Wednesday, February 29, 2012

Power Firms Face $4bn Carbon Slug

ELECTRICITY generators have warned that they face a cashflow crunch of hundreds of millions of dollars to buy carbon tax permits as the latest greenhouse gas emissions figures suggest almost $4 billion of the $7.7bn to be raised in the first year of the policy will come from power companies.

Data from the Climate Change Department yesterday shows the power generation sector accounted for about 170 million tonnes of carbon dioxide emissions in the 2010-11 financial year, which could mean a carbon tax bill of $3.9bn if repeated next year.

The Weekend Australian reported this month that InterGen - the operator of Queensland's black-coal power generator Millmerran - sought help from the federal government's Energy Security Council for loan support because the looming carbon tax had hit its $467 million refinancing.

Victoria's largest power plant, Loy Yang Power, has also had talks with the ESC as it has a $565m refinancing due in November.

The latest greenhouse emissions figures show the nation's top five carbon dioxide emitters in 2010-11 were all coal-fired power generators. But as the government assembled the carbon pricing package, emissions from the sector fell about six million tonnes over the previous 12 months.

The two NSW state-owned generators - Macquarie Generation and Delta Electricity - were the two biggest emitters in 2010-11, with 20.3 million tonnes and 19.8 million tonnes in CO2 emissions respectively.

If the same emissions levels were repeated next year, Macquarie would face a carbon tax bill of more than $466m and Delta would pay $455m, based on the government's starting carbon price of $23 a tonne from July.

The companies told The Australian yesterday they would try to recoup the cost through higher electricity prices, but because prices are set by bids in the national electricity market, they are uncertain how much they will be able to recover.

The government warns that the National Greenhouse and Energy Reporting figures, released yesterday, may not be an accurate guide to next year's carbon tax liability. This is because the reporting is for holding companies, and some of their emissions may not be subject to the carbon tax.

But The Australian confirmed with several of the big power companies that their reported NGER figures broadly represent emissions they would be liable for under the carbon tax.

The chief executive of the Electricity Supply Association of Australia, Matthew Warren, said some companies might have to pay hundreds of millions of dollars for permits in advance of when the electricity was generated and sold.

Mr Warren said the Investor Reference Group estimated that electricity generators would need to hold positions on $6bn worth of forward permits to maintain current levels of electricity contracts.

But a spokesman for Climate Change Minister Greg Combet said the government had announced it would make loans available to generators for the forward purchasing of carbon permits. This was in addition to $5.5bn in assistance for the emissions-intensive generators.

The mid-year budget update had shown the carbon price would raise $7.7bn in 2012-13, Mr Combet's spokesman said.

"Electricity generation is one of the most pollution-intensive sectors of our economy," he said.
"It is essential Australia begins to transform this sector so our economy remains competitive as the world moves to tackle climate change by reducing carbon emissions."

The government will put more than $4bn into household assistance this year to offset higher prices caused by the carbon tax.
Mr Combet's spokesman said there was substantial assistance for industry through the Jobs and Competitiveness Program, and for households through tax cuts, higher family payments and pension increases.

But Mr Warren said: "Without deferred settlement arrangements, allowing energy companies to pay for permits when they sell the energy and produce the emissions, they will need new lines of credit to finance their upfront purchase of forward vintages."

The opposition yesterday attacked the government over Virgin Australia's decision to introduce a carbon tax surcharge.
But Mr Combet's spokesman said Virgin had made the announcement on July 11 last year.

Power Firms Face $4bn Carbon Slug

Thursday, February 16, 2012

Alumina Rejects Wagerup Carbon Tax Claim


Alumina Ltd says the high cost of construction in Western Australia rather than the carbon tax is a key reason that the expansion of its Wagerup alumina refinery has stalled.

WA's Environmental Protection Authority on Monday granted AWAC, Alumina and Alcoa's joint venture company, an extension until September 2016 to substantially commence the expansion that was first given environmental approval in 2006.

The Australian newspaper this week reported an Alcoa spokeswoman as saying the company would not revisit the expansion until it had a clearer picture of the full impact of the carbon tax, due to start on July 1.

The media report also cited the need to secure energy supplies, which Alumina chief executive John Bevan concurred with on Thursday.

But, Mr Bevan said, it was 'not the case' that the carbon tax was the key reason the project was not yet going ahead.

'The capital cost of building in WA is high, as seen with BHP's Worsley (refinery),' Mr Bevan told a conference call for analysts.

