The Possum Box

Thoughts of the Pollytics Community

A plain man’s guide to an emissions trading scheme

Posted by Possum Comitatus on July 21, 2008

By Ad astra

George Megalogenis has criticized the Rudd Government for not making it sufficiently clear what it has in mind for a carbon emissions trading scheme. He says: “OK, it’s a complex topic, but the job of leadership is to translate and educate. An ETS is how governments place a price on carbon pollution. It takes two steps to explain, which is why politicians can get tongue-tied. The Government sets a limit on how much carbon that industry can belch into the atmosphere, and sells permits for the right to pollute. But it leaves it to the market to sort out which firms continue emitting greenhouse gases at that higher cost, while the rest switch to cleaner energy sources.” The Weekend Australian 12-13 July. So there it is. But how many punters would get the gist of ETS from that ‘word bite’? Nicholson’s cartoon in The Weekend Australian 19-20 July captures the teething troubles in explaining the scheme.

I thought it might be interesting to fashion an uncomplicated statement for the typical voter, who eventually will have to pass judgement on the ETS. This is my first try. Respondents are invited to hack it about, improve it, or substitute their own. Let’s agree to a limit of around 1,000 words.

A plain man’s guide to an ETS

All political parties in Australia believe a carbon emissions trading scheme has become necessary to control the amount of carbon in the earth’s atmosphere. The Government’s Green Paper has now changed the name to a Carbon Pollution Reduction Scheme.
Greenhouse gases

Most climate scientists are convinced that the earth is warming because of an increase in carbon in the atmosphere, which is mostly in the form of a gas, carbon dioxide. This gas traps heat close to the earth, just like a greenhouse traps heat inside. This is why it’s called a ‘greenhouse gas’. Another greenhouse gas is methane, which is generated largely in the agricultural sector.

Carbon dioxide

Carbon dioxide has one atom of carbon and two atoms of oxygen, and so is called CO2. It is produced whenever something containing carbon is burned – the carbon atom is joined to two oxygen atoms from the air. Some substances produce much more than others when burned – coal, particularly brown coal, emit large amounts of CO2, and are therefore called ‘heavy emitters’. Sometimes it’s said they have a large ‘carbon footprint’.

For centuries carbon has been emitted into the atmosphere, especially since the start of the industrial revolution. CO2 is also emitted from animals and plants, but plants also soak it up, so plants are called ‘carbon sinks’. Cutting down forests means that less CO2 can be soaked up.

The amount of CO2 in the atmosphere has grown steadily over hundreds of years and is now around 387 parts per million (ppm). Its growth is accelerating. Climate scientists believe that there should be a limit of between 450 and 550 ppm by mid century, otherwise the earth will heat by more than 2 degrees Centigrade, and if that happened there would be severe effects that would change our way of living and reduce the chances of survival of many living things. Already we are seeing the effects of increasing temperatures in the Arctic and Antarctic where ice is melting. As glacial ice melts into the sea, sea levels rise. Already some Pacific islands are being flooded; eventually coastal dwellers in Australia and other countries will suffer the same fate unless the CO2 level is controlled.

So curbing greenhouse gases is considered by all political parties in this country to be essential. The way of doing this proposed by the Government is called a ‘cap and trade’ system.

‘Cap and trade’

The term ‘cap’ means that the total amount of carbon emitted each year by Australia will be limited, or ‘capped’. As the agricultural sector is not included in the scheme at present, it is CO2 emissions that will be limited. Let’s say that the limit or cap will be a million tonnes of CO2 per year. This is not the real figure. All industries that emit CO2 will have to fit within that limit. The term ‘trade’ means that any industry that needs to emit CO2, say to produce electricity, has to buy a permit to do so. The Government will create and auction these carbon pollution permits. In the beginning it will give some away free, but eventually all will be auctioned. Those who buy a permit can sell or trade it to someone else. Suppose a coal-burning electricity generator buys from the Government a permit to emit a thousand tonnes a year, but because it was able to develop a way of producing the same amount of electricity with less CO2 emitted into the atmosphere through, let’s say, storing it underground (carbon capture and storage), that electricity company would be able to sell or trade some of its permit to another company that emits CO2. This would reduce the cost of production to the electricity company, which could make its electricity less costly, and thereby more attractive to customers. Therein is the incentive to companies to develop methods of making their products in a way that results in less CO2 being emitted.

