Wednesday, November 30, 2011


Revised 11 April 2013

The dominant commercial model for rooftop solar PV has the individual house holder owning the panels and getting the resulting income/free power.  In this post it is argued that it may make sense to give home owners the option of leasing rooftop space to power companies who own the panels and the power produced by the panels.  Advantages of this approach include the reduction of power costs by making it easier to use competitive tendering to set the feed in tariff,  allowing a mix of location and panel orientation better suited to the needs of the total power supply system as well as providing an income stream for home owners who cannot afford to buy panels.
Breaking News:
Since I first started talking about the advantages of competitive tendering for the supply of clean electricity , the ACT introduced their "Reverse Auction" for driving investment in large scale solar.  I don't know all the details of their system except that it is a competitive tendering system.
I have now found this article in the Australian (Giles Parkinson 7 Sept 2012) that announced that the ACT auction process had reached the point where the first contract has been awarded to  Spanish group FRV for a lower than expected fixed price of 18.6 cents/kWh for 20 yrs.  This price may seem a bit high but, based on Qld experience it should actually reduce ACT power bills by replacing more expensive sources of day-time power. End of breaking news.

Thursday, September 29, 2011


Andrew Dodd at the Drum had this to say about the Federal court ruling against Andrew Bolt and the Herald Sun on a racial discrimination case brought by a group of prominent fair skinned Aborigines that Bolt accused of claiming Aboriginality to advance their careers:
“No doubt the Federal Court would like us to see its judgment against columnist Andrew Bolt today as a call for decent standards in journalism, rather than as a landmark ruling against freedom of speech.
But in reality it will not be seen that way because it is a slap in the face for free expression. It limits the kinds of things we can discuss in public and it suggests there are lots of taboo areas where only the meekest forms of reporting would be legally acceptable”.

Monday, September 26, 2011


The following link compares life cycle emissions for the use of natural gas and coal in the US:

In particular look at fig 4 and 8.  Fig 4 suggests that, for the LNG cycle, at least 0.3 tonnes of emissions will come from non emission sources per tonne combustion emissions with about half this coming from LNG production, tanker transport and regasification.

While these figures are all about US alternatives, they clearly emphasize the importance of challenging the gas industry to publish site specific data.  Also suggests that there is lots to be said for locating generators close to the gas source.

Would be interesting to compare life cycle emissions from Australian LNG and coal used in Chinese power stations.

Tuesday, August 16, 2011


This post was published originally at Larvatus Prodeo. It discusses options for changing the way we work that could reduce emissions and share the work more fairly. See:  (
A recent Climate Progress post reported that “closing Utah state offices on Fridays has resulted in a 13 percent reduction in energy use as well as collectively saving employees between $5 million and $6 million annually in commuting costs.” (A 5×8 hr week was replaced by a 4×10 hr week) In addition, “employee surveys have shown that most state workers like the new schedule — absenteeism and overtime are down and customer complaints have steadily dropped. Even wait times at the Department of Motor Vehicles have decreased…”
The post goes on to mention Californian studies that have indicated potential health and traffic congestion benefits from making similar changes. More details for the Utah case and additional benefits can be found here. Note that the aim in Utah was to save heating etc. costs by actually shutting down the offices for an extra day/week.
So perhaps it is worth asking how changes in technology and the way we work might help the environment, quality of life and job security? By and large we are still using work patterns that were developed when observing the Sabbath was considered important and the telegraph was leading edge technology. Does it really still make sense for most people to work day shift, Monday to Friday and to do their work in workplaces that are more than a few kilometres from home?
Technology changes in the last 10 years have changed what is practical. Not so long ago I needed to work at my personal workplace with filing cabinets, reference books etc to work efficiently. Now all that information that used to be on paper will fit on a memory stick or be accessible via the internet. There is no longer a need to have a dedicated workplace to work efficiently. Modern technology is also allowing many other jobs that had to be done at a particular place to now be done anywhere with reasonable internet connections. For example, my understanding is that Hamersley now controls its crushing plants from Perth instead from control rooms at the crushers. Technology also means that many people should be able to reduce commute emissions by spending more time working at home or closer to home.
We have also reached a point where most people have no particular reason not to take time off during the week instead of weekends. For me the only time when being off at weekends was important was the 40% of my working life when our children were at school.
One possibility worth considering is a wider adoption of 7 day work rosters similar to those used by the mining industry. For example, many of the Thiess sites I worked with used a 4 day on 4 day off roster that averaged 42 hrs/week for 12 hr days. The roster was popular and turnover low. Seven day rosters can involve more than 2 crews, different roster arrangements etc. if required.
From an emissions point of view the big attraction of the above roster is that assets are used more efficiently. For example, it would allow office space requirements to be halved if individuals work more hours per day to maintain the same weekly hours. Halving office space requirements halves the emissions generated when an office is not being used. It would also allow most of the emissions associated with office buildings to be avoided for many years. Construction resources could be diverted to building more important things such as hospitals, clean power generation and the conversion of unused office space to accommodation etc. Widespread use of 7 day rosters would also reduce traffic congestion during peak hours as well as reducing weekend crowding at some recreation facilities.
It is worth discussing what changes to work arrangements may make sense in terms of society, the environment and the economy and the key reasons for this choice. It is also worth discussing what working arrangements we would choose as individuals if we had the choice.

