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The gas industry needs a carbon price to compete with coal
Putting a price on carbon would benefit the Australian gas industry, at least in the short term. It is therefore in the interests of gas producers to lobby for the emissions trading scheme proposed for the electricity industry by the Climate Change Authority.
At first a sight this might seem a paradoxical suggestion. Isn’t carbon pricing meant to reduce our reliance on fossil fuels after all?
But with gas prices high, coal-fired generation has been increasing. Coal produces about twice as much carbon dioxide as gas when it is used to generate electricity. This is bad news for our emissions, which have increased in the electricity sector recently.
A price on carbon would help to reverse this trend and enable gas to play the role it sees for itself as a stepping stone to a decarbonised future.
So how might this work in practice?
Less gas means more coalIn Australia, electricity demand is relatively flat, so we are not likely to see an increase in the number of fossil fuel power stations. Nor are we likely to see new gas-fired power stations built to replace existing coal-fired power stations – that makes little economic sense at the moment.
This is where the current price of gas is important. Because the newly-completed liquid natural gas (LNG) terminals in Queensland are sucking up so much gas for export, the domestic price for gas has risen to the point that gas-fired power stations in the eastern states are increasingly unable to compete with coal.
As a result the amount of coal-fired generation has been steadily increasing over the last couple of years while gas-fired generation has been cut back “very substantially”. Some gas-fired power stations have been mothballed. So there is now considerable, unused gas-fired generation capacity.
From the point of view of gas producers, this is therefore a perfect time to introduce a price on carbon, since it will drive up the price of coal-fired power, relative to gas. This will slow to decline in gas use and ultimately reverse it. Gas-fired generators will be able to meet this increased demand from existing, under-used capacity.
In this scenario, gas-fired generators would buy gas at the current relatively high prices. This means that electricity will be more expensive to produce. Whether this means that consumers end up paying higher prices is another matter and depends critically on the design of the carbon-pricing scheme.
Policy hotchpotchThe government’s Climate Change Authority recently proposed a carbon-pricing scheme for the electricity industry, known as an emissions-intensity scheme. It is designed to be as palatable as possible to both sides of politics, so that if implemented it would not suffer the fate of the Labor government’s carbon tax, which the Liberal opposition abhorred and abolished as soon as it gained power in 2014.
One of the features of the Authority’s proposal is that it is not a tax paid to government. Rather it involves a subsidy paid by high-emissions, low-cost generators, such as coal-fired power stations, to low-emissions, higher-cost generators such as gas-fired power stations. This means that gas-fired generators will not need to pass on their full production costs to consumers. This will minimise the impact on electricity prices.
Of course, if the government were to accept the Authority’s recommendations for the electricity sector, it would presumably accept its recommendations for other areas of the economy. This is significant, because gas producers don’t just feed into the electricity sector.
Exported LNG would not be subject to any carbon price in Australia because it is not consumed here. However, converting natural gas to its liquid form consumes a large amount of energy. Indeed, 8% of the gas supplied to LNG terminals is used in the production process. This makes LNG an emissions-intensive industry.
Any price imposed on such emissions would drive up the price of Australian LNG relative to countries with no similar carbon price, to the detriment of Australia’s producers. In short, LNG is a “trade-exposed industry”. In particular, in the language of policy makers, it is an EITE (emissions-intensive and trade-exposed) industry.
The Authority considered the case of EITE industries carefully and expressed sympathy with the submission on this point made by the peak oil and gas producers association – APPEA.
It recommended that policy for EITE industries should include a suite of measures designed to protect them from this kind of competition. The LNG industry therefore has little to fear from the implementation of the Authority’s recommendations in this respect.
The Climate Change Authority did not recommend that existing polices be dismantled and replaced with a single coherent, economy-wide policy. Instead it recommended additions to the patchwork of existing polices, with a particular focus on the electricity sector.
This was criticised in some quarters as unprincipled, but defended by the Authority on the grounds that it was vital that we find a way forward that was as bipartisan as possible, so as to provide maximum certainty for investors. APPEA’s submission to the Authority was clearly against this “hotchpotch” approach.
But the Authority’s proposals offer the best chance for achieving bipartisan support. The government intends to review its climate policies in the coming year. APPEA should be lobbying the government to implement the Authority’s proposals, both in its own interests and in the interest of reducing our greenhouse gas emissions.
Andrew Hopkins has been a consultant to various petroleum companies on ways to reduce major accident risk.
Airport expansion’s disastrous effects, near and far | Letters
The government’s decision to greenlight aviation expansion (Chris Grayling: decision on airport expansion to be made on Tuesday, theguardian.com, 23 October) is a predictable failure, but not an acceptable one. With the scrapping of vital decarbonisation policies and funding, the UK is already way off-track to meet our climate change commitments. The impacts of any new runway will be devastating to people’s lives and to the planet. Locally it will see the demolition of hundreds of homes, result in increased noise pollution, and illegal levels of air pollution – already responsible for almost 10,000 premature deaths in London every year.
But the biggest tragedy of the government’s failure is a global one. Only around 5% of the world’s population flies at all, yet the impacts of climate change – droughts, floods and heatwaves – are already hitting poorer communities in the global south, who are the least likely to ever set foot on a plane.
Continue reading...Chris Grayling: decision on airport expansion to be made on Tuesday
Transport secretary denies government has already decided which plan it will back in choice between Heathrow or Gatwick
The government’s decision over which London airport expansion scheme it will finally choose is expected to come on Tuesday, after the transport secretary, Chris Grayling, said the decision would be made at a cabinet committee meeting that day.
