The fall in Europe’s carbon price has further dented the confidence of Australian companies working to either offset or reduce the country’s emissions. Source: ABC News
A carbon offset company said that business interest halted at least a year ago because of uncertainty over the Coalition’s plans, and now Europe’s price fall is more bad news.
EU carbon permits have dropped to as little as 2.63 euros ($3.34) a tonne, a stark contrast to Australia’s fixed carbon price of $23 a tonne. Australia’s carbon pricing scheme will be linked to the European system from 2015, when the fixed carbon tax will cede to an emissions trading scheme.
Treasury modelling had previously estimated the carbon price for 2015-16 would rise from a fixed rate of $23 a tonne to $29.
The Opposition claims there will now be a budget hole of $7 billion when Australia’s carbon scheme links to the European system.
Australian company AusCarbon said the further drop in Europe’s carbon price has added to the uncertainty posed by the September federal election.
AusCarbon has planted about 10,000 hectares of forest in marginal Western Australian farming country to offset the carbon emissions of others. The company was founded in 2007 as the Australian politicians argued over who was going to do more to tackle climate change.
AusCarbon project manager Kent Broad said a lot has changed since then.
“The first year we did approximately 2000 hectares, the second year a little bit more, and then since then it’s just been progressively tailing off,” he said. “For example, this year we’re only doing hundreds of hectares rather than thousands of hectares.”
Broad said carbon emitters are not investing in offsetting their pollution anymore.
“The large emitters that we’re talking to, they’re not prepared to commit to anything long term,” he said. “Obviously growing trees in our case, it is a long-term commitment.
“Therefore there’s been nothing happening really for the last 12 to 18 months, and you don’t blame them really, because they answer to their shareholders.”
Broad said Europe’s new carbon price is not enough to make growing trees worth the trouble.
“We can if we choose to just try and get some cash flow happening but no, not at all. It needs to be at least double that, if not triple that to get any form of investment interested.”
Doctor Frank Jotzo, from the Australian National University’s Centre for Climate Economics and Policy, has just returned from an emissions trading conference in Germany.
He said European politicians are as divided as their Australian counterparts over whether the European Parliament’s decision that led to a massive drop in its carbon price was the right one.
Dr Jotzo said Europe’s new bargain carbon price reflects the region’s economic weakness.
“The economic slowdown has done much of the economic work required to get Europe on track towards the 20 per cent reduction target at 2020,” he said.
“The fundamental question is whether it is fine to have a carbon price that is near zero because a carbon price isn’t really needed to achieve that 20% target, or whether conversely this is now an opportunity to actually ratchet up ambition.”
The Australian Industry Group said the European carbon price shows how out of kilter Australia’s current price of $23 a tonne is.
It argues Australia’s link to the EU scheme should be made now. But Dr Jotzo says there is a major flaw in that argument, because it would make carbon trading in Australia less effective.
He said the current European and Australian economies are fundamentally different, with Europe in a recession and Australia “still chugging along nicely”.
“The larger of those two schemes will dominate, meaning those price settings are not compatible with Australian economic development.”
Dr Jotzo said a lower price would not make it easier for the Coalition to abolish the carbon tax or emissions trading scheme if it wins government.
“If anything it makes it slightly harder to unwind the scheme because at very low prices like this it’s difficult to imagine any significant push from industry for the scheme to be abolished,” he said.
Dr Jotzo said many doubt the carbon trading scheme will be abolished in any case.
“We conducted a survey of industry stakeholders on that very issue last year and the feedback we got was mixed,” he said. “Sixty per cent of the sample expected that the carbon pricing mechanism would be retained, [while] 40 per cent expected that it would be abolished.
“Policy uncertainty really dominates this sphere in Australia just as it does in Europe at the moment.”
