Australia’s power system needs a combination of a carbon price supported by direct action incentives aimed at businesses if it is to withstand future supply and price shocks.
This is according to a new report from The University of Queensland’s Global Change Institute (GCI), the final in a three-part series looking at the competitiveness of Australia’s power system.
GCI Energy Focal Leader Professor John Foster said Australia must diversify its power system to remain globally competitive and that a carbon trading mechanism on its own would not achieve this.
“Carbon trading involves variation in the price of carbon plus uncertainty concerning the life of any given policy, both nationally and internationally,” Professor Foster said.
“If firms are really uncertain they don’t invest. They stand back and say ‘we’ll wait a while’, with potentially serious consequences for the power system.
“The proposal we’ve put forward tries to address that. A fixed price for carbon remains (in order to aid business planning), but within a set of arrangements designed to reduce uncertainty.”
Professor Foster said the proposal drew together aspects of both Labor and Coalition policies and sought to promote a bipartisan approach vitally necessary in this area of policy.
He said Australia needed to have a plan to gradually phase out coal as coal-fired plants needed to be retired in favour of a broad mix of sources of power.
“The more the energy system is diversified, the safer we shall be, but right now we’re too narrowly dependent on coal and gas,” Professor Foster said.
“There are a range of dangers that we have identified. In your own life, it is never a great idea, for example, to invest all your money in the shares of only one or two companies.”
He said doing little or nothing to diversify sources of power would have serious implications for Australia’s economic competitiveness, particularly given its high level of fossil fuel exports.
“If we choose to do little, we’re basically gambling on the world doing little in relation to reducing carbon emissions,” Professor Foster said.
“If it is felt that there is a good chance that other countries will start to decouple their economies from carbon emissions, then it makes a lot of sense for Australia to join the trend right now in a sensible and pragmatic way.”
The Global Change Institute consulted representatives from industry, including Rio Tinto, Ergon Energy, Powerlink, AGL and Xstrata Copper, as well as the Australian Energy Market Operator, Bureau of Resources and Energy Economics and the Electricity Retailers Association, to produce the report.
To read the report, visit the GCI website http://bit.ly/If4Dky
Media: Professor John Foster, Program Leader Clean Energy, UQ Global Change Institute, j.foster@uq.edu.au, 04 1811 9320, or Mark Paterson, mark@curriecommunications.com.au, 0409 411 110.
About the Global Change Institute:
The Global Change Institute at The University of Queensland, Australia, is an independent source of game-changing research, ideas and advice for addressing the challenges of global change. The Global Change Institute advances discovery, creates solutions and advocates responses that meet the challenges presented by climate change, technological innovation and population change.
