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Navigating Climate Change: Insights from the 2008 Electrical Industry Leaders Forum

The 2008 Electrical Industry Leaders Forum in Sydney focused on the comprehensive impacts of climate change on the electrical sector and wider economy. Peter Burn, Associate Director of Public Policy at Ai Group, discussed the implications of the proposed Carbon Pollution Reduction Scheme (CPRS), an emissions trading system set to launch in 2010, targeting a 60% reduction of 2000 emissions levels by 2050. The forum addressed the challenges and opportunities for businesses and consumers, emphasizing the need for strategic investments and policy responses to effectively navigate the transition to a low-carbon future.

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Navigating Climate Change: Insights from the 2008 Electrical Industry Leaders Forum

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  1. Climate Change: The Big Picture 2008 Electrical Industry Leaders Forum, Sydney 26 AugustPeter Burn, Associate Director - Public PolicyAi Group02 9466 5503peter.burn@aigroup.asn.au

  2. Climate Change • Policy Response • Impacts: Long term and transitional • Current Hot Spots

  3. Carbon Pollution Reduction Scheme • A “cap and trade” emissions trading scheme from 2010 • Associated measures 60% of 2000 levels by 2050

  4. CPRS Green Paper:What does it propose? • “Cap and trade’ ETS with broad coverage: • All greenhouse gases and all sectors • All large emitters (over 25,000 t of CO2-e) • Fuel - upstream suppliers • Less than 1,000 companies need to have permits • ONLY for their non-fuel direct emissions • NOT to cover their electricity use

  5. Associated Measures • National Greenhouse and Energy Reporting Scheme (NGERS) – from 1 July 2008 • Business Measures • Emissions Intensive Trade Exposed (EITE) Activities • Strongly Affected Industries • Climate Change Action Fund • Household measures • Short-term fuel excise offset • Compensation for households

  6. Long Term Impacts • Reduce risks of drastic climate change • Shift the development path of the global economy • Emissions-intensive activities less viable • “Encourage” investment in other activities (including abatement) • Greater-than-average challenge for Australia

  7. Adjustment Required -11.1% -28.3% -53.8% -72.8%

  8. Where we’re headed … +182%

  9. Where we’ve got to get to … +175%

  10. Immediate Impacts on Business Direct costs • Costs of permits and compliance costs of involvement in the ETS for less than 1,000 companies Energy costs • Electricity, Gas, Petrol etc Energy intensive inputs • Metals, Non-metallic mineral products (e.g. cement), Plastics, Chemicals, Transport Sales volumes • Particularly for goods and services whose consumption uses energy(cars, appliances, travel)

  11. Impacts on Consumers (before any compensating measures) • Petrol (retail price) @ $20/tonne + 5c/litre @ $50/tonne + 12.5c/litre • Electricity (retail price) @ $20/tonne + 16% @ $50/tonne + 40% • CPI @ $20/tonne + 2% @ $50/tonne + 5%

  12. Emissions Intensive Trade Exposed • Green Paper Proposal – free EITE permits = 20% of total cap (30% when agriculture is in) • Emissions intensity measure • tonnes of emissions (scope 1 + 2) / million dollars of sales revenue • Allocations based on individual activity output at industry wide emissions intensities • 0 to 1,500 t/$m 0 allocation • 1,500 to 2,000 t/$m 60% allocation • 2,000 plus t/$m 90% allocation

  13. Short-Term Policy Trade Off Raising Allowances for EITEs may: • Extend relief across these industries and over time • Raise permit prices (at a given national cap) to the detriment of all others) • Leave less for Climate Change Action Fund and household compensation

  14. Hot Spots • Scheme Design • Initial (to 2015) emissions reduction levels/permit price • EITE measures • Security of electricity supply • Project Management • Timelines • Lack of Data • Skill shortages • Regulatory Overkill • CPRS, RET, NEETS, VEETS, MEPS, etc. etc.

  15. Climate Change: The Big Picture 2008 Electrical Industry Leaders Forum, Sydney 26 AugustPeter Burn, Associate Director - Public PolicyAi Group02 9466 5503peter.burn@aigroup.asn.au

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