Another one from the economic saboteurs. All in the name of protecting us from that evil greening of the planet due to available plant food, of course
We should not fool ourselves that current international carbon prices reflect efficient climate policy.
Letting Australia’s carbon price fall to single digits would destroy incentives to make low-carbon investments, and compound investment uncertainty in the energy sector. It would be extremely short-sighted, and right out of line with the goal of getting the economy on a lower carbon trajectory. The answer for Australia is a carbon price floor.
The EU carbon permit price, at its current low of around ten dollars per tonne, is not a reflection of the cost of meaningful climate change action. Rather it is an artefact of Europe’s economic mess and policy preferences. And the current CDM price of around $5 per tonne is indeed the price at which these emissions offset credits can be bought in secondary markets, but it bears no resemblance to the actual and expected carbon prices in major trading schemes including the EU, California and South Korea. None of these schemes expect to have their domestic price set in international offset markets.
Europe’s economic crisis cuts energy use and thus lowers emissions, but the emissions target remains the same. In addition, many European countries have big subsidies for renewable energy, and impose strict energy efficiency standards. That leaves less to do for the carbon price. Europe may succeed in breathing ambition back into its scheme, but there are no guarantees.
What matters most for Australia though is a glut of credits from developing countries which will be going cheap. Europe has turned its back on the Clean Development Mechanism because of concerns about its environmental credibility, and because it stands in the way of stronger emissions policies in developing countries. The EU has put restrictions on the amount of CDM credits that European emitters can use, and from next year will accept new projects only from least developed countries.
A massive excess supply from CDM projects already underway or in the pipeline is expected. Until 2020, the amount of unsold excess could be several times larger than the total amount that Europe accepts, and far and away higher than Australia’s maximum demand.