MAC: Mines and Communities

Carbon Trading Scheme: A Sop To King Coal

Published by MAC on 2006-09-21
Source: Green Left Weekly

Carbon Trading Scheme: A Sop To King Coal

By Zoe Kenny, Green Left Weekly

21st September 2006

In his documentary film "An Inconvenient Truth", former US vice-president Al Gore describes global warming as the greatest crisis humanity has ever faced. Australia is singled out twice in the film, along with the US, for not joining most of the rest of the world on climate change, especially the Howard government’s refusal to ratify the UN’s Kyoto Protocol.

The Kyoto Protocol includes a “cap and trade” system that imposes national caps on the carbon dioxide (CO2) emissions but seeks to promote reductions of emissions through the capitalist market by creating “carbon-trading” schemes.

On August 16, NSW Premier Morris Iemma, South Australian Premier Mike Rann and Victorian deputy premier John Thwaites launched a discussion paper on the possibility of establishing a national CO2 emissions trading scheme that would aim to cut Australia's CO2 emissions by 60% by mid-century.

While the scheme is an attempt to differentiate these Labor state governments from the federal Coalition government's inaction on climate change, it is based on a fundamentally flawed approach which purportedly relies on “the market” to solve the problem of greenhouse gas emissions but which, in fact, continues in the Liberal-Labor tradition of government support for coal-fired electricity generation.

The scheme would entail the creation of a government body that would have a mandate to set up CO2 emission “caps” for a particular period, initially only covering electricity generation plants, and then producing permits to the value of the cap. The permits would then be allocated to the plants covered by the scheme, with the permits equalling less CO2 emissions than the plants are projected to emit. There would be penalties for plants that emit more CO2 than they are allotted.

The logic of the scheme is that high-emitting plants would have to out-bid each other for the excess permits that low-emitting plants can sell. The proposed effect would be that low-emitting plants, which would have invested in expensive technology to reduce their emissions, would make enough money from the sale of their permits to offset their investments. This would supposedly make low-emitting plants more “competitive” with high-emitting plants.

It was also claimed in the discussion paper that if the cost of paying for extra permits became prohibitive then high-emitting plants would have to invest in technology in order to keep costs down.

The scheme has numerous loopholes. Firstly, it assumes that the participating governments will set an emissions cap that mandates massive decreases in CO2 emissions. Only then would the scarcity of permits increase, pushing up their price and impacting on the bottom line of high-emitting plants.

In one of the first major tests of carbon trading, the European Union's Emissions Trading Scheme (ETS) which began on January 1, 2005, was labelled a “major disappointment” in an April 2006 assessment by the Climate Action Network-Europe, the network of major environmental groups in the EU, as a result of member governments setting lax national emission targets.

According to a May 15, 2005, CAN-Europe press release, EU member states condemned Phase 1 of the scheme to failure from the beginning by being too generous in their allocation of permits so that the “actual emissions of installations covered by the ETS in 2005 were several million tonnes below the granted permits”.

As a result, by May 2006 the market price of permits had dropped to 10 euros per tonne, down from 30 euros per tonne in April.

CAN-Europe criticised the “lack of transparency in most member states processes” to determine their national emission caps, highlighting the vulnerability of carbon-trading schemes to manipulation by governments acting in the interests of the big energy corporations.

On the other hand, a stringent national emissions cap can be undermined by a lack of capacity to enforce the regulations or by penalties that are easily absorbed by corporations that make billions of dollars of profits.

Underlying the three Labor governments’ discussion paper is a commitment to coal-fired electricity generation far into the future. It states that coal “is expected to be the dominant source of fuel till 2030". In fact, one of the key aims of establishing a carbon-trading scheme is to “reduce uncertainty” for capitalists who would otherwise be keen to invest in energy production but are unsure how governments’ future climate change policy will impact on their profit margins.

The continued reliance on coal as the main means of electricity production will condemn Australia to continued high levels of CO2 emissions. While the coal-mining companies, and federal and state governments are investing great hopes in “clean-coal technology” as a means to keep the coal industry viable, the technology is far from being proven, and will be expensive and risky.

The main hope for this technology is carbon geosequestration. This involves capturing CO2 gas emissions before they enter the atmosphere, converting them into a liquidm and then storing them in deep underground cavities.

Currently, there is one such project being piloted in Australia — the Gorgon project, run by Chevron-Texaco (Caltex) on Barrow Island, off the coast of Western Australia. It is projected to be able to store 25 million tonnes of CO2.

However, there is widespread agreement, even among “clean-coal” advocates, that the technology is still in an early stage of research and will need vast amounts of government and private investment to even ascertain if it is viable.

The August 28 ABC TV Four Corners program “What Price Global Warming” interviewed Dr John Wright, director of the CSIRO's Newcastle-based energy research institute Energy Transformed, which hopes to build a $100 million carbon capture and storage pilot plant.

Wright said: “If that demonstration plant is successful, then I would imagine it would take probably about another five years or so before we could demonstrate that at a commercial size. So 10 years would be about the minimum” before such a technology could be tested as being viable.

He also estimated that the technology, if it was viable, would double the cost of coal-fired electricity production — a cost that would almost certainly be passed on to ordinary consumers.

A September 23, 2004, ABC Science Online report, “Greenhouse Gas Grave”, highlighted other difficulties and expenses associated with clean-coal technology. One was that the technology needed to capture the CO2 emissions from any coal-fired power plant could only be fitted to new power plants, which would make it unviable for the 24 coal-fired power plants currently operating in Australia. These stations produce 50% of Australia’s annual output of 570 billion tonnes of CO2.

To store the captured CO2 emissions, underground caverns would have to be found near the power plants. These CO2 storage sites would have to be constantly monitored for slow leaks or seismic activity leading to major eruptions into the atmosphere. If either were to occur, the whole process would have been a waste of effort.

Overall, the three Labor states’ proposal for a national emissions scheme holds no vision for tackling the huge problem of Australia's CO2 emissions, which are the highest in the world on a per capita basis. The three Labor governments have shown themselves to be as beholden as the Howard government is to the coal-mining companies, which earned $22 billion in 2005,.

Instead of challenging the Howard government's protection of the profits of the coal-mining companies, the largest of which is BHP Billiton, by calling for massive government investment into research and development of renewable energy sources such as wind and solar power and then mandating that these replace coal, the three Labor governments have simply fallen in behind the Howard government’s subservience to King Coal.

The bankruptcy of relying on big business and the capitalist market to solve the global warming crisis is highlighted further by the vast potential of renewable energy. A July 17 Canberra Times article quoted from a “confidential” unpublished CSIRO report that makes the claim that solar-thermal technology is so advanced that a 35 square kilometre installation in the Australian desert “could produce Australia's entire current power demand” and would be “cheap or cheaper than the cheapest wind-power technology”.

Instead government funding for renewable energy research and development is falling. According to a April 20 ABC Science Online report, there is not a single cooperative research centre for renewable energy in Australia, while there are three centres for coal and other fossil-fuel research. Whatever funding is available, for example through the federal government's $500 million Low Emissions Technology Demonstration Fund, is subject to competition from clean-coal technology research, which already receives state government and corporate funding.

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