Where and Why of Emission Trading
Pollution permit-trading began in the USA in 1977 with amendments to their Clean Air Act and was formalised with their new Clean Air Act of 1990 which introduced a “cap and trade” system of “allowances” for power companies that burn coal to emit sulphur dioxide and nitrous oxide – the “acid rain” compounds – with the caps gradually reducing over time.
The 1990 US Clean Air Act was adapted for the 1997 conference on climate change in Kyoto, which committed ratifying nations to emissions trading in 2005. Interestingly only Europe actually did it, even though the idea of emissions trading actually began in the United States.
In June 2007 John Howard announced that the coalition government would introduce a carbon trading scheme, and this was one of the first such announcements by any sitting government in the world. So both major Australian parties went to the 2007 election promising to introduce emissions trading.
OOPs – now the political landscape has changed
Australia can still effectively reduce its emissions without emission trading. We already have Government-regulated health and safety standards and the Renewable Energy Target legislation. It’s a more expensive way to reduce carbon emissions than a cap and trade system, but it’s not a Great Big New Tax either.
We would need to increase the renewable energy target from 20% by 2020 to something more than that and introduce stringent energy efficiency laws, perhaps subsidised by the government to some extent (like this year’s insulation scheme which was part of the fiscal stimulus).
But the bullet Australia needs to bite is replacing coal – especially brown coal – with gas for base load electricity generation. Nuclear would take too long for any emissions reduction timetable that’s likely to come out of Copenhagen –plus it simply isn’t politically acceptable. The only other potentially viable base load power source – geothermal – would also take too long.
So a coalition government would have to simply ban electricity generation that involves carbon emissions above a certain level – say, 1.2 tonnes per megawatt hour, which would shut down the brown coal generators. They would have to be fully compensated, but they have to be compensated under the ETS anyway. It would be more expensive but at it would actually achieve emission reductions and provide more certainty.
Perhaps increasing the budget deficit to pay for a reduction in carbon emissions, would be logical because this is spending that only benefits future generations, so maybe they should pay for it.
I think it is great that we can finally have the debate and explanations that we need.
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