The Government believes that rather than it trying to regulate the system, ‘market forces’ would be the best way to govern the purchase and sale of permits to emit CO2. Eventually the market would become international. The cost of the permits has not been set, but is likely to range from $20 to $100 per tonne of CO2. It will probably start low and increase slowly.

Who’s included?

All agree that the more sectors of the economy that are included in the scheme, the less the burden will be on each individual sector. The Government has proposed that apart from the agricultural sector, all other sectors will be included at the outset. Some say that fuel used by motor vehicles, which emit CO2 while their motors are running, should not be included as this would increase the cost of fuel. But if fuel is excluded, the others that emit CO2, for example coal-burning electricity generators, would have to bear a greater cost burden, and the cost of electricity would be higher. So what might be saved by excluding fuel would be made up by higher electricity costs.

Compensating those affected

Because even the poorest in the community pay the same price for fuel and electricity as the better off, the Government proposes to compensate those on lower or fixed incomes for the extra cost to them. It also proposes to support industries unintentionally affected, such as those, while not polluting much themselves, rely on heavy emitters for their electricity, such as aluminium producers.

In a nutshell

To sum up, most see the need for limiting CO2 emissions. There is less agreement about the best way of doing it and how fast it should be done. The Government shares the sense of urgency expressed by most climate scientists and therefore has decided to act sooner rather than later by introducing a ‘cap and trade’ scheme to cover as many sectors as feasible by 2010, and compensate those on lower incomes and industries unfairly affected. The aim is not just to reduce emissions while minimizing the effect on the economy, but to encourage innovation towards ‘cleaner’ energy technology, with a view to profitably exporting this technology to high emission economies.

Ad astra can be contacted at:

ad dots astra5 IatI bigpond dots com

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23 Responses to “A plain man’s guide to an emissions trading scheme”

  1. Classified said

    Excellent

  2. Deathridesahorse said

    …noice!

  3. Sir Ian Upton said

    The Indians, Chinese, Yanks, Brits and other big carbon polluters are hopping on board? If not why not?

  4. Deathridesahorse said

    The Chinese are doing a mighty job, really, all things considered.

  5. kerneels said

    Clear and concise – this article should be published more widely. Thank you, Ad Astra!

  6. janice said

    Thank you for this article Ad Astra. While journos, commentators and climate change deniers are scratching their heads wondering why the polls are showing support (77%) for Rudd’s determined action on climate change, I suspect that the perceived lack of understanding as to what is an ETS and how it works, comes about because most of us are not able to articulate the reasons for our support and our willingness to pay more for cleaner energy.

    From reading the blogs I get the impression that climate change deniers are bogged down in the global warming debate and have not begun to even consider that this country, and the world, can only benefit by changing to renewable energy and a breathable atmosphere, regardless whether global warming is real or not. The benefits to be gained are real and the hurt to the hip-pocket now is miniscule in comparison.

    Do you think as I do that there should be more emphasis placed on the benefits to be gained for this country, regardless of whether other countries continue their polluting ways?

  7. Ad astra said

    Janice

    I agree with you that whether the planet is or is not warming, moving towards a less polluting Australia is the intelligent thing to do. Also, the fact that we are at or near peak oil demands that we find other energy sources that are less polluting than oil.

    The debate about global warming is a distraction. Andrew Bolt, who is one of the most voluble commentators on global warming, needs to be challenged with your proposition that irrespective of global warming, the substantial benefits of a less polluting society making emissions control essential. It’s a pity he gets away with his scepticism on such programmes as Insiders because the other panellists either fruitlessly argue the toss with him, or dismiss his views, yet don’t confront him with the question: “Whether or not the planet is warming, isn’t it rational to reduce pollution and move towards renewable energy sources?” I’d enjoy hearing his answer.

  8. Grumps said

    A nice piece Ad Astra.

    I am sold on the need for a carbon trading system. Global warming is occurring and as you rightly say numb nuts like Dolt need to be need to be challenged.

    The other human industrial induced phenomena with potential to affect the way we live is ozone depletion.

