1. The Clean Energy Future A Price on Carbon Pollution
28 July 2011
Sustainable Business Consulting Pty Ltd
Level 32, 101 Miller Street, North Sydney 2060
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Preferred provider for the NSW Government

2. Agenda
Australias pollution profile and emissions
Expected changes with a price on carbon
Carbon tax versus an Emissions Trading Scheme
How does the carbon price work
Biggest polluters in Australia
Changes that will be implemented
The carbon pricing mechanism explained
Impact for companies

3. Australias pollution profile
Source: 2009 emissions from the National Greenhouse Gas Inventory 2011, DCCEE analysis; graphic taken from Clean_Energy_Future_Final.pdf from www.cleanenergyfuture.gov.au

4. Australias projected growth in emissions
Source: Treasury modelling, 2011(medium global action scenario); graphic taken from Clean_Energy_Future_Final.pdf from www.cleanenergyfuture.gov.au

5. How can Australia reach the carbon reduction target?

6. Ways to achieve emission reduction:
Current proposed
solution
Feed-in tariff
Subsidies
Renewable Energy Target
Cap-and-trade

7. When things get more expensive, we will start looking for cheaper alternatives

8. The basics of a market-based carbon pricing approach
A company is faced with a price on carbon
It will now decide whether it is cheaper to
As each company behaves similarly.
the least costly abatement measures are adopted Australia-wide
A
B

9. Expected changes with a price on carbon
Switch to more gas-fired electricity generation(less emissions-intensive than coal)
Switch to renewableelectricity generation (as coal is made more expensive the relative price of renewables will come down)
Coal-fired boilers converted to gas-fired boilers in manufacturing plants, commercial buildings and hospitals
Energy-efficient buildings more attractive to tenants
Incentive for households and businesses to use energy more wisely
Innovationin technology to reduce pollution from existing processes
Chemical plants to install scrubbers to reduce nitrous oxide emissions
Installation of more efficient motors in industry
Capture and use or flaring of emissions from mining and gas extraction

10. Carbon Tax versus the ETS
Carbon Tax:
Fixed price of $23 / t of CO2-e
Unlimited number of permits available for purchase during fixed price period

11. Australia is not an early mover with pricing carbon

12. Where else is carbon taxed?
Finland: enacted carbon tax in 1990 (first country to do so)
Sweden: enacted carbon tax in 1991
Great Britain: climate change levy in 2001
Boulder, Colorado: implemented USAs 1st tax on carbon emissions in 2007
Quebec: first North American state to charge a carbon tax on hydrocarbons (petroleum, natural gas and coal)
British Columbia: enacted carbon tax in 2008
At C$25 per tonne, British Columbias tax already exceeds the price of carbon in Europes emissions-trading scheme. But it is still too low to prompt radical changes in behaviour: it adds just five cents to the price of a litre of petrol. Getting the most energy-intensive industries to make big cuts might take a tax four times as high. Even so, British Columbia has shown the rest of Canada, a country with high carbon emissions per head, that a carbon tax can achieve multiple benefits at minimal cost. The Economist, 21 July 2011

13. What countries have got an Emissions Trading Scheme?
(NSW first ETS ever: 2003)
New Zealand: since 2010
European Union: since 2005
China is piloting ETS in several provinces and will introduce a nation-wide ETS in 2017
Japan to launch ETS in 2013
South Korea is preparing for an ETS
Picture source: ABC News, 22 July 2011

14. Implemented and planned climate change action

15. How does the proposed carbon pricing work?
Source: http://www.abc.net.au/news/events/climate-change/carbon-pricing-explained.htm

16. How does the proposed carbon pricing work, video
Video, source: http://www.youtube.com/watch?v=fQd_DlkdQ1w&feature=player_embedded

17. Who are the biggest polluters in Australia?
Source: AFR July 16-17, 2011

18. Carbon cost and assistance for the big polluters
$580m cost in first year
Source: AFR July 23-24, 2011

19. Main sectors and companies impacted by the carbon price
SteelBlueScope and OneSteel
Oil and gasWoodside, Santos, Origin
MiningBHP Billiton, Rio Tinto, Iluka, Newcrest
ConstructionBoral, James Hardie
TransportAsciano, QR National
Commercial and RetailDexus Property Group, GPT

20. What is proposed?
The Clean Energy Future

21. Implemented Changes
Climate Change Authority Independent body, to distance emission reduction target setting from political influence, Bernie Fraser to head CCA
New long-term emission reduction target of 80% by 2050 on 2000 levels (used to be -60%)
Tax reform (some recommendations of the Henry Tax Review were adopted)

22. Four key elements

23. Dates
1 July 2012: Start for carbon tax
1 July 2013: CPI increase (plus 2.5%)
1 July 2014: CPI increase (plus 2.5%)
1 July 2015: price will be floating (Cap-and-trade emissions trading scheme)

24. Coverage of carbon tax facilities and gases
Thresholds
Facilities with scope 1 emissions greater than 25kt CO2-e
10kt of CO2-e for some landfill facilities
~500 companies (60% of Australias emission profile)(Under the CPRS this would have been the 1000 largest polluters)
Gases covered: Carbon dioxide, methane, nitrous oxide, PFCs (aluminium production)
HFCs and sulphur hexafluoride: equivalent carbon price through the existing synthetic greenhouse gas legislation
Gases

