AGL Energy: How does emissions trading work

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AGL Energy: How does emissions trading work

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AGL Energy: How does emissions trading work

  1. 1. Emissions trading A presentation prepared by AGL For further information: Simon Kelley [email_address] Tim Nelson [email_address]
  2. 2. Emissions trading: an example <ul><li>Assumptions : </li></ul><ul><ul><li>One gas producer </li></ul></ul><ul><ul><li>One electricity generator </li></ul></ul><ul><ul><li>Economy wide emissions equal 150 tonnes (tCO 2 -e ) </li></ul></ul><ul><li>ETS Introduced: </li></ul><ul><ul><li>Cap of 125 tCO 2 -e </li></ul></ul><ul><ul><li>120 permits are allocated and 5 permits are auctioned (1 permit = 1 tCO 2 -e ) </li></ul></ul><ul><li>AGL Energy </li></ul><ul><li>March 2010 </li></ul>80 tCO 2 -e allocated 40 tCO 2 -e allocated Permits Held 125 tCO 2 -e cap for the economy Emissions Cap Emissions 100 tCO 2 -e 50 tCO 2 -e Coal Generator Gas Producer Both covered by a cap and trade
  3. 3. Emissions trading: an example <ul><li>Trade Commences: </li></ul><ul><ul><li>Gas producer buys 5 permits at auction and 5 permits from the coal generator </li></ul></ul><ul><li>AGL Energy </li></ul><ul><li>March 2010 </li></ul>Allocated = 80 tCO 2 -e Sold to gas producer = 5 tCO 2 -e Total permits = 75 tCO 2 -e Allocated = 40 tCO 2 -e Bought at auction = 5 tCO 2 -e Bought from coal generator =5 tCO 2 -e Total permits = 50 tCO 2 -e Permits Held 125 tCO 2 -e cap for the economy Emissions Cap Emissions 100 tCO 2 -e 50 tCO 2 -e Coal Generator Gas Producer
  4. 4. Emissions trading: an example <ul><li>Low emissions investment commences: </li></ul><ul><ul><li>Gas producer maintains production but at higher cost </li></ul></ul><ul><ul><li>Coal fired generator cuts production </li></ul></ul><ul><ul><li>New renewable generator is constructed to meet energy demand </li></ul></ul><ul><li>AGL Energy </li></ul><ul><li>March 2010 </li></ul>Zero emissions generation: Requires no permit Allocated = 80 tCO 2 -e Sold to gas producer = 5 tCO 2 -e Total permits = 75 tCO 2 -e Allocated = 40 tCO 2 -e Bought at auction = 5 tCO 2 -e Bought from coal generator =5 tCO 2 -e Total permits = 50 tCO 2 -e Permits Held 125 tCO 2 -e cap for the economy Reduced production to emit 75 tCO 2 -e Coal Generator Emissions Cap Emissions Zero 50 tCO 2 -e Renewable Generator Gas Producer

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