SBC Carbon Price 2011 07 28


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This presentation gives an overview of the carbon pricing mechanism that has been announced by the Australian government. It talks about Australia’s pollution profile and emissions, the expected changes with a price on carbon, carbon tax versus emissions trading schemes, how the carbon price will work, the biggest polluters in Australia, the changes that will be implemented, the carbon pricing mechanism explained and the impact for companies.

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  • Tags:Carbon Tax, Carbon Price, ETS, CPRS, Clean Energy Future, price on carbon pollution, NGER, price on carbon, carbon pricing mechanism, coverage carbon taxDescription:This presentation gives an overview of the carbon pricing mechanism that has been announced by the Australian government. It talks about Australia’s pollution profile and emissions, the expected changes with a price on carbon, carbon tax versus emissions trading schemes, how the carbon price will work, the biggest polluters in Australia, the changes that will be implemented, the carbon pricing mechanism explained and the impact for companies.
  • SBC Carbon Price 2011 07 28

    1. 1. The Clean Energy Future A Price on Carbon Pollution<br />28 July 2011<br />Sustainable Business Consulting Pty Ltd<br />Level 32, 101 Miller Street, North Sydney 2060<br />P: 1300 102 195 | F: +61 2 8079 6101<br /> <br />ACN 140 233 932 | ABN 46 506 219 241<br />Preferred provider for the NSW Government<br />
    2. 2. Agenda<br />Australia’s pollution profile and emissions<br />Expected changes with a price on carbon<br />Carbon tax versus an Emissions Trading Scheme<br />How does the carbon price work<br />Biggest polluters in Australia<br />Changes that will be implemented<br />The carbon pricing mechanism explained<br />Impact for companies<br />
    3. 3. Australia’s pollution profile<br />Source: 2009 emissions from the National Greenhouse Gas Inventory 2011, DCCEE analysis; graphic taken from Clean_Energy_Future_Final.pdf from<br />
    4. 4. Australia’s projected growth in emissions<br />Source: Treasury modelling, 2011(medium global action scenario); graphic taken from Clean_Energy_Future_Final.pdf from<br />
    5. 5. How can Australia reach the carbon reduction target?<br />
    6. 6. Ways to achieve emission reduction:<br />Current proposed <br />solution <br />Feed-in tariff<br />Subsidies<br />Renewable Energy Target<br />Cap-and-trade<br />
    7. 7. When things get more expensive, we will start looking for cheaper alternatives<br />
    8. 8. The basics of a market-based carbon pricing approach<br />A company is faced with a price on carbon<br />It will now decide whether it is cheaper to<br />As each company behaves similarly….<br />… the least costly abatement measures are adopted Australia-wide<br />A<br />B<br />
    9. 9. Expected changes with a price on carbon<br />Switch to more gas-fired electricity generation(less emissions-intensive than coal)<br />Switch to renewableelectricity generation (as coal is made more expensive the relative price of renewables will come down)<br />Coal-fired boilers converted to gas-fired boilers in manufacturing plants, commercial buildings and hospitals<br />Energy-efficient buildings more attractive to tenants<br />Incentive for households and businesses to use energy more wisely<br />Innovationin technology to reduce pollution from existing processes<br />Chemical plants to install scrubbers to reduce nitrous oxide emissions<br />Installation of more efficient motors in industry<br />Capture and use or flaring of emissions from mining and gas extraction<br />
    10. 10. Carbon Tax versus the ETS<br />Carbon Tax:<br />Fixed price of $23 / t of CO2-e<br />Unlimited number of permits available for purchase during fixed price period<br />
    11. 11. Australia is not an early mover with pricing carbon<br />
    12. 12. Where else is carbon taxed?<br />Finland: enacted carbon tax in 1990 (first country to do so)<br />Sweden: enacted carbon tax in 1991<br />Great Britain: ‘climate change levy’ in 2001<br />Boulder, Colorado: implemented USA’s 1st tax on carbon emissions in 2007<br />Quebec: first North American state to charge a carbon tax on hydrocarbons (petroleum, natural gas and coal)<br />British Columbia: enacted carbon tax in 2008<br />‘At C$25 per tonne, British Columbia’s tax already exceeds the price of carbon in Europe’s 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<br />