25. Coverage of carbon tax sectors
Sectors
Stationary energy
Industrial processes
Fugitive processes (other than decommissioned coal mines)
Non-legacy waste
Rail
Domestic aviation and shipping
Agriculture and land-use sectors are excluded

26. Treatment of transport fuels
Road transport is initially exempt
Included transport fuel uses:
domestic aviation
domestic shipping
rail and non transport uses of fuel (e.g. diesel generators)
Heavyroadtransport is expected to be included from 1 July 2014
Excluded transport fuel uses:
Households
Light vehicles in business (< 4.5t GVM)
Off-road by the following industries
Farming
Fisheries
Forestry

27. The linkage to the NGER Act
The carbon tax only covers scope 1 emissions over 25 kt, and only for certain sectors. There is no energy consumption/production threshold with the carbon tax
NGERS is broader in scope than the carbon tax
Covers all sectors

28. On the NGER Act: new NGER threshold applies
Your organisation is liable to report under NGERS if you:
Consumed 25,000 MWh of electricity
Burnt 2.5 million litres of fuel
Emitted 25kt of CO2-e
That would fall under the carbon tax regime, but only for scope 1 emissions (excluding emissions from transport fuels and excluding HFCs and SF6)
Source: AFR July 16-17, 2011

29. International Linkage
*
2015
Fixed Price
ETS
Use of international emissions units will not be allowed
Kyoto compliant credits from the CFI (ACCU) will be eligible for compliance purposes limited to 5%
International emissions units will be accepted
International permits will be allowed to offset an entitys carbon liability with a 50% limit until 2020
Kyoto compliant credits from the CFI (ACCU) will be eligible for compliance purposes no limit
Significant opportunity
for the land use and agricultural sectors

30. Industry and Household Assistance
$9.2 billion for industry
EITEs (see next slide) will receive 94.5% assistance
Special assistance for the coal, electricity, LNG and steel sectors
Small businesses eligible to access a $240m fund to reduce energy consumption
Small businesses can immediately write off capital purchases to $6,500
More than 50% of scheme revenue towards household assistance (tax cuts and/or benefit payments)
Treasury modelling indicates that the average cost to households will be $9.90 per week, with compensation to be $10.10 per week (NOT revenue neutral)

31. EITEs Emissions intensive trade-exposed industries

32. The new situation for EITEs
94.5% compensation guaranteed for 5 years
3 year notice for period for changes that can overlap with the initial 5 year guarantee
Industries will need to provide evidence that they are losing competitiveness
The Productivity Commission will oversee EITE compensation, including how much industries are cutting their emissions and what carbon price their international competitors are facing
EITEs need to start innovating now to become cleaner and more efficient to avoid losing competitiveness

33. Economic Impact
Treasury modelling indicates
economy will continue to grow
Impact on employment negligible
Scheme budgeted to cost $4.3 billion over four years
Tax-free threshold will increase from $6,000 to $18,200
Income tax cuts for all earning less than $80,000
Benefits payment for single income households earning up to $150,000
Prices for most household purchases will barely be affected by the carbon price
http://www.abc.net.au/news/events/climate-change/carbon-pricing-explained.htm

34. New Institutions
ARENA (Australian Renewable Energy Agency)will consolidate renewable technology support measures
Biodiversity Fund$946m to manage biodiverse carbon stores
Carbon Farming Initiative (CFI)
Clean Energy Finance Corporation (CFEC) CCS is not included here
Clean Energy Regulator (CER) brings together the NGERS, RET, and CFI from July 2012
Climate Change Authority (CCA) will provide independent advice to government (progress on emissions reduction targets, recommended pollution caps, voluntary action, etc.)
Energy Security Fund (ESF) will fund the closure of emissions-intensive power plants

35. The carbon pricing mechanisms governance structure

36. Carbon Farming Initiative
Landholders will be able to create Australian Carbon Credit Units (ACCU) by undertaking activities which comply with the Kyoto protocol
Activities include:
Reforestation
Avoided deforestation
Controlled savannah burning
Reducing livestock methane emissions
Reducing emissions from fertiliser use
Innovations such as biochar, biofuels and new species will be supported
Tax breaks for conservation tillage equipment will also apply
Farmers will be rewarded for biodiversity improvements. There will be regulations to determine the ACCU potential of tree planting projects

37. What does all this mean for your organisation?
Impact to your company

38. Risk or Opportunity?
Some of the most carbon intensive industries have seen the writing on the wall and are pouring billions of dollars into renewable energy
A carbon tax provides business with the certainty they need to continue trading in a modern economy, while creating a revenue stream that can be directed at investment into supporting other industries that are crying out for assistance, such as the renewable energy sector, an area of growth which has the potential to create thousands of jobs in this country.
Marius Kloppers, CEO BHP

39. Impact for companies
Understand your own emissions potential cost impact
Understand the emissions of your suppliers price pass through
Can you accurately and reliably measure your current and forecasted emissions?
How much of the carbon cost can you pass on?
Assess new and existing investments in terms of the carbon tax
Put governance processes in place to be able to deal with the 1 July 2012 start date
Is your company eligible for government assistance?
Are there any new market opportunities for your company?
Smart businesses will make adjustments early

40. Thanks For Attending This Presentation
Sustainable Business Consulting
We are happy to help you further with your
Carbon Management needs