Friday, August 12, 2011


In a previous post it was argued that the most effective way of driving down the emissions per km of new cars would be to use an offset credit emissions trading system.  The aim of this post is to detail one version of this type of system.
Versions of offset credit trading emission trading schemes are at the core of both the Australian MRET emissions trading scheme used to drive investment in renewables as well as the US system for reducing acid rain. Offset credit trading is particularly suited for situations where the aim is to control an average and where there is no shortage of better than target product. 
There is no transfer of funds to the government so offset credit trading schemes are not defacto tax schemes.  If all else is equal price increases will be lower because prices do not have to cover the cost of the defacto tax.
Under an offset credit trading system credits are awarded for better than target performance.  Any entity that wants to perform worse that target has to purchase these credits from entities awarded credits for performing better than target.
A basic offset credit emission trading scheme for controlling average emissions per km might work as follows:
1.          Government sets target and specifies test procedures.
2.          If a new car with emissions per km below target is registered, free credits would be awarded by the government.  The number of credits awarded would depend on how far below target the emissions were.
3.          Before a new car with above target emissions could be registered enough of these credits generated by the registration of below target cars must be purchased and surrendered to the government. The number of credits needed will depend on how far above target.
In effect, all above target emissions have to be offset against below target emissions so that the average stays at or below target.
The advantages of offset credit trading schemes include:
1.          Do not depend on any change in the price of fuel to work.
2.          Will reduce the price paid for cars with below target fuel consumption.
3.          The target can be as challenging as the government is willing to make it.
4.          Unlike simple cap schemes, it does not completely block the sale of new cars with above target emissions.  (Reduces the impact of complaints from those who really do need cars with above target emissions.)
5.          At a petrol price of $1.50/litre it would actually REDUCE the national fuel bill by $614/tonne CO2 abatement.
In practice there may be a number of modifications to the above system.  For example;
1.          Limiting actual trading to that required by manufacturers/importers whose averages haven’t quite matched the target.
2.          Providing some relief for genuine working vehicles and special cases such as large families.
3.          Extending the system to take account of significant conversions of existing cars.
4.          Controlling fuel consumption rather than emissions so that it is easier for people to understand targets.
5.           Excluding light commercial vehicles from the offset trading pool while giving/requiring similar payments to those in the offset credit trading scheme for below or above target emissions.  (Removes the incentive to argue about whether a vehicle is or isn’t commercial.)  There might be an upper limit on payments to avoid pushing the payments for large trucks up for no real reason.
6.          Have a separate system for commercial vehicles.
7.          Having different targets for vehicles that normally travel long distances or do not have access to clean electricity.  (Vehicles for which plug in hybrid will make little difference.)
At the start of the program there will be plenty of large, second hand vehicles available for those who really need this type of vehicle.  It would make sense to wait and see before introducing special arrangements.


