Australia lags US on emissions reductions

From reading and listening to much of the press, including the ABC, you'd think Australia was somehow on a lone kamikaze mission to reduce emissions, because it was introducing a nationwide carbon tax or price of $23 (although one that notably excludes passenger vehicle fuel and also agricultural emissions).

The usual catch-cry says our carbon price is apparently twice that of Europe's and the US doesn't have a carbon price at all.

But you can usually manage to get people to apply a bit of common sense on Europe and look beyond a myopic comparison of emissions trading carbon prices at a single point in time.

Sure the carbon price under Europe's emissions trading scheme is lower than ours but they've had a carbon price in place years before us. And it has been higher than $23 per tonne of CO₂ for a significant period of its operation. Plus when settings were originally put in place for 2013-2020 phase of the scheme, prior to the European debt crisis, they were signed-off with an expectation of carbon prices substantially higher than what's planned for Australia.

Also no matter what metric you might like to use, it's pretty clear Europe leads Australia. Australia's emissions have grown considerably since 1990 whereas the European Union's haven't. They blow us away in terms of policy to drive installations of renewables. Their cars are miles ahead of ours in terms of fuel efficiency and CO₂ emissions as I pointed out in Climate Spectator on Tuesday. Their emissions per unit of GDP, per capita and per unit of electricity generated are vastly lower than ours. In addition a range of European countries apply carbon and other fossil fuel taxes on top of their emissions trading obligation that put our $23 carbon price in the shade.

So anyone with an ounce of common sense can see that even if our $23 carbon price is higher than current permit price in the EU trading scheme, we aren't leading Europe.

But what's not well appreciated is that the United States has also contained their emissions. Based on the latest emissions projections by the US Energy Information Administration, the chart below shows that US energy-related emissions will remain below 2005 levels throughout the entire outlook period to 2035. Australia's emissions by comparison are expected to grow considerably were it not for the carbon price.  

United States energy-related CO2 emissions 

Source: US Energy Information Administration 2012 Annual Energy Outlook

An important part of this is clearly the recession the US has suffered, but it's not anywhere close to the full story.

Firstly, when the US Government bailed out the US car manufacturers, it provided a once in a lifetime opportunity to circumvent their relentless lobbying against policy to reduce carbon emissions and dependence on oil. The Obama administration seized it with both hands to set stricter fuel-economy standards for 2016 (although much weaker than Europe). Consequently fuel use by light passenger vehicles will grow between 2010 and 2035 by 0%, yep that's right zip. This is in spite of the fact that the number of licensed drivers is expected to grow by 59 million over the same period.

Now what's more if the US EPA's draft Corporate Average Fuel Economy (CAFE) standards proposed for cars sold in 2017-2025 period are enacted, then emissions and fuel use will noticeably decline as illustrated below.

Total CO2-e emissions from US transportation energy use with and without EPA 2011 draft fuel economy standard (million tonnes)

Source: US Energy Information Administration 2012 Annual Energy Outlook

The second part of the story is the decline of coal in power generation. The shale gas revolution and rapid growth of renewables are putting coal into the deep freeze. Over 2010 to 2035 around 50 gigawatts of coal plant (substantially more than Australia's entire coal generating capacity) will be shut-down. In terms of new capacity the chart below illustrates that renewables will add 67 gigawatts, nuclear 9GW and gas 142GW. Meanwhile coal will add just 17GW.    

Source: US Energy Information Administration 2012 Annual Energy Outlook

So is Australia really ahead of the pack?

You've got to be joking.