    No need to bore you folks with this, but if you need to refresh Wiki here. At the time, similar tactics where used as the scientists and ozone depletion sceptics fought this one. (If Dolt was around I am sure he would have been a sceptic because his boss told him so.)

    Through patient and consistent explanation all accepted there was a problem. National leaders and Industry forged an agreement that was implemented.

    In the end the world banned a number of classes of refrigerants and other ozone depleting substances. Industry made the appropriate changes. I was working in the refrigeration industry involved in the change over, and paid well for this.

    Costs where passed on to the customer but at the end no economy melted down, the sky didn’t fall in and it is accepted by all the Ozone depletion is a fact of life. The hole is still there but at least depletion rates have slowed down and an eventual sealing might occur but well after my life has expired.

    The carbon debate will have similar path. I feel confident, based on past experience a transition to carbon costing will be introduced into our economy. This will cost extra, but, I feel this is a cost we will accept and those coming after us will wonder why we didn’t act earlier.

  9. janice said

    Ad Astra, I put my question to bloggers in Tim Dunlop’s blog and so far just one answer. The reply was disappointing in that the respondent seems to see ‘benefits’ only in dollars and renewable engery as a means by which the world can make non-renewables last longer. I have not had any responses in other blogs. I will put the question to Bolt in his blog but past experience tells me it won’t see the light of day because Bolt appears to censor posts that might challenge his view.

  10. Paul said

    Nice precis, Ad Astra.
    A few points on the science:
    * Perhaps you could also discern between ‘brown’ coal and ‘black’ coal (brown coal contains more ‘impurities’ and produces less energy per unit burned).

    * Maybe include the reason WHY coal is such a heavy emitter (i.e. it is a ‘carbon concentrate’, produced by the compression of dead biotic material over many thousands of years).

    * You could mention the effect of increased carbon emissions upon our ocean systems (i.e. increased acidity) and note that this is NOT dependent upon changing temperature (an important consideration, as it bypasses the unresolved warming/cooling issue).

    * Perhaps state that cutting down trees has a double whammy effect upon carbon levels – not only does it prevent future uptake of emitted carbon (as less plants are around to ‘breathe in’ the carbon) but it also releases stored carbon once the trees are burned (which will happen to most timber based products at one stage or another).

    I guess the governmental response section is pretty accurate, although it would fill me with more confidence if what you have prepared had come from a Canberra press office!

  11. Ad astra said

    Paul

    Thank you for your comments. I’ve modified the relevant three paragraphs to read:

    Carbon dioxide has one atom of carbon and two atoms of oxygen, and so is called CO2. It is produced whenever something containing carbon is burned – the carbon atom is joined to two oxygen atoms from the air. Some substances produce much more than others when burned – coal, particularly brown coal (which has more impurities), emit large amounts of CO2 because they contain dead biotic material thousands of years old, and are therefore called ‘heavy emitters’. Sometimes it’s said they have a large ‘carbon footprint’.

    For centuries carbon has been emitted into the atmosphere, especially since the start of the industrial revolution. CO2 is also emitted from animals and plants, but plants also soak it up, so plants are called ‘carbon sinks’. Cutting down forests means that less CO2 can be soaked up, and when they decompose or burn, CO2 is released.

    The amount of CO2 in the atmosphere has grown steadily over hundreds of years and is now around 387 parts per million (ppm). Its growth is accelerating. Climate scientists believe that there should be a limit of between 450 and 550 ppm by mid century, otherwise the earth will heat by more than 2 degrees Centigrade, and if that happened there would be severe effects that would change our way of living and reduce the chances of survival of many living things. Already we are seeing the effects of increasing temperatures in the Arctic and Antarctic where ice is melting. As glacial ice melts into the sea, sea levels rise. Already some Pacific islands are being flooded; eventually coastal dwellers in Australia and other countries will suffer the same fate unless the CO2 level is controlled. Irrespective of any affect CO2 has on temperature and sea levels, CO2 makes the oceans more acidic, a serious threat to coral reefs.

    Janice

    I doubt if you will get any scienticic sense from Andrew Bolt. There’s an interesting dialogue on Poll Bludger today about Bolt (see several early items, item 36 Just Me’s link and item 40 John of Melbourne’s link.)