This note argues that:
1.          A carbon tax is not an effective way of driving down car related emissions.  It was estimated that a $23/tonne carbon tax would reduce total car emissions by only 1.1% initially rising to 2.6% after a number of years.
2.          Driving down the average emissions per km of new cars should be a key part of any long term plan for reducing fleet emissions. 
3.          An offset credit emissions trading scheme would be the most effective way of reducing the average emissions per km of new cars.  The attractions of this approach include:
I.            Does not depend on any change in the price of fuel to work.
II.         Will reduce the price paid for cars with below target fuel consumption.
III.       The target can be as challenging as the government is willing to make it.
IV.      Unlike simple cap schemes, it allows some scope for people to purchase new cars with above target fuel consumption.
V.         At a petrol price of $1.50/litre it would actually REDUCE the national fuel bill $614 per tonne CO2 abatement.
(*NOTE:  Offset credit trading is at the core of both the Australian MRET emissions trading scheme used to drive investment in renewables as well as the US system for reducing acid rain.) 

1.          That an offset credit trading scheme be introduced before the next election.
2.          The initial tailpipe emission** target be set at 122 g CO2/km.  (5 litres/100 km for a petrol driven car.)
3.          The target be ramped down to 25 g/km by 2020.
(**NOTE: The target may be expressed in a form that takes account of total emissions from well to tailpipe, not just tailpipe emissions.)
Reducing the fuel consumption of cars is important from the point of view of both emission reduction and reducing our exposure to oil supply problems.  ABS data indicates that passenger vehicles (excluding buses) consumed 18 billion litres of fuel at an average rate of 11.5 litres/100km during 2007. This fuel consumption would generate about 45 million tonnes of CO2.
Unfortunately, a carbon tax has been found to be ineffective at reducing total car fleet emissions.  The results of two large overseas studies in the UK and US both suggest that a $30/tonne CO2 tax on tailpipe emissions would reduce total car fleet fuel consumption by only 1.4% initially rising to 3.4% after a number of years.  (For a base fuel price $1.50/litre - These reductions correspond to price increases per tonne CO2 abatement of about $2100 and $900 respectively.)
Other strategies for achieving total fuel reduction include:
1.          Reducing total km traveled by using more public transport, car pools, reducing the distance/frequency of travel to work etc.
2.          Reducing emissions per km for the existing car fleet by retrofitting cars with plug in hybrid drives, improving driving practices, lowering speed limits, using lower roll resistance tires, fitting lower air resistance hub caps, etc.
3.          Reducing average fleet emissions per km over time by improving the average emissions per km of the new cars.  This strategy is important because it has the potential to yield the large reductions required to survive future oil shortages and because a typical car will have a life of 10 to 20 years.
The focus of this note is driving down the average fuel consumption of new cars.
Driving down the average fuel consumption of new cars:
There are many commercially available cars that are that have standard fuel consumptions well below the 11.5 litres/100km 2007 average.  For example, there are small, low cost cars with claimed highway fuel consumption below 5.0 litres/100 km as well as more expensive conventional drive cars that are claimed to consume as little as 3 litres/100 km.  ABS 2007 figures had passenger vehicles averaging 39 km traveled per day, light commercial 50 km/day.  This suggests that the plug in hybrids that are beginning to appear on world markets should deliver fuel consumptions below one litre/100 km without requiring large batteries.
Car related emissions are one area where quite dramatic reductions can be achieved over time even if we restrict ourselves to technologies that are currently commercially available. 
ABS reports that “Over recent years there has been a continuous reduction in average new vehicle emissions. From an estimated 252 grams of CO2 per kilometre in 2002, National Average Carbon Emissions (NACE) for all new light vehicles sold in Australia for 2008 was 222.4 grams of CO2 per kilometre. This decline in carbon emissions of new vehicles places the industry well on track to achieve the target of an average of 222 grams of CO2 per kilometre by 2010.” The target referred to was the Federal Chamber of Automotive Industries (FCAI) voluntary target.  (222 gms per km corresponds to the tailpipe emissions from a car consuming 9 litres petrol/100km.)
Three alternatives for driving down the average fuel consumption of new cars down further have been considered here:
1.          The carbon tax.
2.          The use of caps to put an upper limit on emissions per km.
3.          The use of an offset credit based emission trading scheme to control the average fuel consumption of new cars.
The carbon tax:
As mentioned above the carbon tax is not an effective way of driving down car related emissions because average fuel consumption has been found to be only weakly linked to fuel price.
A $30/tonne tax would add about 33¢/day to the cost of running the average 2007 car.  So it is hardly surprising that fuel consumption that such a tax would not be a great incentive to act.  Even worse, most of the changes that we are suggesting people take to reduce their fuel cost will reduce comfort, convenience and status.
The carbon tax is not an effective way of driving down the average fuel consumption of new cars.
The use of regulated emission caps:
Regulations that cap emissions per km for new cars could be used to block the sale of new cars that exceed the limit.  Advantages include:
1.          It does not depend on any change in the price of fuel to work.
2.          It could be very simple if no exceptions are allowed.
3.          The target can be as challenging as the government is willing to make it.
4.          At a petrol price of $1.50/litre it would actually REDUCE the national fuel bill by $614/tonne CO2 abatement.
The disadvantage is that a simple cap may produce loud protests from individuals who have a particular desire for a vehicle that exceeds the cap as well as manufacturers whose product just exceeds the cap. There is a real risk is that the protests will result in higher caps.
A cap based system also provides no incentive for manufacturers to produce cars with emissions well below the cap.
The use of caps can be used to drive serious reductions in emissions.  However, there are some disadvantages.
Offset credit based emission trading schemes:
Offset credit trading emission trading schemes are at the core of both the Australian MRET emissions trading scheme used to drive investment in renewables as well as the US system for reducing acid rain. Offset credit trading is particularly suited for situations where the aim is to control an average and where there is no shortage of better than target product.
An offset credit emission trading scheme for controlling average emissions per km might work by:
1.          Government sets target and specifies test procedures.
2.          If a new car with emissions below target is registered, free credits would be awarded by the government.  The number of credits awarded will depend on how far below target.
3.          Before a car with above target emissions could be registered a number of these credits generated by the registration of a below target car must be purchased and surrendered to the government. The number of credits purchased will depend on how far above target.
In effect, above target emissions have to be offset against below target emissions so that the average stays at or below target.
The advantages of this approach compared with the others include:
1.          It does not depend on any change in the price of fuel to work.
2.          It will reduce the price paid for cars with below target fuel consumption.
3.          The target can be as challenging as the government is willing to make it.
4.          Unlike simple cap schemes, it does not completely block the sale of new cars with above target emissions.
5.          At a petrol price of $1.50/litre it would actually REDUCE the national fuel bill by $614/tonne CO2 abatement.
In practice, it may be convenient to use the existing MRET administration system to manage the system for reducing car related emissions. 
Offset trading could be used to drive serious reductions in car related emissions while avoiding some of the disadvantages associated the use of regulated emission caps.  It is the best of the alternatives considered.

