Major economies are acting - Now for an Australian made pollution price Media Release

Jun 09, 2011 - 12:00am

“Australia is not acting on pollution and clean energy in isolation,” said Erwin Jackson, Deputy CEO of The Climate Institute. “The Productivity Commission has found over 1,000 policies have been implemented in major economies to reduce pollution and drive clean energy. Those countries who are leading are reaping first mover economic benefits.” 

“Clean energy investments now regularly outstrip investments in traditional power generation. This has not happened by accident. It is the direct result of governments putting in place policies to reduce pollution and build new, clean energy industries. “

However, The Climate Institute cautions against using the Productivity Commission’s estimates of implicit pollution prices in other nations to indicate the best pollution price package for Australia. As the Productivity Commission says, “the estimates cannot be used to determine the appropriate starting price of a broadly-based carbon pricing scheme.”

“Australia’s pollution price package needs to be set with an unrelenting focus on what we are actually trying to achieve: reducing pollution in line, at least, with our international commitments and the unlocking of Australia’s world-class clean energy resources.”

“What matters to Australia is the price that is needed to unlock Australia’s world class clean energy resources and meet out international pollution reduction commitments. We need an Australian made pollution price not one made in China, the USA or elsewhere.”

“While the Productivity Commission report does not deliver us the right price to drive Australian investment in clean energy and pollution reductions, the Australian Parliament can.”

A number of critical points need to be considered in assessing the Productivity Commission’s report:

  1. Countries are implementing a broad suite of policies to meet a range of objectives. These include building low carbon competitiveness; meeting carbon pollution targets; driving industry development; increasing energy security; and reducing local air and regional pollution. Over two years (2008-09), 46 per cent of total global electricity capacity came from renewable energy sources such as wind and solar. Globally, it’s estimated that up to 3 million people are now employed in the renewable energy industry and investment in 2010 reached an unparalleled US$243 billion, a 30 per cent increase from 2009.
  2. Productivity Commission’s work is backward looking: Like the previous ground-breaking assessment undertaken for The Climate Institute by Vivid Economic, the Productivity Commission’s work does not capture the forward looking policies that countries are implementing right now to meet their Cancun Agreement obligations. China, for instance, is developing domestic laws to enable it to meet its announced targets. For example, the planned increase in wind energy capacity of 50 GW by 2015 compares to around 30 GW of coal generation in Australia today. In total these initiatives in China alone are estimated to deliver pollution reductions in 2015 of around a billon tonnes a year.
  3. Productivity Commission’s work does not capture the full range of policies being implemented: The Productivity Commission’s and previous work by Vivid Economics does not capture the full range of economy-wide measures countries are taking. For example, as Professor Garnaut highlights, some Chinese provinces now impose a surcharge equivalent to $57 per tonne of pollution on electricity used in excessively emissions-intensive plants in eight ‘high-polluting’ industries, including aluminium, steel and cement.

“As shown with previous analyses, while complementary policies to direct pollution pricing can be justified on many grounds, the Productivity Commission’s analysis suggests that market-based and explicit pollution price signals are the most cost effective options to limiting pollution.” 

“In Australia, a policy package including energy efficiency laws and direct support for clean energy and farm sector investment from pollution pricing revenues is needed to ensure we build low pollution competitiveness, help manage energy bills and drive industry development.”

“Australian pollution politics desperately needs to be freed from the quagmire of vested interests, and supported by robust and independent institutions to advise our political leaders without fear or favour.”

“Ongoing work on implicit prices by the Productivity Commission or other relevant bodies is important to expose the myth perpetuated by some in business, politics and media that other countries are not implementing pollution reduction and clean energy polices. Continued work is needed to guide assessments of future industry assistance.”

“Making the big polluters pay for the pollution they cause is the cheapest and most economically efficient way to address climate change, but we will need to see other complementary policies to provide a long-term low-pollution investment pathway for the economy and independent and transparent processes to hold business and the Parliament to account on pollution policies,” Mr Jackson said.

For further information: 
Erwin Jackson | Deputy CEO, The Climate Institute | 03 9600 4039
Giulia Baggio | Communications Director, The Climate Institute | 03 9600 4039
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