Beyond markets

Of the 185 countries that have submitted climate targets ahead of the Paris talks, more than 80 have referenced market mechanisms.

Clearly, a price on carbon is going to play a role in attempts to tackle climate change. This is a good thing but it is not sufficient and must not become a distraction from other serious interventions.

Recent research confirms that we do not have time to wait for energy companies to transition at their own pace from fossil fuels to renewable energy. For example, last week Kevin Anderson from the Tyndall Centre for Climate Change Research published a paper in Nature Geoscience which argued:

The carbon budgets associated with a 2℃ threshold demand profound changes to the consumption and production of energy … the IPCC’s 1,000 gigatonne budget requires an end to all carbon emissions from energy systems by 2050.

A carbon budget consistent with 2℃ (let alone 1.5℃) requires a dramatic reversal in energy consumption and emissions growth. Governments should treat overtures from business with caution, even if businesses are making the right moves. They need to ensure that these moves are made at a speed that suits the climate, rather than just business.

Peter Burdon, Senior lecturer, Adelaide Law School

This article was originally published on The Conversation. Read the original article.

One year on from the carbon price experiment, the rebound in emissions is clear

Hugh Saddler, Australian National University

Just over a year ago, Australia concluded a unique public policy experiment. For the preceding two years and two weeks, it had put a price on a range of greenhouse gas emitting activities, most significantly power generation.

Now, 12 months since the price was removed, is a good time to assess the results of the experiment.

The immediate effect of the carbon price was to increase the costs faced by most electricity generators, by an amount that varied between individual power stations depending on that station’s emissions intensity (the emissions per unit of electricity). These costs were then passed on in higher prices to consumers.

Simple economics suggests that two effects should have followed.

First, less emissions-intensive generators should have been able to increase their market share, resulting in an overall reduction in the average emissions intensity of electricity.

Second, higher prices should have led consumers to reduce their consumption, cutting the total demand for electricity. When the price was removed, both of these effects should have been reversed.

Let’s look at what happened in the National Electricity Market (NEM), which is the wholesale electricity market in every state and territory except Western Australia and the Northern Territory.

My analysis, using detailed NEM operational data from the Australian Energy Market Operator (AEMO) finds that emissions intensity, which was increasing until shortly before June 2012, fell continuously (see graph below) for most of the two years to June 2014. Since then, it has increased consistently. All these changes were caused by changes in the market shares the different types of generation, just as expected.

Before, during and after the carbon price: relative changes in moving annual values for the National Electricity Market.
Hugh Saddler, Author provided

Generation by both black and brown coal decreased under the carbon price, with the more emissions-intensive brown coal falling faster. Over the past year both have increased, with brown coal growing faster. It is plausible to assume that, had the carbon price remained, the earlier trend would have continued.

The rise and fall of hydro

Much of the gap left by reduced coal-fired generation between 2012 and 2014 was filled by increased hydro generation, particularly in Tasmania, which supplies about 60% of total NEM hydro generation. In 2013-14, hydro generation was 40% higher than two years earlier, but 2014-15 it fell back to below the 2011-12 level.

While these changes appear to have been largely driven by the carbon price’s introduction and removal, it would be wrong to assume that the level of hydro output achieved in 2013-14 would have continued had the price been retained.

The average output of a hydro power station is determined not by the capacity of the station but by how much energy it can access in the form of stored water, which in turn is determined by rainfall and run-off into hydro dams. This storage gives hydro generators some flexibility to choose when to generate.

When the carbon price was introduced, hydro generators, with no carbon price to pay, were able to make windfall profits.

But the hydro generators, especially Hydro Tasmania, anticipated that the carbon price would be short-lived and so generated as much as they could while it was in place. Hydro Tasmania achieved its highest ever annual profit in 2013-14, exporting large quantities of electricity to Victoria while also supplying Tasmanian demand.

In doing so, it ran down its energy in storage from 61% of maximum level in October 2012 to 28% in June 2014. With more certainty of a long-term carbon price, they hydro generation industry may not have pushed itself so hard.

Consumer demand was (mainly) oblivious to carbon pricing

There is no clear trend in the rate of demand reduction after the carbon price was introduced. Separate analysis has shown that the demand reduction seen in the NEM since 2010 was due not to the carbon price but rather to a dramatic reduction in household electricity consumption and the closure of two aluminium smelters.

The sharpest change in demand occurred between 2010 and 2011, a period that saw price increases in most state markets, caused by a hike in transmission and distribution costs that was considerably larger than the price increases due to the carbon price.

This was also a time when higher electricity prices became a high-profile topic of political debate, both because of the price rises and also because of a successful scare campaign about the possible effects of a carbon price. It seems that many householders were looking to cut their power use even before the carbon tax arrived.

For five years, from 2010 to 2014, residential and business consumers steadily reduced their electricity consumption, largely because of improved energy efficiency. It is possible that, with the carbon price now gone and emissions rising once more, this trend has now come to an end.

Perhaps the price decreases have persuaded many consumers that they have now done enough, although after five years of growing energy efficiency it is equally possible that the range of efficiency measures has simply been largely exhausted.

The take-home messages

If we are thinking of the carbon tax as an experiment, I have drawn four main conclusions.

The first is that many factors besides the carbon price have influenced changes in the behaviour of electricity consumers and suppliers, so it is not possible to isolate the effect of the carbon price alone. The volatility caused by the short duration of the carbon price may even have been a factor in itself.

Second, notwithstanding this complexity, the carbon price induced the sorts of changes in both supply and consumption that economic theory would have predicted. This is consistent with an earlier analysis done immediately after the end of the carbon price.

