Australia lags its Trading Partners on Pollution Price Tags: Global Study Media Release

Oct 18, 2010 - 3:00pm


Pioneering global research commissioned by The Climate Institute reveals that Australia’s major trading partners have higher direct and indirect carbon pricing in their electricity sectors in order to drive cleaner energy investments. 

“More and more competitors are putting a price tag on pollution to boost clean energy competitiveness,” said The Climate Institute’s Deputy CEO Erwin Jackson. “There is no risk of Australia leading the world in making businesses responsible for the pollution they cause – we have already been overtaken by competitors including the UK, China and the USA.”

Internationally recognised Vivid Economics assessed the incentives to clean energy deployment applied to the electricity generation sector in 2010, in Australia, China, Japan, South Korea, the United Kingdom and the United States. A comparison of the effort countries are taking was measured as an equivalent price tag on pollution - dollars per tonne of carbon pollution. A similar report is part of the terms of reference for the Federal Government’s Multi-Party Climate Change Committee.

The report finds that a range of policies and regulations are already in place in key trading partners with an equivalent price tag on pollution in the electricity sector of up to 17 times that of Australia’s. 

“The UK is reaping the benefits of its policies to price pollution, in addition to its participation in the European Emissions Trading Scheme, and has an equivalent price tag around 17 times that of Australia’s. Investment in clean energy in the UK reached around US$ 11 billion in 2009 and captured around 17 per cent of the market in the countries studied,” said Mr Jackson. 

“The UK’s low pollution economy now compares to its healthcare and construction sectors. Over 900,000 people are now employed in the UK in low pollution businesses and jobs in these sectors have been growing strongly despite the UK’s economic downturn.”

“China’s policies to meet its targets and dominate the global clean energy race imply a price tag on pollution over eight times higher than that of Australia’s. In 2009, clean energy investment in China reached US$35 billion compared with US$18 billion in the USA and less than $US1 billion in Australia.”

BHP Billiton CEO Marius Kloppers has noted Australia will need to turn into a lower pollution economy to remain internationally competitive.

“A direct and broad based price tag on pollution is required if Australia is to meet its targets at lowest short and long-term cost. However, it is also critical to ensure that our international competitiveness is not lost to other countries gaining early mover advantages in clean energy investment and reducing their economies’ dependence on pollution,” said Mr Jackson. 

“Countries such as India are already taxing imports of pollution intensive products like coal. Putting a price tag on pollution is also insurance against possible trade measures aimed at highly polluting exports.”

KPMG, a Major Climate Partner of The Climate Institute, hosted the report launch today at its Sydney headquarters.

KPMG’s partner in charge of Sustainability, Climate Change & Water, Jennifer Westacott, said: “The lack of a robust carbon price was hampering Australian business’ ability to compete and attract investment, despite a global increase in the clean energy sector.”  
"The question is no longer ‘should we have a price on carbon?’, but ‘how comprehensive should it be?’ and ‘how do we transition key sectors based on technological readiness, competitiveness and the pace of global negotiations?’.”
Country rankings of implied carbon price in the electricity sector shows that Australia is the second lowest of the 7 regions studied:

  • UK:  US$29.30
  • China:  US$14.20
  • North East USA:  US$9.50; USA Overall: US$5.10
  • Japan:  US$3.10
  • Australia:  US$1.70
  • South Korea:  US$0.70

Australia’s implied pollution price is largely driven by the introduction of the Renewable Energy Target and to a smaller extent the Queensland Government’s gas target. Australia’s existing emission trading schemes in NSW and the ACT also play a role. As with other countries, technology specific feed-in-tariffs have a relatively small impact on pollution pricing. 

Countries are implementing a broad range of clean energy policies to meet a variety of objectives - from achieving carbon pollution reductions, to stimulating industry development, increasing energy security, and achieving reductions in air pollution.

However, the research does indicate that broadly speaking a market based mechanism, such as an emissions trading scheme, is the cheapest and most economically efficient way to reduce pollution.

“The test for both the leadership and effectiveness of this Parliament is whether it can put real limits and a price tag on pollution that reverses Australia’s still rising pollution levels by 2013 and enables significant reductions by 2020,” said Mr Jackson.

“It will also be a test of the extent to which this Parliament is willing to make the necessary decisions today to equip and strengthen Australia’s economy for the low pollution opportunities of today and tomorrow.”

“Alongside a price tag on pollution, urgent measures are needed to make clean energy cheaper, reduce energy bills and improve energy productivity.”

Visit our Interactive Media Release for  a summary of the report findings, video interviews, document downloads and infographic.

For further information:
The full Vivid Economics report; The Climate Institute’s Policy Brief; an infographic is available from 
Harriet Binet | Communications Director |  02 8239 6299 or  0402 588 384hbinet@climateinstitute.org.au

For further comment from KPMG contact
Caroline Baldwin | Communications Manager |  0400 508 748 or cbaldwin@kpmg.com.au

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