The price of carbon: A view from the mendicant state

Tasmania was a clear winner from the carbon price. And Tasmania will be the biggest loser now that it has gone. Apart from an emergency backup gas fired plant all our distributed electricity is hydro or wind powered.

Axing the carbon price will axe Tasmanian jobs and incomes. 100 direct Hydro jobs will go plus many more due to flow on effects. Hundreds more potential jobs will never be created as planned renewable energy schemes are dropped.

Last year Aurora (Tasmania’s power company) paid a $116 million dividend to Tasmanians, plus a minuscule cut in electricity bills. The Hydro made a record profit of $238 million, but this year it will crash to less than $20 million if the carbon price is dropped.

Tasmania’s hydro and wind power generation attracted no price penalty. It was the one bright spot in an otherwise bleak national outlook for power generation. In the last financial year (2013-14) the carbon “tax” meant Tasmania enjoyed the lowest wholesale price in the National Electricity Market. Tasmanian wholesale prices averaged $10 to $20 per megawatt hour less than the other states. That’s a 20-40% advantage.

There will be no compensation for the resulting loss of hundreds of jobs and over $200 million in lost revenues. Compensation for these losses to Tasmania should have been be an essential pre-condition of passing the bill. Tasmania’s coalition senators and Senator Lambie have been strangely quiet on this.

The demand for electricity and generation emissions have been falling since the 2010. Since the introduction of a carbon price in June 2012 they have fallen faster.

According to Dr Hugh Saddler, Principal Consultant, Energy Strategies at Pitt&Sherry: “Throughout this period, and for a year and a half before that, demand for electricity in the National Energy Market (NEM) has been falling steadily. Falls in demand have occurred in every NEM state, except for Western Australia.

“The total fall in emissions has been 10.4 per cent, or 18 million tonnes (Mt) of CO2-e in absolute terms. Changes in electricity consumption have always been of great importance to the outlook of Australia’s emission.” The demand in WA has remained flat.

Meanwhile, the Coalition still lies about the cost of Australia’s electricity bills. Over 50% of price rises are due to the electricity companies’ rorting loopholes in the electricity pricing system. They get paid to build poles and wires even if they carry no power at all. While they were claiming more infrastructure was needed to meet rising demand real demand fell about 18 per year , and emissions fell by 18%. They are still pursuing increased tariffs.

While the details can be debated, we are about to see a dramatic demonstration of just how effective carbon pricing has been in reducing emissions and stabilising electricity prices.

If Tasmania’s rainfall declines to below average there will dire consequences for Tasmanian wholesale electricity prices in the medium term. Tasmania’s hydro dams are already low due to the power company (Aurora) profiting from its low carbon advantage by selling record amounts of power to mainland states. The forecast El Nino could dramatically push up the wholesale price of hydro electricity.

Cutting the carbon price will also put Tasmania’s implementation of its ambitious wind power schemes in jeopardy.

It’s not just Tasmanians who will suffer. Despite corporate and government lmisinformation a market price on carbon is still the best way to reduce emissions and encourage investment in renewables. It also provides the policy certainty and incentives necessary for manufacturer confidence in this country.

BlueScope Steel’s recently unveiled solar energy gathering roof is a case in point. It incorporates photovoltaics, solar hot water and building temperature control. Abandoning the price on carbon will remove an incentive for building Bluescope’s proposed Australian manufacturing plant. Opportunities for new manufacturing and service jobs will be lost, as will the financial benefits for all Australians.

If Tasmania’s new PUP senator Jacqui Lambie is sincere in saying she will always put Tasmanian interests first, then she could do no better than to vote against the repeal of the price on carbon. She he would advocate for a strong price on carbon, both nationally and internationally. At the very least she should vote for retention of a carbon pricing mechanism with no fixed price.

That would help secure Tasmanian interests in the event that the world moves more quickly on pricing carbon. In a world carbon market Tasmania would be significantly advantaged. The higher the price the more the advantage to our cash strapped state.