  12. Enemy Combatant said

    Great summary, Ad Astra. Rolled along like a couple of pages from Bill Bryson’s “Everything you wanted to know……”, at essay’s end the science becomes clear in a formerly confused mind.

  13. Ad astra said

    Nice compliment Enemy Combatant – thank you.

    Thanks to all contributors. The revised piece is reproduced below:

    A plain man’s guide to an emissions trading scheme

    All political parties in Australia believe a carbon emissions trading scheme has become necessary to control the amount of carbon in the earth’s atmosphere. The Government’s Green Paper has now changed the name to a Carbon Pollution Reduction Scheme.

    Greenhouse gases

    Most climate scientists are convinced that the earth is warming because of an increase in carbon in the atmosphere, which is mostly in the form of a gas, carbon dioxide. This gas traps heat close to the earth, just like a greenhouse traps heat inside. This is why it’s called a ‘greenhouse gas’. Another greenhouse gas is methane, which is generated largely in the agricultural sector.

    Carbon dioxide

    Carbon dioxide has one atom of carbon and two atoms of oxygen, and so is called CO2. It is produced whenever something containing carbon decomposes or is burned – the carbon atom is joined to two oxygen atoms from the air. Some substances produce much more than others when burned – coal, particularly brown coal (which has more impurities), emit large amounts of CO2 because they contain dead biotic material thousands of years old, and are therefore called ‘heavy emitters’. Sometimes it’s said they have a large ‘carbon footprint’.

    For centuries carbon has been emitted into the atmosphere, especially since the start of the industrial revolution. CO2 is also emitted from animals and plants, but plants also soak it up, so plants are called ‘carbon sinks’. Cutting down forests means that less CO2 can be soaked up, and when they decompose or burn CO2 is released.

    The amount of CO2 in the atmosphere has grown steadily over hundreds of years and is now around 387 parts per million (ppm). Its growth is accelerating. Climate scientists believe that there should be a limit of between 450 and 550 ppm by mid century, otherwise the earth will heat by more than 2 degrees Centigrade, and if that happened there would be severe effects that would change our way of living and reduce the chances of survival of many living things. Already we are seeing the effects of increasing temperatures in the Arctic and Antarctic where ice is melting. As glacial ice melts into the sea, sea levels rise. Already some Pacific islands are being flooded; eventually coastal dwellers in Australia and other countries will suffer the same fate unless the CO2 level is controlled. Irrespective of any affect CO2 has on temperature and sea levels, CO2 makes the oceans more acidic, a serious threat to coral reefs.

    So curbing greenhouse gases is considered by all political parties in this country to be essential. The way of doing this proposed by the Government is called a ‘cap and trade’ system.

    ‘Cap and trade’

    The term ‘cap’ means that the total amount of carbon emitted each year by Australia will be limited, or ‘capped’. As the agricultural sector is not included in the scheme at present, it is CO2 emissions that will be limited. Let’s say that the limit or cap will be a million tonnes of CO2 per year. This is not the real figure. All industries that emit CO2 will have to fit within that limit. The term ‘trade’ means that any industry that needs to emit CO2, say to produce electricity, has to buy a permit to do so. The Government will create and auction these carbon pollution permits. In the beginning it will give some away free, but eventually all will be auctioned. Those who buy a permit can sell or trade it to someone else. Suppose a coal-burning electricity generator buys from the Government a permit to emit a thousand tonnes a year, but because it was able to develop a way of producing the same amount of electricity with less CO2 emitted into the atmosphere through, let’s say, storing it underground (carbon capture and storage), that electricity company would be able to sell or trade some of its permit to another company that emits CO2. This would reduce the cost of production to the electricity company, which could make its electricity less costly, and thereby more attractive to customers. Therein is the incentive to companies to develop methods of making their products in a way that results in less CO2 being emitted.

    The Government believes that rather than it trying to regulate the system, ‘market forces’ would be the best way to govern the purchase and sale of permits to emit CO2. Eventually the market would become international. The cost of the permits has not been set, but is likely to range from $20 to $100 per tonne of CO2. It will probably start low and increase slowly.

    Who’s included?