The cost of expanding BHP Billiton's Worsley alumina refinery in WA has blown out substantially due to factors including inflationary pressures and the stronger Australian dollar.

This had prompted analysts to speculate recently that the asset may be sold by the mining giant.

Alcoa last week announced that AWAC could close one of its two Australian aluminium smelters, Point Henry in Victoria, in the face of continuing difficult global economic conditions for the industry.

The company warned in January that it planned to close or curtail about 12 per cent of its global smelting capacity to improve its competitiveness amid falling aluminium prices and escalating raw materials costs.

The Point Henry announcement triggered a parliamentary furore, with federal Opposition Leader Tony Abbott blaming the possible closure on the government's carbon tax.

Prime Minister Julia Gillard labelled his comments a disgrace given that 600 jobs at the smelter hung in the balance.

'It (the potential Point Henry closure) is really not firm at this stage,' Mr Bevan said on Thursday, adding that Alcoa's global curtailments would occur in the next four or five months.

In delivering a near fourfold surge in full-year net profit on Thursday, Alumina said costs at Point Henry and its other aluminium smelter in Portland, Victoria, were last year pushed up by increased alumina and coke prices, and the rising Australian dollar.

Alumina booked a net profit for the 12 months to December 31 of $US127 million ($A119.16 million), up from $US35 million ($A32.84 million) for the 2010 calendar year.

Mr Bevan said margins rose after the company moved to price some of its alumina on an index/spot basis.

Morningstar analyst Mark Taylor said a 55 per cent rise in underlying earnings to $US128 million beat the investment research firm's forecast of $US113 million ($A106.02 million).

The company to maintain its full year dividend at six cents per share.

Mr Bevan said the company was cautious on the outlook for 2012, reflecting volatile pricing conditions, a strong Australian dollar and high input costs.

Conditions deteriorated towards the end of 2011, with prices for Alumina's products falling significantly.

Shares in Alumina closed up 1.5 cents, or 1.3 per cent, at $1.17.

Alumina Rejects Wagerup Carbon Tax Claim

Monday, February 6, 2012

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

Tony Abbott to Warn of Carbon Pay Cuts

TONY Abbott will use tomorrow's resumption of parliament to renew his attack on Labor's carbon tax by using Treasury economic modelling to warn it will slash wages.

The Opposition Leader will time his attacks to coincide with speculation about Julia Gillard's leadership as he seeks to put pressure on the government in the first sitting week of the year.

As the Coalition released its economic briefing notes yesterday, Labor ministers counter-attacked, with Wayne Swan condemning the opposition's pledge to relieve mining magnates such as Gina Rinehart and Clive Palmer of Labor's mining tax but refusing to implement a disability insurance scheme.

Mr Abbott spent much of last year attacking Labor over its carbon tax of $23 a tonne, which will take effect from July 1.

Sources confirmed yesterday Mr Abbott would return to the issue in parliament this week, with the Coalition economic note warning that the carbon tax would cause "a large and continually growing fall-off" in gross domestic product.

"On Treasury's own modelling, the cumulative loss of output will be $32 billion by 2020 -- and that's in real 2010 dollars (ie the figure is not being driven by inflation)," the paper says.

"What's more, this will rise to the enormous figure of over $1 trillion by 2050."

The opposition claims the carbon tax would cut real wages by 1 per cent by 2020.

"To put this figure in perspective, for someone on current average adult full-time earnings (approx $70k), this would be equivalent to a cut in their salary of around $600 a year," it says.

Coalition sources said the figures would form the basis of the opposition's attack in question time this week.

But the Treasurer said the Coalition stand was "weak and pathetic", and told ABC television the media was fanning the leadership speculation that has prevented Labor gaining traction on other issues in the past week.

Industrial Relations Minister Bill Shorten joined in, accusing the Coalition of concealing its workplace policy and of wanting to damage workers by introducing greater industrial "flexibility".

"When conservatives use the term flexibility, they actually mean that if you're poor . . . it's time to take a pay cut," Mr Shorten told the Ten Network's Meet the Press.

"Why is it . . . Coalition DNA says the only way the rich can get richer is with low-paid workers getting penalty-rate cuts?"

Mr Abbott, who has been wary about announcing industrial relations policies for fear of sparking Labor claims he would return to the Howard government's Work Choices regime, said Labor's Fair Work Act had caused problems with flexibility and militancy in the workplace and was damaging the nation's economic productivity.

