Greg Combet, the Climate Change Minister who Bob Hawke thinks could/should succeed Julia Gillard as Prime Minister, has told the community, via an interview with Brisbane’s “Sunday Mail” newspaper, that the best way to deal with the cost of his government’s proposed carbon tax is by saving energy. “Turn things off at the wall. Think about how often you use the air-conditioner. Use a cheaper-to-run hot water system. Change the light bulbs. Have you got insulation?”
However, he agreed that spending money on these measures is not an option for people renting homes and for low-income families.
In the week Combet gave this interview — a week in which Gillard seemed to use the national media fixation on the Christchurch earthquake to mask breaking her election promise not to introduce a carbon tax — the Secretary of his department was appearing before the Senate Estimates committee and acknowledging that the government has not modelled what average carbon price will be necessary to achieve 160 million tonnes of annual abatement, the level required to deliver the national target of reducing emissions to five per cent below 2000 levels by 2020.
This is the critical number in the debate; not the deliberately low initial price that it apparently being proposed.
Senators were told that, under the failed Rudd emissions scheme, the first year price would be just $10 a tonne, rising to $26 in 2012-13 and then going up by five per cent a year to 2020.
In case your solar-powered calculator is flat, this delivers a price of $36.58 in 2020. But this is a carbon charge to achieve about 140 million tonnes of abatement, the target in 2008 when Treasury did the modelling.
What’s the price for 160 million tonnes, let alone for what the target actually will be at the end of the decade on present electricity production trends?
The Rudd approach, after all, was based on government estimates that coal-burning generation would still account for 43 per cent of power supply as late as 2030,falling from 72 per cent now, with gas-fired generation rising to 37 per cent of supply. What’s not appreciated by laymen is that every three combined cycle power stations equate, in emissions terms, to one coal-fired plant. In very round terms meeting new growth and replacing some old, inefficient coal burners by 2020 via gas could equate to adding three or four Kogan Creek plants to the mix — the 750 MW Queensland power station is the newest coal plant in the country and burns 2.8 million tonnes of coal a year.
The target by 2020, allowing for a rise in power production, could be about 200 million tonnes.
Will Julia Gillard or Wayne Swan at least order the Treasury to model the 160 million tonne target price and guarantee to publish it asap?
Meanwhile Combert is telling voters that predictions of a $300 a year increase in average home power bills arising from the carbon tax are “just speculation.” Actually, there is no need to speculate. If the carbon price opens at $26, the average home using 8MWh a year will pay $208, a home using 10MWh (with more than one air-conditioner) will pay $260. When the carbon prices reaches $36, the 8MWh householder is facing a bill of $300.
But what if the carbon price needed to deliver a 160 million target is $50 (or more)?
And here’s another piece of arithmetic. At the $26 charge level and 8MWh average consumption, the aggregate hit on eight million or so households is pushing towards $1.7 billion a year. Using the Treasury accumulator numbers for the tax, and not even bothering to account for an increase in the number of households, the aggregate cost for Australian households between 2012 and 2020 will be in excess of $20 billion. Just how much of this will be given back to residential customers by Gillard, Combet or whoever is leading the country over the decade?
You would have to be a dim bulb not to work out that there is a world of pain down this road — and that’s only for household power bills. What impact will the carbon charge have on people’s other costs as it feeds through the supply chain?