1. ABS

2. PHIL GOODWIN, JOYCE DARGAY and MARK HANLY ESRC Transport Studies Unit, University College London, London, UK: “Elasticities of Road Traffic and Fuel Consumption with Respect to Price and Income: A Review (UK)Transport Reviews, Vol. 24, No. 3, 275–292, May 2004
3.  Espey, Molly (Energy Journal. Vol. 17, no. 3, pp. 49-60. 1996)
It may make sense to keep light commercial vehicles out of the offset trading pool while giving/requiring similar payments to those in the offset credit trading scheme for below or above target emissions.  Removes the incentive to argue about whether a vehicle is or isn’t commercial.  (There might be an upper limit on payments to avoid pushing the payments for large trucks up for no real reason – or exclusion of vehicles above say 10 tonnes.)

Sunday, August 7, 2011


At the moment the Asian (and by extension, the Australian) economic strategy depends on the US growing its debt at an unsustainable rate so that it can continue to buy Asian goodies.  Goodies that the US could make for itself by using idle human and manufacturing resources. So far a key part of this arrangement has been that countries like China have simply accumulated surplus’s of $US or fed them into the questionable loans that fed the GFC.
The problem has been made worse by the crazies at the WTO who don’t seem to have come to grips with the idea that countries suffering from large trade deficits destabilize the world’s economic system as well as damaging themselves.  Under the current rules all that a country with a serious trade deficit seems to be allowed to do is to slow its economy to the point in an attempt to drive down the demand for imports.  Attempting to control imports by more direct means is considered unacceptable.
If China is seriously concerned about the loss of value of its $US holdings, the most logical thing for them to do would be to use their $US surplus to directly or indirectly buy US goods. This approach should be a win/win that  helps both the US and world economy, creates jobs in the US while improving the standard of living of the average Chinese. The long term problem with this approach is that other countries may take up the destabilizing role that China currently fills.
In the longer term we need to have a hard look at the way free trade globalization operates. If nothing else, the WTO rules should be changed to recognize that countries with large trade deficits should be able/required to take direct action to restrict imports to a level the country can afford.
The key question is: “how does the world get the benefits of free trade globalization while minimizing some of the potential problems?”
I guess the good news at the momnet is that a contracting world economy will reduce greenhouse emissions.