Grayling said that the government had still not decided which option to choose and would make the final decision on the day. He is expected to announce the choice to the House of Commons as soon as it has been made.
Continue reading...Decision on airport expansion to be made on Tuesday, says Grayling – video
Transport secretary Chris Grayling denies government has already decided which plan to back at Heathrow or Gatwick, during an appearance at BBC1’s Andrew Marr Show on Sunday, adding that a decision will be made on Tuesday during a cabinet committee meeting. The committee will meet amid predictions that the government has already opted to push for expansion at Heathrow
Continue reading...Foreign invaders infiltrate Britain’s ancient woodlands
In July 2013, a large, strangely shaped beetle emerged from the fabric of a wooden chair that had just been bought in the UK. The inch-long creature had developed inside the chair’s wooden frame before it ate its way to the surface and burst through the seat’s plastic covering – much to the alarm of its purchaser. Crucially, the furniture had been made in, and imported from, China.
Analysis by Fera Science, formerly the Food and Environment Research Agency, showed the beetle was a Japanese pine sawyer. Worse, the beetle was found to be infested with a second serious pest: the pinewood nematode worm. In combination, the beetle (Monochamus alternatus) and worm (Bursaphelenchus xylophilus) have been linked to widespread damage to pine forests in China and Japan. Now it is spreading through parts of Europe.
Continue reading...The eco guide to televisions
How highly should we rate the energy ratings?
It’s not very rock’n’roll, but I’ve always loved an energy rating. A third of the UK’s greenhouse gas emissions come from Energy Using Products (EUPs) in offices and industry and also, significantly, in our own homes, too. The ones we control can really help to reduce that percentage, so choosing the best energy-rated model makes sense.
EU energy labels give us an easy way to power down. Regulated by European law, they can help us see how efficient a product is before we buy it, and also mandate vampirical products that suck power out of the grid when you think they’re asleep (since 2010 products cannot have standby power greater than 1W). Don’t ask me what happens after Brexit. I worry about that, too.
Continue reading...Drone captures rare whale footage
Four in 10 UK councils exceed air pollution limits, figures show
Ministers reveal 169 local authorities breached annual legal limits on nitrogen oxide, linked to lung disease, last year
Four in 10 of Britain’s local authorities breached legal air quality limits last year, largely due to heavy road traffic, government records reveal.
Ministers have admitted that 169 local authorities were found to have gone over annual limits on nitrogen dioxide. It is an invisible gas produced predominantly by road traffic, and is linked to lung disease and cardiovascular problems such as heart attacks and strokes.
Continue reading...The 20 photographs of the week
The battle for Mosul, the ongoing violence in Syria, the aftermath of Hurricane Matthew – the best photography in news, culture and sport from around the world this week
WARNING: this gallery includes images that some might find distressing
Continue reading...Lonely and mysterious, this is the other Borrowdale
Borrowdale, Lake District Borrowdale is thriving following an era of being successfully farmed by generations of Westmorland hill farmers
Several faces, mottled black and white, glance up as I alight from the car. On seeing no dog, these Rough Fells – burly ewes with horns – return to grazing the open fell, unalarmed.
Following the A685 Kendal road south from Tebay in the Lune Gorge, I had turned off through woodland of rowan, alder, birch and holly, and parked along a byway running for nine miles west towards Shap summit through the “other” Borrowdale. This is Howgills country, lonely and mysterious and devoid of the crags and lakes that bring the tourists to the Borrowdale near Keswick. Yet in a reshuffle of the boundaries, it too has recently become part of the Lake District national park.
Continue reading...The colourful life of the Australian Magpie
In Season: Sprummer
Heathrow expansion will boost air quality | Letters
The suggestion that the previous government failed to address questions surrounding air quality (Report, 20 October) does not reflect the progress that has been made on the issue since December 2015. Since then, the government’s air quality plan, updated modelling undertaken by Heathrow and an independent study by Cambridge University have all shown that baseline air-quality levels around the airport will have significantly improved by the time a new runway is built, as the nation’s vehicle fleet gradually becomes cleaner.
The Airports Commission’s analysis concluded that a third runway at Heathrow can be delivered in accordance with EU air-quality limit law, and would have less impact on health receptors (where people live and work) than a runway at Gatwick would have on the community in that area. A new runway at the UK’s hub airport represents an opportunity to deliver significant improvements to air quality around Heathrow: the redesign of local roads, support for sustainable transport and the opportunity to introduce an airport emissions charge all have the potential to bring improvements in air quality.
Continue reading...Country Breakfast Features 22 Oct
Schiaparelli: Mars probe 'crash site identified'
Bill Bailey
Heathrow expansion, nuclear fusion and Tasmanian devils – green news roundup
The week’s top environment news stories and green events. If you are not already receiving this roundup, sign up here to get the briefing delivered to your inbox
Continue reading...Rare fin whale stranding in Norfolk puzzles scientists
Experts say fin whales are normally found on south or west coasts of UK, not on east coast
Mystery surrounds how a rare 12-metre (40ft) fin whale came to be washed up on a beach in Norfolk.
The enormous creature was already dead when it was washed up on Holkham beach, on the north Norfolk coast, on Thursday afternoon.
Continue reading...On the road with Malaysia's honey hunters – in pictures
During the spring harvest season, a group of traditional Malaysian honey hunters travel to the rainforest near the Thai border to collect honeycombs from giant bees – and risk their lives climbing 200ft trees
Continue reading...The week in wildlife – in pictures
An inquisitive polar bear, blue-footed boobies and autumn colours are among this week’s pick of images from the natural world
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