1 / 11

Frank Topham Government Affairs & Strategic Communications Manager Caltex Australia Limited

Australian Environment Business Network Industry and Greenhouse Conference Sydney, 27 February 2008 Alternative arrangements for carbon abatement and associated issues from a petroleum company’s perspective.

chogan
Download Presentation

Frank Topham Government Affairs & Strategic Communications Manager Caltex Australia Limited

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Australian Environment Business Network Industry and Greenhouse ConferenceSydney, 27 February 2008Alternative arrangements for carbon abatement and associated issues from a petroleum company’s perspective Frank TophamGovernment Affairs & Strategic Communications ManagerCaltex Australia Limited

  2. Caltex profile • Australian company - ASX listed • Chevron 50% shareholder – but all decisions by Aust management and board • No overseas operations, no exploration or production • Refining and marketing only • 2 refineries – Kurnell NSW and Lytton Qld • 1750 branded service stations (Caltex, Caltex Woolworths, Ampol) of which 511 owned or leased • #1 convenience retailer • 3200 employees

  3. Caltex climate change policy • Accept conclusions of IPCC on science • Recognise climate change presents a significant risk to economies, societies and the environment • Support long term aspirational goal for reduction of greenhouse gas emissions but experts to determine reduction % • Support carbon pricing – carbon tax better for liquid fuels

  4. Australian greenhouse gas emissions • Total Australian GHG emissions 559 Mt CO2eq • Contribution of petroleum products Petrol (motorists) Diesel (transport/industry) Jet/other fuels Total Refinery emissions 47 Mt 44 Mt 22 Mt 113 Mt 5 Mt 8% 8% 4% 20% 1% Source : Australia's National Greenhouse Accounts, National Greenhouse Gas Inventory 2005

  5. Customer emissions are 20 times Caltex emissions

  6. Caltex key policies on carbon pricing • Emission trading supported for refining - but must not reduce international competitiveness • energy intensive trade exposed industries require protection • issue free allocation of permits • Carbon tax should apply to liquid fuels - not emission trading • Caltex proposes carbon tax be set equal to ET permit price • 40 A$/t CO2 is about 10 cpl petrol

  7. Carbon tax for liquid fuels more environmentally effective than emission trading • Carbon tax more visible so stronger consumer influence • emission trading cost “lost” in fuel price volatility • How much would carbon price reduce emissions? • A$40/tonne CO2 is 10 cpl petrol • price elasticity of demand about -0.1 (short run), -0.5 (long run) • 7% price increase reduces petrol emissions by 0.3 Mt (short run) and 3.5 Mt (long run) versus 47 Mt emissions in 2005 • so carbon price ineffective in substantially reducing emissions • Alternative policy instruments may be needed

  8. Carbon tax more transparent than emission trading • Carbon tax would operate in similar way to excise • Price monitoring simple as carbon price known • Emission trading carbon price very difficult to monitor

  9. Emission trading would cost motorists $200 million pa (1 cpl) more than carbon tax • Under emission trading, fuel suppliers must purchase $5 billion of emission permits annually • Caltex $1.4 billion v debt of $600 million/EBIT $675 million • so unable to significantly participate in permit auctions • Financial middleman working capital cost/profit $200 million pa • no middleman with carbon tax • Carbon tax allows more precise revenue recycling

  10. Other issues • Emission trading for liquid fuels would not assist carbon price discovery as fuel suppliers can’t make technology choices • End user liability would be very complex under emission trading, simple under carbon tax • Emission trading for liquid fuels creates inequitable financial risks for fuel suppliers • no capacity to absorb carbon costs • but exposed to competitive risk of permit price under-recovery

  11. What are the policy options for 2010? • Omit all liquid fuels from carbon pricing • Omit all liquid fuels from carbon pricing except those within emission reporting threshold (eg 25,000 kt for facility) • Apply emission trading to all liquid fuels • Apply a carbon tax to all liquid fuels • with end user acquittal likely from 2011

More Related