    13. 13. What countries have got an Emissions Trading Scheme?<br />(NSW – first ETS ever: 2003)<br />New Zealand: since 2010<br />European Union: since 2005<br />China is piloting ETS in several provinces and will introduce a nation-wide ETS in 2017<br />Japan to launch ETS in 2013<br />South Korea is preparing for an ETS<br />Picture source: ABC News, 22 July 2011<br />
    14. 14. Implemented and planned climate change action<br />
    15. 15. How does the proposed carbon pricing work?<br />Source:<br />
    16. 16. How does the proposed carbon pricing work, video<br />Video, source:<br />
    17. 17. Who are the biggest polluters in Australia?<br />Source: AFR July 16-17, 2011<br />
    18. 18. Carbon cost and assistance for the big polluters<br />$580m cost in first year<br />Source: AFR July 23-24, 2011<br />
    19. 19. Main sectors and companies impacted by the carbon price<br />SteelBlueScope and OneSteel<br />Oil and gasWoodside, Santos, Origin<br />MiningBHP Billiton, Rio Tinto, Iluka, Newcrest<br />ConstructionBoral, James Hardie<br />TransportAsciano, QR National<br />Commercial and RetailDexus Property Group, GPT<br />
    20. 20. What is proposed?<br />‘The Clean Energy Future’<br />
    21. 21. Implemented Changes<br />Climate Change Authority Independent body, to distance emission reduction target setting from political influence, Bernie Fraser to head CCA<br />New long-term emission reduction target of – 80% by 2050 on 2000 levels (used to be -60%)<br />Tax reform (some recommendations of the Henry Tax Review were adopted)<br />
    22. 22. Four key elements<br />
    23. 23. Dates<br />1 July 2012: Start for carbon tax<br />1 July 2013: CPI increase (plus 2.5%)<br />1 July 2014: CPI increase (plus 2.5%)<br />1 July 2015: price will be floating (Cap-and-trade emissions trading scheme)<br />
    24. 24. Coverage of carbon tax – facilities and gases<br />Thresholds<br />Facilities with scope 1 emissions greater than 25kt CO2-e<br />10kt of CO2-e for some landfill facilities<br />~500 companies (60% of Australia’s emission profile)(Under the CPRS this would have been the 1000 largest polluters)<br />Gases covered: Carbon dioxide, methane, nitrous oxide, PFCs (aluminium production)<br />HFCs and sulphur hexafluoride: equivalent carbon price through the existing synthetic greenhouse gas legislation<br />Gases<br />
    25. 25. Coverage of carbon tax – sectors<br />Sectors<br />Stationary energy<br />Industrial processes<br />Fugitive processes (other than decommissioned coal mines)<br />Non-legacy waste<br />Rail<br />Domestic aviation and shipping<br />Agriculture and land-use sectors are excluded<br />
    26. 26. Treatment of transport fuels<br />Road transport is initially exempt<br />Included transport fuel uses:<br />domestic aviation <br />domestic shipping <br />rail and non transport uses of fuel (e.g. diesel generators)<br />Heavyroadtransport is expected to be included from 1 July 2014<br />Excluded transport fuel uses:<br />Households<br />Light vehicles in business (< 4.5t GVM)<br />Off-road by the following industries<br />Farming<br />Fisheries<br />Forestry<br />
    27. 27. The linkage to the NGER Act<br />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<br />NGERS is broader in scope than the carbon tax<br />Covers all sectors<br />
    28. 28. On the NGER Act: new NGER threshold applies<br />Your organisation is liable to report under NGERS if you:<br />Consumed 25,000 MWh of electricity<br />Burnt 2.5 million litres of fuel<br />Emitted 25kt of CO2-e<br />That would fall under the carbon tax regime, but only for scope 1 emissions (excluding emissions from transport fuels and excluding HFCs and SF6)<br />Source: AFR July 16-17, 2011<br />
    29. 29. International Linkage<br />*<br />2015<br />Fixed Price<br />ETS<br />Use of international emissions units will not be allowed<br />Kyoto compliant credits from the CFI (ACCU) will be eligible for compliance purposes – limited to 5% <br />International emissions units will be accepted <br />International permits will be allowed to offset an entity’s carbon liability with a 50% limit until 2020<br />Kyoto compliant credits from the CFI (ACCU) will be eligible for compliance purposes – no limit<br />Significant opportunity <br />for the land use and agricultural sectors<br />
