One of the greatest problems that will face the party that wins the 2013 election is the local and global energy turmoil. The Coalition's carbon policy has been slammed by the Greens but, as I will explain below, while untried, it is actually very innovative and could be a big winner for the nation.
But it will come into play at a time when, Kings College policy Institute head Nick Butler (who is former BP Vice President of strategy and adviser to former British Prime Minister Gordon Brown) explains, the world is turning its back on climate change and is now much more concerned about employment.
At the same time we are looking at enormous increases in the supply of gas and oil plus a rise in the use of coal. Apart from the US shale gas and oil, Iraq is looking to lift its production of oil from 2 million barrels a day to between 9 million and 12 million barrels by 2020; Iran’s oil embargo is likely to be lifted. In addition China has twice as much shale gas/oil as the US; Argentina about the same as the US and Australia about half of the US. Unfortunately the shale oil and gas deposits in China, Argentina and Australia will require different fracking techniques to the US and they have yet to be proven.
But in the first few months in office all attention will be on the Coalition’s plan to abolish the carbon tax and reduce carbon emissions by a user pays scheme.
There have been a series of environmental rallying calls from the pro-carbon tax lobby suggesting that the Coalition’s carbon reduction program will simply not work (Abbott's carbon credibility is in tatters, August 15).
Rather than try to predict whether the scheme will work or not, let’s look at what the Coalition plans to do. They have allocated in the vicinity of $3.5 billion to $4 billion towards carbon abatement in the forward estimates. They plan to ask companies and organisations to put forward tenders to reduce carbon. And so Gottliebsen Pty Ltd might say that if you pay me $6 a tonne I can reduce carbon emissions and in the process I will invest in new processes that will improve my business.
Some other company might tender $5 a tonne. A coalition government will accept the lowest tenders consistent with the amount they have budgeted for and the carbon reduction targets forecast.
The plan is that a coalition government will irrevocably promise the money but it will not be delivered until the techniques that reduce the carbon emissions are in place and proven. But the government “guarantee” is bankable provided the bank believes the company can deliver on its carbon undertaking.
The need to reduce carbon in Australia has been reduced by the lower emissions that have come from the fall in electricity demand.
The Coalition policy is that the cost of carbon reduction will be shared with industry that will gain benefit from lower emissions. The tender invitations will cover a wide area of activity, including agriculture.
The Coalition is very confident that the co-contribution scheme will deliver the required costs within the budget. It is possible they are wrong and much more money is required. It is also possible that the reduction can be achieved at lower than expected costs – it all depends on what comes in the tenders.