Clear The Air Energy Blog Rotating Header Image

Australian Carbon Trade To Boost Affordable Energy

Reuters in Sydney – Updated on Jun 23, 2008

Australia’s emissions trading scheme starting in 2010 should make energy more affordable in the long-term, but short-term price hikes could see the government facing an A$1.8 billion (HK$13.2 billion) a year compensation bill.

The Climate Institute report on energy affordability and emissions trading released on Monday found energy price rises could easily be offset through the auction of carbon permits, estimated to exceed one percent of GDP or about A$10 billion.

The report studied three carbon price outlooks of low (A$15-100), moderate (A$30-163) and high (A$45-225) by 2050.

“For most Australians, the affordability of energy is likely to improve substantially over coming years, notwithstanding the introduction of emissions trading and the associated increase in energy prices,” said the report.

But it said that under a high carbon price scenario, and if world oil prices continued to rise, there would be a deterioration in energy affordability in the short to medium term, especially among low income families.

Australia’s centre-left Labor government won power last November, immediately ratifying the Kyoto Protocol on climate change and promising a carbon trading scheme by 2010 to give business a financial incentive to cut pollution.

The government is expected to release an options paper on the emissions trading scheme next month, with legislation expected by the end of 2008.

Australia is responsible for about 1.2 percent of global carbon emissions, but remains one of the highest polluters per capita because of the nation’s reliance on coal and other fossil fuels. Australia is the world’s largest coal exporter and relies on coal to generate about 80 percent of its electricity.


The average Australian family spends around 9 percent of its budget on energy, low income singles spend about 15 percent and high income families spend 5 percent.

The report found average families could face price rises of up to A$10 a week for electricity, gas and petrol in the short term, but over time energy affordability would rise as energy prices plateau, incomes rise and energy efficiency improves.

Under a high carbon price by 2050, the average family would spend less than 6 percent of its budget on energy, low income singles around 10 percent and high income families less than 4 percent.

“The Climate Institute believes that in next year’s federal budget the government should establish a multi-year, multi-billion dollar financial package to offset price increase impacts in low income groups,” said the report.

To compensate low income families for higher energy prices would cost the government around A$360 million a year by 2020, while compensating all Australians would cost A$1.8 billion.

“Additional funds should also be targeted at energy efficiency and affordability programmes to build long-term national resilience to future price increases.”

The report said energy efficiency could fully address the impacts of emissions trading on energy affordability and living standards over the medium to long term, but it was likely energy efficiency will take some years to be fully implemented.

“The introduction of a carbon price does not need to involve a social cost. Australia can make deep cuts in our greenhouse emissions without reducing our living standards … even if emissions trading involves high carbon prices,” it said.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>