Wednesday, April 27, 2011


The cap and trade sytem used to reduce acid rain is often quoted as the justification of other ETS systems such as the Australian CPRS.  However, it is important to understand that there are important differences between the cap and trade used to drive down acid rain and some of the other cap and trade systems.
Firstly, the acid rain system was an offset credit cap and trade system. Wikapedia ( says: “As an incentive for reducing emissions, for each ton of sulfur dioxide reduced below the applicable emissions limit, owners of a generating unit received an emissions allowance they could use at another unit, keep for future use, or sell. This legitimized a market for sulfur dioxide emissions allowances, administered by the Chicago Board of Trade.[5] Units that installed flue gas desulfurization equipment (e.g., scrubbers) or other “qualifying Phase I technology” which reduced sulfur dioxide emissions by 90%, qualified for a two-year extension of the 1995 deadline, provided they owned allowances to cover their total actual emissions for each year of the extension period.” This system generates no revenue for governments.  It is worth noting too that this cap and trade was only part of a complex system that included substantial regulation.  (See link above for more detail.)
This is very different than some other programs, such as the CPRS, where governments SELL permits. These systems are defacto taxes. The price increases associated with this type of system have to be much higher because the price increases have to take account of the cost of the tax in addition to the actual cost of clean-up.
Secondly, there was always plenty of low sulfur coal available so the target could always be met. The cap and trade simply allowed various generators to use different strategies. It also encouraged generators installing scrubbers to scrub more then the minimum required to meet target for the sake of trade-able allowances.  The price of low sulphur coal would have had a stabilizing effect on the price of trade-able allowances
It is a bit more tricky where investment is required to meet targets. The value of trade-able allowances will vary enormously depending whether investors have over or under estimated future demand. Not desirable when investment in things like clean energy take years years to be paid back

Wednesday, April 20, 2011

The Damage Caused by Unemployment

This post was first published in Australian Options:

There are many things that contribute to the damage caused by unemployment. One problem is that politicians are unwilling to admit that they haven't got a quick fix for this shortage of work. As a consequence, the only fixes they are willing to consider seriously involve creating more work and using welfare to alleviate some of the economic pain. That is, when the more scurrilous politicians are not trying to blame the unemployed for unemployment and doing all they can to increase the damage to the unemployed.
The second problem is that employers that create unemployment by working individuals long hours are not the ones paying the unemployment welfare bill. Peter Brokensha's recent figures (Australian Options, Autumn 2004) suggest that over 700,000 extra 35 hr/week jobs would be created if nobody averaged more than 45 hrs/week. Perhaps we should go "user pays" and let employers who claim that they save money by working people long hours pay the cost of the unemployment welfare bill? Perhaps too, the union movement might ask itself whether the working class as a whole might not be better of if penalty rates for overtime were traded off for increases in base pay rates. Worker dependence on those hours at double time is part of the reason work-sharing is resisted.
The third problem is we assume unemployment is automatically damaging and ignore the possibility that there are ways of reducing the damage without reducing unemployment. There are certainly individuals who desperately need work for economic and other reasons. However, there are also those who are not damaged by unemployment and use it as an opportunity to further their education, start a new business or simply seek the perfect wave. I am sure that there are many employed people who would see 12 months on the dole as a welcome opportunity, particularly if they knew they could get work at the end of it. Most of us have worthwhile things we really want to do but never get around to because we never have the time. The shortage of work should have been treated as an opportunity to increase the skills of the workforce, create new business and allow individuals to spend time on more satisfactory things than working long hours.
Perhaps we should start saying that the real problem is that there are people unemployed who are damaged by unemployment, not unemployment as such. Yes, we need to think about creating jobs and providing welfare. Yes, we need to think about sharing the work that is available. But we also need to think about other ways of reducing the damage and actually using the opportunities unemployment offers individuals.

John Davidson

Tuesday, March 1, 2011


Random header image at Larvatus Prodeo
This post first appeared as a guest post at  Larvatus Prodeo .  It looks at what should be considered when eveluating climate action programs and applie sthese criteria to the eveluation of programs that depend on putting a price on carbon.  The conclusion was that the carbon price should be put to one side and alternative approaches used to get on doing things that we know have to be done.