    All agree that the more sectors of the economy that are included in the scheme, the less the burden will be on each individual sector. The Government has proposed that apart from the agricultural sector, all other sectors will be included at the outset. Some say that fuel used by motor vehicles, which emit CO2 while their motors are running, should not be included as this would increase the cost of fuel. But if fuel is excluded, the others that emit CO2, for example coal-burning electricity generators, would have to bear a greater cost burden, and the cost of electricity would be higher. So what might be saved by excluding fuel would be made up by higher electricity costs.

    Compensating those affected

    Because even the poorest in the community pay the same price for fuel and electricity as the better off, the Government proposes to compensate those on lower or fixed incomes for the extra cost to them. It also proposes to support industries unintentionally affected, such as those, while not polluting much themselves, rely on heavy emitters for their electricity, such as aluminium producers.

    In a nutshell

    To sum up, most see the need for limiting CO2 emissions. There is less agreement about the best way of doing it and how fast it should be done. The Government shares the sense of urgency expressed by most climate scientists and therefore has decided to act sooner rather than later by introducing a ‘cap and trade’ scheme to cover as many sectors as feasible by 2010, and compensate those on lower incomes and industries unfairly affected. The aim is not just to reduce emissions while minimizing the effect on the economy, but to encourage innovation towards ‘cleaner’ energy technology, with a view to profitably exporting this technology to high emission economies.

  14. william said

    the ets, as its being sold, is based on the premise that co2 is an atmospheric pollutant. it is not. the ets is another tax system with its own government department, and army of otherwise unemployable parasites. its all about a new tax, and significant subsidies to certain comanies with well connected advisors.Im a climate change denier, simply because climate change, as its being sold, is utter gibberish/propaganda. the issue of genuine pollution however is another issue entirely.Those pumping foul chemicals into the air and rivers and the ocean, need replacing with clean green industries yesterday, theres a distinction wich the media and others dont want to make there.pollution is real and needs to be stopped, climate change was once known as global warming, but apparently the warming bit stopped some years ago but the agenda was to lucrative to stop, so now its just “change”.co2 is not the problem, gutless greedy politicians and a media who sells whatever crap is most profitable, combined with a population more interested in television than truth, makes for a massive parasite feeding off a host wich really deosnt deserve any better.
    oh and “most” scientists dont agree on climate change as presented on oprah’s freak show,however those who go against the grain dont get much airtime.close to half the ipcc scientists walked out a couple years ago, they werent prepared to research to fit an agenda, and they werent for sale.

  15. andry said

    Gpm34I comment5 ,

  16. Brent said

    I certainly agree that we should be cleaning up our act and that should be the focus, not a single by product of our activity CO2. CO2 is plant food and essential to life on this planet.

    Trees and all other plants are excellent at taking up the CO2 but they should be cut down and replanted. The timber should be used for building or furniture. That’s the only way to prevent the absorbed CO2 being re-released into the atmosphere. Trees aged, die and fall down or are knocked down by weather. As these trees decay the CO2 will be released so at best trees are CO2 neutral.

    When you examine environmental evidence for causes of Global Warming, now called Climate Change, there is a distinct challenge in separating the result of changes from the causes of change. I firmly believe that the CO2 levels are a result of change not the cause of it.

    When you look at this post and this post it seems that there are risks that even the cleaning up of our polluters could have significant unintended side effects. Par for the course when you look at human intervention in nature, we rarely get it right and generally do more harm than good.

    I am not in climate change denial at all I do not believe that taxing pollution will have any beneficial effect any more than I believe water trading is a moral ethical activity. Any big polluter who can will move their operations to countries without the imposts, those who can’t move are likely to be driven out of business by being unable to compete with low cost competitors and we the taxpayer will pay the most.

    There is no need for this bully boy tactic of a Continue Polluting Regardless Scheme, there is a need to clean up and reduce pollution. Don’t get the cleanup mixed up with the peak oil/peak coal/peak gas/peak anything rhetoric as they are not relevant to this discussion. They are different issues that need to be dealt with but separately.

    Climate change is not in dispute, the causes are. Science is not about consensus, it is about provable, replicable tests. Modeling is not science it is an unreliable way of generating unreliable results. Modeling outputs are determined by the inputs and assumptions. Any input can be adjusted to give the output you want, any assumption can be weighted to give the output you want. Standard computer talk here, GIGO. Climate modeling is GIGO and should not be used for legislation.

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