Given that if the Americans go for an emissions trading scheme then Abbott is on board, these are sums that are going to dominate any serious carbon debate in Australia.

To illustrate what we are talking about I want to take you through the existing ’5 per cent from 2000′ cut that the government is talking about and show that if we become serious instead of political and get down to the task there are some big decisions ahead on our use of fuels.

Australia’s 2000 emissions were 553 million tonnes – note the difference to the US level.

Now to cut that by 5 per cent does not look that hard. We merely go down to around 525 million tonnes. The trouble is that we are growing and by 2020 the ball park estimates are that our emissions will rise to around 664 million tonnes even after counting the renewable energy program.

So we have to cut emissions by 139 million tonnes to 525 million tonnes by 2020 on our criteria and much more than that if the American criteria are used.

The most straight forward way of quickly cutting emissions is to shut down Victorian brown coal generation and close the high-emitting South Australian station Playford B. The ill-conceived Rudd/Turnbull scheme has Australia possibly guaranteeing the brown coal power stations’ $7 billion debt. If we replace that with a sensible policy it would cost about $5 billion to eliminate and replace two Latrobe Valley generators with gas. Yallourn and Hazelwood are the two obvious ones. If we replace them with gas fired turbines we save about 26 million tonnes of carbon or about 19 per cent of the 2020 target. Remember that Rudd and Turnbull were going to raise $114 billion by selling permits so that looks good value and it could be funded by a 1.6 per cent lift in power prices over 10 years.

So why not do it again and spend another $5 billion shutting the other two brown coal generators? We would reach 40 per cent of our target by spending less than 10 per cent of the Rudd/Turnbull money.

via Let Australia’s carbon reform begin – Robert Gottliebsen – News – Business Spectator.

The threat to close them is empty. If the generators failed to maintain the stations during the transitional period to cleaner electricity supply, the State Government has emergency powers that allow it to take over and run the assets.

But it wouldn't come to that. The politicians in Canberra have put together a CPRS that will give free pollution permits worth anything between $7 billion and $20 billion over 10 years, depending on whether the cap is reduced 5 per cent or somewhere up to 25 per cent following the eventual Kyoto Mark II agreement. Only a mug would give up the chance to get their hands on this cash flow.

The generators say they don't get the money unless the price of electricity rises. True. Macindoe said after the Government/Opposition deal was announced that the price of electricity would double in the next four to five years if the CPRS went ahead as planned. If that happens then the value of the free permits will more than double to $15 billion to $20 billion and the generators might then be worth $8 billion or more expressed as the present value of the stream of future earnings.

There are a number of scenarios that could bring this massive bonanza about, including bullying the Government into generous long-term fixed contracts and converting the brown-coal generators to natural gas, which would reduce carbon dioxide emissions by 75 per cent and allow the generators to sell all their free permits. Under the CPRS rules, they can buy unlimited supplies of cheap, dodgy carbon offsets from Indonesia and PNG to avoid using any of their free permits to actually produce electricity. In other words they will be able to sell their free permits by simply replicating, with minor variations, the multibillion-dollar rort by EU generators of the EU carbon trading system since its establishment.

The flawed CPRS should be replaced with a broad-based carbon tax. If it was set initially at $10 a tonne it would be hardly noticed, it would raise $5 billion a year and all the money could be spent on green infrastructure instead of the financial bubble if the CPRS goes ahead.

via Power giants crying foul? What a joke!.