Evaluating emission abatement programs

The great big lie that makes AGW deniers so influential is not their climate science distortions. It is their exaggeration of the impact of the action required to reduce emissions on individuals and the economy.
Fighting this exaggeration is not been helped by some of the climate action programs that have been foisted on us by both the Coalition and Labor in recent years. Programs where the cost per tonne CO2 abatement have been over $300/tonne. (Compared with less than $40/tonne to achieve the same emission reduction by lifting the MRET target.)
Fighting this exaggeration has not been helped either by proposals for large, complicated programs which are difficult to understand and easy to distort. The complicated nature of the CPRS was the gift that kept on giving for a skilled distorter like Abbott.
Given past mistakes and the government’s determination to commit to a large, complicated carbon price program with compensation before the end of the year, it might make sense to have a conversation about what questions should be asked before committing to climate action programs.
It might also make sense to see how well the proposed carbon price program stacks up against these questions. Unfortunately, the carbon price program just doesn’t stack up when the right questions are asked.
This post was prompted by a recent article from Mark Davis and Lenore Taylor under the provocative title Climate cash goes up in smoke. They said:
More than $5.5 billion has been spent by federal governments during the past decade on climate change programs that are delivering only small reductions in greenhouse gas emissions.
An analysis of government schemes designed to cut emissions by direct spending or regulatory intervention reveals they have cost an average $168 for each tonne of carbon dioxide abated.
The article then goes on to compare various programs based on a table that can be found here.
Unfortunately, their analysis is seriously flawed. The “total cost” quoted in the table does not take account of “costs or savings to households, businesses and other non-government players in the economy.” As a result, the regulation-driven “Greenhouse intensive water heater phase out” program looks like a real bargain because the cost of installing the greener option is a non-government cost. Equally, the “Household insulation” program looks worse than it should because it doesn’t include the benefits of savings in power costs or the economic stimulus that was critical at the time.
Despite these limitations, the article was a strong reminder of the need for proper evaluation of climate action programs.
An interesting article, A carbon price can’t save the planet by itself by Ross Gittens, is more useful. The article focuses on the need for complementary measures to deal with important issues for which a carbon price is particularly ineffective. Much of the discussion is relevant to evaluating the desirability of adopting a carbon price scheme.
Of particular interest is a set of six principles for evaluating climate action programs that come from Richard Denniss and Andrew Macintosh. These can be summarized by the following check list:
    Cost effective? ($ per tonne CO2 abatement?)
    Response to clear case of market failure?
    Complement, not oppose other programs?
    Federal policies fit in with state policies?
(NOTE: Explanations and examples for all these principles can be found near the end of the Gittens article.)
It was concluded that “objectives… need to be spelt out clearly…. and the schemes need to be monitored regularly against those objectives.”
Some other items might be added to this check list:
    Price effective? (Important because it is price increases rather than costs that voters actually see and price increases that spur claims for compensation.)
    Easy to explain/hard to distort?
    Generates appropriate market forces to drive improvements?
    Certainty re rate of take-up?
    International impact?
At this stage it is useful to see how two existing programs would rate:
Firstly – Malcolm Turnbull’s “Incandescent light bulb phase out”: This is a successful program that ticks all the applicable boxes. In particular:
    It gave certainty of take-up – a particular advantage of simple regulation based schemes.
    It addressed a market failure. This arose because the potential savings to an individual user were too low to create much interest.
    It created the market forces that have helped to improve light quality and drive down globe prices since the regulations came into force.
    It is cost effective. A high efficiency globe running one hour a day will save me about $5/year – close to the current price of a high efficiency globe.
Secondly – Various solar PV programs: These were less successful programs that still got results and would get a tick in terms for most of the applicable checks. However, there were some checks where the answer was ambiguous or clearly negative:
    Cost/price increase per tonne CO2 abatement: There is some ambiguity re this figure because solar PV generates most of its electricity at times when the price paid is well above average.
    Uncertainty re rate of take-up: Governments have responded to above expectation take-up by cutting back on schemes. The resulting fluctuations in demand have made it difficult to develop a stable solar PV installation industry.
    No market forces to drive down the cost of subsidies or the size of feed in tariffs: The above expectation take-up suggests that the price premium for solar PV power would have been lower if the programs had been set up to create competition between solar PV generators.
