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Climate Change

Climate Change: The Big Picture 2008 Electrical Industry Leaders Forum, Sydney 26 August Peter Burn, Associate Director - Public Policy Ai Group 02 9466 5503 peter.burn@aigroup.asn.au. Climate Change. Policy Response Impacts: Long term and transitional Current Hot Spots.

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Climate Change

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  1. Climate Change: The Big Picture 2008 Electrical Industry Leaders Forum, Sydney 26 AugustPeter Burn, Associate Director - Public PolicyAi Group02 9466 5503peter.burn@aigroup.asn.au

  2. Climate Change • Policy Response • Impacts: Long term and transitional • Current Hot Spots

  3. Carbon Pollution Reduction Scheme • A “cap and trade” emissions trading scheme from 2010 • Associated measures 60% of 2000 levels by 2050

  4. CPRS Green Paper:What does it propose? • “Cap and trade’ ETS with broad coverage: • All greenhouse gases and all sectors • All large emitters (over 25,000 t of CO2-e) • Fuel - upstream suppliers • Less than 1,000 companies need to have permits • ONLY for their non-fuel direct emissions • NOT to cover their electricity use

  5. Associated Measures • National Greenhouse and Energy Reporting Scheme (NGERS) – from 1 July 2008 • Business Measures • Emissions Intensive Trade Exposed (EITE) Activities • Strongly Affected Industries • Climate Change Action Fund • Household measures • Short-term fuel excise offset • Compensation for households

  6. Long Term Impacts • Reduce risks of drastic climate change • Shift the development path of the global economy • Emissions-intensive activities less viable • “Encourage” investment in other activities (including abatement) • Greater-than-average challenge for Australia

  7. Adjustment Required -11.1% -28.3% -53.8% -72.8%

  8. Where we’re headed … +182%

  9. Where we’ve got to get to … +175%

  10. Immediate Impacts on Business Direct costs • Costs of permits and compliance costs of involvement in the ETS for less than 1,000 companies Energy costs • Electricity, Gas, Petrol etc Energy intensive inputs • Metals, Non-metallic mineral products (e.g. cement), Plastics, Chemicals, Transport Sales volumes • Particularly for goods and services whose consumption uses energy(cars, appliances, travel)

  11. Impacts on Consumers (before any compensating measures) • Petrol (retail price) @ $20/tonne + 5c/litre @ $50/tonne + 12.5c/litre • Electricity (retail price) @ $20/tonne + 16% @ $50/tonne + 40% • CPI @ $20/tonne + 2% @ $50/tonne + 5%

  12. Emissions Intensive Trade Exposed • Green Paper Proposal – free EITE permits = 20% of total cap (30% when agriculture is in) • Emissions intensity measure • tonnes of emissions (scope 1 + 2) / million dollars of sales revenue • Allocations based on individual activity output at industry wide emissions intensities • 0 to 1,500 t/$m 0 allocation • 1,500 to 2,000 t/$m 60% allocation • 2,000 plus t/$m 90% allocation

  13. Short-Term Policy Trade Off Raising Allowances for EITEs may: • Extend relief across these industries and over time • Raise permit prices (at a given national cap) to the detriment of all others) • Leave less for Climate Change Action Fund and household compensation

  14. Hot Spots • Scheme Design • Initial (to 2015) emissions reduction levels/permit price • EITE measures • Security of electricity supply • Project Management • Timelines • Lack of Data • Skill shortages • Regulatory Overkill • CPRS, RET, NEETS, VEETS, MEPS, etc. etc.

  15. Climate Change: The Big Picture 2008 Electrical Industry Leaders Forum, Sydney 26 AugustPeter Burn, Associate Director - Public PolicyAi Group02 9466 5503peter.burn@aigroup.asn.au

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