Cost due to the Carbon Tax
The carbon tax was responsible for the greatest proportion of the last round of electricity price increases; around half in NSW and nearly all in Queensland.
Initially the price of a permit for one tonne of carbon is fixed at $23 for the 2012–13 financial year. Only the ‘largest polluters’ need pay. They can buy as many permits as they need at the annual price. The fixed annual price will rise by 2.5% a year, until a transition to an emissions trading scheme in 2015–16, when permits will be limited in line with a pollution cap.
The effect of the carbon tax is to raise the cost of fossil fuel. Obviously it has no direct impact on renewable energy. Indirectly it may raise capital equipment and other input prices slightly.
A carbon price ‘pass-through’ of around 2 cents per kWh in the wholesale price has been estimated by the Australian Energy Market Operator. This is the extra amount paid by retailers due to the carbon tax.
I have previously commented on the economic distortions introduced by the tax and offsetting compensation - read more. And more.
For example as part of the tax implementation ‘dirty’ brown coal generators have been given compensation to help them compete but cleaner black coal generators have not:
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Victoria's dirtiest coal-fired power plants have snared the lion's share of $1 billion in energy industry carbon tax compensation - a concession that will protect jobs but slow the shift to renewable energy… … Latrobe Valley's brown coal stations Hazelwood, Yallourn, Loy Yang A and B, and Energy Brix are the major winners from the government's $1 billion Energy Security Fund, which compensates the most greenhouse-intensive power generators for the loss of value to their assets under the carbon tax, due to start on July 1. |
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David Wroe in The Age March 31, 2012 |
Is this tax to cut carbon or not?
As presently implemented it is a tax to 'rob peter to pay peter'. The money goes 'round but stays in the country. The main damage done is due to the seemingly random or politically motivated distortions it introduces.
But when international trading starts things will change. The price is expected to more than halve, dismantling a good deal of the economic impact that it presently has.
At the same time it is expected that money will start to flow overseas, in search of carbon credits. Some of these will be very dubious like carbon farming; commonplace in Europe and already devastating poor rural communities in Southern Portugal. See my report of our trip there on this website.
The difference between this heavily flawed tax and the renewable energy target is that the target has the potential to actually force investment into renewable alternatives. Unlike a tax that robs you to pay you (read what the Wall Street Journal had to say - here), the renewable energy target has really serious economic consequences.