    Not equitable: Only the better off could afford to take advantage of the overly generous feed in tariffs. On the other hand, the poor had to pay the higher prices required to support this generosity.
In addition, the subsidy scheme was run on pork barrel principles. The subsidy per kWh was higher for small installations and the subsidy model assumed that the panels would be owned by the householders. It might have been smarter to provide the same subsidy per kWh no matter how large the installations were and not to have differentiated between householder owned installations and installations owned by companies who leased roof space from householders. Larger scale and the roof top leasing option should result in lower costs and the possibility of extra income for low income householders.
So what about the proposed carbon price program?
Once again the proposed program would get a tick for most of the applicable checks. However, there are some real problem areas:
Certainty of take-up is going to be a real issue, particularly during the initial stages where the carbon price is low. In theory, the starting prices being bandied around at the moment would be sufficient to start a massive boom in CCGT (combined cycle gas turbine) investment that could see almost complete replacement of coal fired power by the end of 2016. In reality, there may be almost no investment in CCGT because of carbon price uncertainty. There will be uncertainty caused by fears that the opposition will win the next election and drop the whole program. In the specific case of CCGT there will be the additional risk that future increases in the price of carbon may be sufficient to drive the replacement of CCGT before an adequate return on investment has been achieved. Greater certainty and smaller price increases could be achieved by using competitive tendering to set up long term contracts for the supply of cleaner electricity.
Market failure: Gitten’s argument for complementary systems was based on the market failure of the carbon price system for some sources of emissions. For example, the carbon price program would not be an effective way of driving down car-related emissions because the price signal is so weak. In 2007, a $30/tone carbon price would have added only 49¢/day to the fuel costs of the average car. (See here for more details.) Hardly enough on its own to make most people change their driving habits, particularly if they are being asked to sacrifice convenience, comfort and status. People may change their driving habits because of a commitment to saving the planet. They will change if required by regulation but they are unlikely to change for 49¢/day.
Opposing other programs: Richard Denniss says:
The Rudd government’s emissions trading scheme was designed in such a way that any reduction in emissions caused by its subsidies for households installing solar panels would simply reduce the effort required by other polluters, not add to the overall reduction.
This is a potential problem with any program that has an overall emission reduction target.
Easy to explain/hard to distort: Would be a problem if the government goes ahead with a comprehensive program, particularly if it includes compensation for polluters.
Cost/price increase per tonne CO2 abatement: Intuitively, it might be expected that, if the carbon price is $40/tonne, then the price increase per tonne CO2 abatement will also be $40/tonne. However, this is only true if there is 100% replacement of dirty with a clean alternative (and the price premium for clean is the same as the carbon price.) For lesser replacements the price increase is higher because the average price has to take account of both the price premium for clean and the carbon price on dirty. For example, by the time the percentage of clean electricity has reached the 2020 MRET target of 20% renewables, the price increase per tonne CO2 abatement would be $200/tonne, not $40/tonne. At the halfway mark (10%) it would be $400/tonne. In addition, the actual price of electricity will have to be the same as the price of dirty after the carbon price is applied no matter how far the cleanup has progressed. (About 4¢/kWh above the current price.)
By contrast, alternatives, such as the MRET, that do not depend on a carbon price to drive change give lower price increases per tonne CO2 abatement because the average price does not have to take account of the carbon price on dirty. For the above case the price per tonne CO2 abatement will stay at $40/tonne no matter how far emission reduction has progressed. In addition, the actual price only ramps up as the proportion of clean electricity increases. For example, the average price will only need to ramp up by 0.08¢/kWh per year to reach 0.8¢/kWh above the current price by 2020.
In theory some of the higher prices associated with the carbon price approach can be returned to tax payers after taking out admin costs and the CPRS style compensation payments that the government is now talking about including in their carbon price scheme. Even if all the difference were returned, the politics of arguing for a 4¢/kWh price increase now instead of a 0.08¢/kWh increase per year is ridiculous. It would also be much harder for a polluter to argue for compensation when the price of electricity is only rising at 0.08¢/kWh per year.
CONCLUSION: It might be a lot smarter to forget about carbon price for the time being and get on with the things we know have to be done to meet 2020 targets using approaches that don’t depend on putting a price on carbon.

