Warning! Emissions trading bogeyman approaching

The casual reader of yesterday's Australian might be alarmed to see that power costs are set to double under an emissions trading scheme. This is reminiscent of the same logic that the McCain - Lieberman energy bill co-sponsored by the perennial Republican candidate is set to cost American consumers several trillion dollars.

The statement comes from the National Generators Forum prognosticating that a global carbon price of $80 per ton would effectively double the Australian retail electricity price. It is unclear whether this is Australian or US dollars, given that global estimates are usually given in the latter. That figure is at the upper end of predictions by European banks, estimating a price of $60-80 per ton. Interestingly, an EU Impact Summary Working Document noted that cuts of 30% by 2020 and 50% by 2030 would necessitate a carbon price of $60 per ton - in 2020. The price would not reach $80 until 2025, even allowing for the kind of deep cuts even the climate change champion Rudd will not counternance. By the way, those figures are in Australian dollars, based on the current exchange rate to the Euro.

In other words, even if Rudd signed up for a 50% global reduction on GHGs by 2030, the electricity price is not going to double until 2025. Given I would wager my electricity bill would be at least twice its face value as compared to 1991, this increase may well have been the natural course of utility price inflation. Rudd's target is for a total cut of 60% by 2050, which means he is unlikely to sign up, and nor is anyone else, to anything like this level of price increase. Further, markets are generally skeptical that these projections will prove correct and that energy improvements and efficiency increases will mean the market sets an ultimate lower price.

The headline of the article is thus little more than an idle speculation based on a straw-man worst case scenario. By making it the headline, a subeditor has promoted it to the status of fact. Expect to see a lot more of this given slow-to-move conservatives' have the perverse incentive to stir up community suspicion and discontent for short-term electoral gain.