    30. 30. Industry and Household Assistance<br />$9.2 billion for industry<br />EITEs (see next slide) will receive 94.5% assistance<br />Special assistance for the coal, electricity, LNG and steel sectors<br />Small businesses eligible to access a $240m fund to reduce energy consumption<br />Small businesses can immediately write off capital purchases to $6,500<br />More than 50% of scheme revenue towards household assistance (tax cuts and/or benefit payments)<br />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)<br />
    31. 31. EITEs – Emissions intensive trade-exposed industries<br />
    32. 32. The new situation for EITEs<br />94.5% compensation guaranteed for 5 years<br />3 year notice for period for changes that can overlap with the initial 5 year guarantee<br />Industries will need to provide evidence that they are losing competitiveness<br />The Productivity Commission will oversee EITE compensation, including how much industries are cutting their emissions and what carbon price their international competitors are facing<br />EITEs need to start innovating now to become cleaner and more efficient to avoid losing competitiveness <br />
    33. 33. Economic Impact<br />Treasury modelling indicates <br />economy will continue to grow<br />Impact on employment negligible<br />Scheme budgeted to cost $4.3 billion over four years<br />Tax-free threshold will increase from $6,000 to $18,200<br />Income tax cuts for all earning less than $80,000<br />Benefits payment for single income households earning up to $150,000<br />Prices for most household purchases will barely be affected by the carbon price<br /><br />
    34. 34. New Institutions<br />ARENA (Australian Renewable Energy Agency)will consolidate renewable technology support measures<br />Biodiversity Fund$946m to manage biodiverse carbon stores<br />Carbon Farming Initiative (CFI)<br />Clean Energy Finance Corporation (CFEC) – CCS is not included here<br />Clean Energy Regulator (CER) – brings together the NGERS, RET, and CFI from July 2012<br />Climate Change Authority (CCA) – will provide independent advice to government (progress on emissions reduction targets, recommended pollution caps, voluntary action, etc.)<br />Energy Security Fund (ESF) – will fund the closure of emissions-intensive power plants<br />
    35. 35. The carbon pricing mechanism’s governance structure<br />
    36. 36. Carbon Farming Initiative<br />Landholders will be able to create Australian Carbon Credit Units (ACCU) by undertaking activities which comply with the Kyoto protocol<br />Activities include:<br />Reforestation<br />Avoided deforestation<br />Controlled savannah burning<br />Reducing livestock methane emissions<br />Reducing emissions from fertiliser use<br />Innovations such as biochar, biofuels and new species will be supported<br />Tax breaks for conservation tillage equipment will also apply<br />Farmers will be rewarded for biodiversity improvements. There will be regulations to determine the ACCU potential of tree planting projects<br />
    37. 37. What does all this mean for your organisation?<br />Impact to your company<br />
    38. 38. Risk or Opportunity?<br />Some of the most carbon intensive industries have seen the writing on the wall and are pouring billions of dollars into renewable energy<br />“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.” <br />Marius Kloppers, CEO BHP<br />
    39. 39. Impact for companies<br />Understand your own emissions – potential cost impact<br />Understand the emissions of your suppliers – price pass through<br />Can you accurately and reliably measure your current and forecasted emissions?<br />How much of the carbon cost can you pass on?<br />Assess new and existing investments in terms of the carbon tax<br />Put governance processes in place to be able to deal with the 1 July 2012 start date<br />Is your company eligible for government assistance?<br />Are there any new market opportunities for your company?<br />Smart businesses will make adjustments early<br />
    40. 40. Thanks For Attending This Presentation <br />Sustainable Business Consulting<br />We are happy to help you further with your <br />Carbon Management needs<br />