Sunday, January 30, 2011


Brisbane water supply got down to 17% full at one stage during the recent drought.  If the drought had continued much longer we would have had a crisis that would have resulted in the widespread shutting down of business as well as really severe restrictions on domestic use. The economic damage would have been much worse that what happened to Brisbane during these floods.  The real danger of the 2011 flood  inquiry is that the focus will be on flood mitigation at the expense of water supply. It is crucial that the inquiry is an integrated one that looks at both floods and water shortages as well as making the city less vulnerable to the effects of both:


  This is a copy of aletter sent to a number of MPs during Jan 2011.  The key message is that the government will have very little tangible action to show for 5 years of Labor government unless it puts the search for the carbon price magic bullet to one side and gets on with some of the things that clearly ned to be done.
The letter also argues that the carbon price approach is far less effective than alternatives that leave the price of dirty unchanged and only charge for the higher price of clean (if applicable).  In the case of driving investment in clean electricity the price increase per tonne emission reduction will be four times the value for the alternative suggested at the point where emission have been reduced by 25%.

Saturday, January 29, 2011


This post was first published as a guest post at Larvatus Prodeo  The post looks at some of the issues raised in the commission and challenges the wisdom of both the way the commission was conducted  and some of the conclusions.  It is particularly critical of the change in emphasis to evacuation as the magic bullet.  Only 1.5% of people in the area left their homes as the "result of  a red alert" issued a while after black Saturday:


 This post was first published as a guest post by John Davidson.  It argues that it makes good sense to use the gas fired transition as part of the process of replacing fossil fuel power with clean power.  The gas fired transition provides a low cost way of making rapid reductions in emissions.  It has the added advantage  of providing back-up for renewables that do not have steady output such as wind and solar:


This post was first published as a  guest post   in Larvatus Prodeo (June 23 2010).  It discusses the problems of systems for driving climate action that depend on a carbon price as well as the additional problems that arise as a result of the carbon price being set by a market that can change the value of emission credits very rapidly.  This more recent post based on a letter to MPs  (15 Jan 2011) looks at how staying with the carbon price approach will make it difficult for Labor to have anything tangible to show when it goes into the next election.  It also points out that the carbon price approach results in a much higher price increase per tonne emission reduction than some alternatives that do not depend on using a carbon price to artificially increase the price of dirty :


 This post was first published as a guest post by John Davidson before the 2010 federal election.  Much of what was said then is still very relevant:

Since their last change of leaders both Labor and the Coalition have placed “putting a price on carbon” as the key driver of climate action on indefinite hold. They also look like moving to some form of direct action for at least the next few years. In addition, while the polls are continuing to show support for climate action this support has softened since Copenhagen. There is a reluctance to support changes that will have much effect on people’s lives or the economy, particularly if certain large countries with much lower per capita emissions than Australia don’t start reducing their emissions first. (In 2007, even the US per capita figure for emissions from the consumption and flaring of fossil fuels was 9% lower than Australia.)
So in this changing political environment does it still make sense to continue urging the Labor party to include putting a price on carbon as part of their election promises or to concentrate on arguing for an effective direct action program?


This was published originally as a guest post by John Davidson on Larvatus Prodeo (4 Nov 2010):
Barry Cohen had a depressing article on the decline of question time in yesterday’s Australian. His line is that question time should return to being “the forum for a backbencher to make a reputation” instead of allowing QT to be the private domain of of both government and opposition executives. He provides some interesting statistics to support his argument:


This post first appeared as a guest post by John Davidson in  Larvatus Prodeo 1 Sept 2010:

The informal vote for the house of reps was 5.64% in this election with state figures ranging from 4.19 in Tasmania to 6.89 in NSW. Some of these informal votes would be due to the “pox on both your houses syndrome”. However, the rest would be due to votes being “accidentally informal” for some reason or other. Accidentally informal not only robs individuals of their vote but it may also skew the election results given that people with low education or poor English skills might be more likely to make mistakes on their ballot paper.
With these problems in mind it was interesting to read a recent analysis by POSSUM on the causes of informal voting for the house reps. He used statistics (linear regression) to estimate the effect of the number of candidates on a ballot paper, the percentage of people in the electorate who speak English poorly (or not at all) as well as whether the state in which the electorate was located had optional preference voting (OPV) for state elections. (Qld and NSW have OPV)