Third, the rather modest size of the changes is also consistent with the theoretical expectation that major changes in electricity markets depend on large-scale investment. This means that larger impacts of a price on carbon will only appear if the policy is maintained over the long term.

Fourth, and following from the three preceding conclusions, achieving larger and faster emissions reductions will require a wide range of policies, all working in the same direction. A price on emissions, whether through an emissions trading scheme or a tax, will be a key component of such a suite, but only one component.
This is the approach being taken by all of the many countries and sub-national jurisdictions that have introduced emissions pricing.

Campaigners for the return of Australian carbon pricing shouldn’t lose sight of the fact that other policies will be needed too.

Hugh Saddler is Research Associate, Centre for Climate Economics & Policy at Australian National University.

This article was originally published on The Conversation.
Read the original article.

The carbon tax wasn't a 'slug' to the economy and Direct Action may be a waste of money

Michael Harris, University of Sydney

Federal Environment Minister Greg Hunt, writing in the Fairfax opinion pages, has said that the now abolished carbon tax was a far more expensive way to reduce Australia’s carbon emissions than the Direct Action policy that replaced it.

He writes:

The carbon tax was a A$15.4 billion slug on the Australian economy – that works out at a cost of just over $1,300 a tonne for the emissions reduced.

It appears the Minister has taken the A$15.4 billion in revenue collected by the carbon tax and divided it by the “less than 12 million tonnes” of emissions reduction, to get just over $1,300 a tonne for the emissions reduced.

But tax revenues collected on emissions have no business being included in a calculation of the costs of reducing emissions. Measuring the cost of a tax on overall economic activity is not the same as measuring how much revenue was collected — not least because the revenue raised could be used elsewhere in the economy to provide infrastructure or mitigate against climate change.

Costs of emitting versus reducing carbon dioxide

Let’s consider what we’re measuring and why.

The social cost of carbon measures the expected cost to society of emitting “one more unit” of carbon into the atmosphere. Flipped around, it tells us the benefit of not emitting that tonne of carbon.

Estimates of the social cost of carbon depend both on our knowledge of the future impacts of warming, and the assumptions built into models to quantify these impacts on society. Unsurprisingly, they are controversial and subject to debate.

Hunt’s assertions relate to the cost of reducing carbon emissions per tonne; in principle we can compare this to the social cost of carbon, which tells us the benefit of emissions reductions.

His claim is that the cost of reducing emissions has been vastly decreased by using a subsidy approach (as in Direct Action) rather than a tax.

However, the first thing to understand is that the amount of tax collected under the carbon pricing scheme reflects taxes paid on actual emissions, not reductions in emissions.

There is also a difference between costs to the economy, and transfers within it. The amount of revenue raised through any tax is not a cost; it is simply a transfer from one “pocket” to “another”. The money has not been destroyed, and it remains available to be spent on something. It has distributional consequences, obviously, as the “pocket” where that money sits has changed, but total spending power within the economy remains undiminished. (Moreover, Australians received compensation via the tax system after the carbon tax was introduced.)

By contrast, the cost of a tax is what the economy – not an individual person or business enterprise – has lost as a result of the existence of the tax. Lower labour supply, fewer goods and services produced – these are the things we would typically count when assessing the burden imposed on an economy from any tax instrument. Hunt hasn’t provided credible estimates of these kinds of impacts.

Is there any simple way to quantify the costs of emissions reductions? In terms of the cost to individual businesses, the carbon tax was initially priced at A$23 a tonne. That means that for every tonne of greenhouse gases a liable business did not emit, they would save A$23. We would expect businesses to reduce any emissions they could where the cost to them was less than A$23 per tonne.

In other words, the amount of emissions reduction comes at a cost to that business of A$23 a tonne or less – not $1,300 a tonne.

Is Direct Action superior anyway?

If we assess the unit cost of emissions reduction under the previous carbon price as being (in the order of) A$23 per tonne, compared to $13.95 per tonne under the Direct Action policy, does this make the current scheme a winner anyway?

Not necessarily. First, ongoing revenue from the carbon tax can be used to fund, for example, public infrastructure investments, or to allow cuts to other more economically harmful taxes.

The cost of payments under Direct Action, by contrast, have to be funded by taxes elsewhere, or borrowed funds.

Second, the Direct Action scheme only involves commitments to reduce emissions, which have yet to occur, and may not be successfully achieved.

Third, emissions reductions contracted under the scheme may be offset by emissions increases elsewhere. Experts are concerned that the safeguard mechanism designed to prevent this has been weakened so much as to render it ineffective. This means there’s no guarantee that emissions reductions purchased under the scheme will translate to national emissions reductions, even though that’s what they are meant to represent.

The implication of all this is that Direct Action’s cost-effectiveness is unknown, and as things stand, possibly unknowable.

Michael Harris is Senior Fellow in the School of Economics at University of Sydney.

This article was originally published on The Conversation.
Read the original article.

Will dumping Australia’s climate-savvy prime minister help the climate?

Australia: Double Dissolution Threat Over Carbon Tax

The link below is to an article that looks at threats by the Liberal Party to hold a double dissolution election should its plans to scrap the carbon tax are rejected by the senate.

For more visit:
http://www.abc.net.au/am/content/2013/s3762074.htm

Article: IMF Backs Australian Carbon Price

The link below is to an article reporting on how the IMF recommends a $US20 a tonne carbon price, which is only slightly less than Australia’s July 1 price.

For more visit:
http://www.theage.com.au/opinion/political-news/imf-backs-carbon-price-20120618-20k9k.html

Australia’s Carbon Tax and the World

The link below is to an article reporting on the carbon tax in Australia and the world’s view of it.

For more visit:
http://bigthink.com/think-tank/the-carbon-tax-is-it-time-to-follow-australias-lead.