Our ETS Future 'Will Not Come Cheaply

AUSTRALIA will be unable to produce affordable baseload power supplies while meeting its emissions targets under present policy, new research has found.

A study by Melbourne's Grattan Institute, to be published today, warns that while carbon pricing will help make low-emissions technologies competitive, it will not be enough without big structural and policy changes.

Tony Wood, the institute's energy program director, says governments face "an acute intellectual and policy challenge" steering a course between inadequate support for low-emissions technologies or unduly favouring one technology over another. He cautions "Australia's move to a low-carbon future will be too expensive unless they do."

The Grattan research stresses markets as the primary mechanism by which Australia can reduce its emissions, but it says markets cannot work properly unless governments optimise regulatory and policy frameworks.

The study also warns against letting ideology limit the scope for manoeuvre by preventing serious evaluation of carbon capture and storage and nuclear energy. "A range of technologies available today can generate electricity at or below 0.2 tonnes of carbon dioxide per megawatt-hour and have significant scale-up projection," the Grattan research finds.

"Yet none currently represents more than 2 per cent of Australia's electricity supply and

their future technical and economic potential is shrouded in uncertainty."

The report finds further refinement of the underlying technologies of low-emission energy options will be the most important tool for their future development and commercialisation.

It reminds governments of their roles overseeing the development of new transmission networks and pipelines, resource maps, market frameworks, regulations and engineering skills.

The Grattan researchers urge the commonwealth to ensure the carbon pricing scheme works properly by setting long-term emission caps and call on all governments to act to ensure there is a level playing field for all power-generating technologies.

The report's authors urge the removal of obstacles that impede technologies such as wind and geothermal from connecting at large-scale to electricity grids built around the needs of very large fossil-fuel plants.

Our ETS Future 'Will Not Come Cheaply

Many Would Back Repealing Carbon Price

Half the country supports Opposition Leader Tony Abbott's stance that he would overturn the carbon pricing scheme should the coalition with the next election, a news survey shows.

The weekly online Essential Research survey released on Monday shows the prospect of a coalition election win remains clear cut, with only a minor increase in support for Labor recorded in the latest week.

Labor support among voters rose to 45 per cent from 44 per cent last week on a two-party preferred basis, compared with 55 per cent for the coalition, down from 56 per cent previously.

Fifty per cent of the 1053 respondents supported Mr Abbott's stance that he would repeal the carbon price legislation on winning power, while 36 per cent said they opposed such a move.

Carbon Credits Market at Point of Collapse

THE international market in carbon credits has suffered an almost total collapse, with only $US1.5 billion of them traded last year - the lowest since the system opened in 2005, says a report from the World Bank.

A fledgling market in greenhouse gas emissions in the United States also declined, and only the European Union's internal market in carbon remained healthy, worth $US120 billion. However, leaked documents appear to show that even the EU's system is in danger.

The international market in carbon credits was brought about under the Kyoto Protocol, as a way of injecting investment in low-carbon technology in the developing world.

Under the system, known as the clean development mechanism, projects such as wind farms or solar panels in developing countries are awarded credits for every tonne of carbon avoided. These credits are bought by rich countries to count towards their emissions reduction targets.

From 2005, when the Kyoto Protocol came into force, to 2009 the system generated a total of $25 billion for developing countries. But last year's $1.5 billion was even less than the amount paid for credits in the first year of operation.

''This bodes very badly for the countries we are trying to help,'' said the World Bank's envoy for climate change, Andrew Steer. ''The [carbon] market is failing us.''

If the poor performance continued, it would mean increasing greenhouse gas emissions, he said. Part of the problem is uncertainty over the future of the Kyoto Protocol. The provisions of the 1997 treaty, which took years to come into force, are due to expire in 2012 and there is no agreement yet on a continuation.

The US refuses to take part in the treaty, and Russia, Japan and Canada said at the recent Group of Eight meeting they would not continue under the Kyoto Protocol. The United Nations is trying to ensure that the trade in credits continues even if the protocol is not renewed.