Tuesday, January 31, 2012

Carbon Tax 'alarmism' Doesn't fit Facts, Scientists Warn

SCIENTISTS from around the world, including the former head of Australia's National Climate Centre, are calling for calm on global warming, saying alarmist rhetoric is not backed by evidence and is being used to increase taxes.

Writing in The Wall Street Journal, the 16 scientists say a "large and growing number" of scientists and engineers do not agree that drastic action on global warming is needed. "The number of scientific 'heretics' is growing with each passing year. The reason is a collection of stubborn scientific facts," they say. "Perhaps the most inconvenient fact is the lack of global warming for well over 10 years now."

Carbon Tax 'alarmism' Doesn't fit Facts, Scientists Warn

OneSteel Gets $64m Ahead of CarbonTax

MANUFACTURER OneSteel will receive $64 million to help it prepare for the introduction of the Federal Government's carbon tax in July. 
 
Climate Change Minister Greg Combet announced today that the advance payment had been finalised under the government's $300 million Steel Transformation Plan (STP).
OneSteel expects to receive the payment within 30 days and it will be recorded as income in the company's financial statements for fiscal 2012.

Labor finalised a similar $100 million advance to BlueScope Steel in December.
"The assistance provided to the Australian steel manufacturers will help OneSteel and BlueScope to adapt and modify their business models to ensure their long-term sustainability in a low carbon economy," Mr Combet said in a statement.

OneSteel chief executive Geoff Plummer told the stock exchange the company was "pleased with the government's interest in steel manufacturing in Australia" and welcomed the funds.

The STP, announced in July 2011, was intended to help steel makers adjust to the government's carbon tax, which will start with a fixed pollution price of $23 a tonne.

But the advance payments will also help OneSteel and BlueScope deal with the high Australian dollar, weak domestic demand and excess supply in international steel markers, Mr Combet said.

Labor's $300 million STP was passed by the Parliament in November alongside the 18 carbon tax bills.

Tuesday, December 6, 2011

Climategate (Part II) A sequel as ugly as the original.


The conventional wisdom about blockbuster movie sequels is that the second acts are seldom as good as the originals. The exceptions, like The Godfather: Part II or The Empire Strikes Back, succeed because they build a bigger backstory and add dimensions to the original characters. The sudden release last week of another 5,000 emails from the Climate Research Unit (CRU) of East Anglia University​—​ground zero of “Climategate I” in 2009​—​immediately raised the question of whether this would be one of those rare exceptions or Revenge of the Nerds II.

Before anyone had time to get very far into this vast archive, the climate campaigners were ready with their critical review: Nothing worth seeing here. Out of context! Cherry picking! “This is just trivia, it’s a diversion,” climate researcher Joel Smith told Politico. On the other side, Anthony Watts, proprietor of the invaluable WattsUpWithThat.com skeptic website, had the kind of memorable line fit for a movie poster. With a hat tip to the famous Seinfeld episode, Watts wrote: “They’re real, and they’re spectacular!” An extended review of this massive new cache will take months and could easily require a book-length treatment. But reading even a few dozen of the newly leaked emails makes clear that Watts and other longtime critics of the climate cabal are going to be vindicated.

Climategate I, the release of a few thousand emails and documents from the CRU in November 2009, revealed that the united-front clubbiness of the leading climate scientists was just a display for public consumption. The science of climate change was not “settled.” There was no consensus about the extent and causes of global warming; in their private emails, the scientists expressed serious doubts and disagreements on some major issues. In particular, the email exchanges showed that they were far from agreement about a key part of the global warming narrative​—​the famous “hockey stick” graph that purported to demonstrate that the last 30 years were the warmest of the last millennium and which made the “medieval warm period,” an especially problematic phenomenon for the climate campaign, simply go away. (See my “Scientists Behaving Badly,” The Weekly Standard, December 14, 2009.) Leading scientists in the inner circle expressed significant doubts and uncertainty about the hockey stick and several other global warming claims about which we are repeatedly told there exists an ironclad consensus among scientists. (Many of the new emails make this point even more powerfully.) On the merits, the 2009 emails showed that the case for certainty about climate change was grossly overstated.

More damning than the substantive disagreement was the attitude the CRU circle displayed toward dissenters, skeptics, and science journals that did not strictly adhere to the party line. Dissenting articles were blocked from publication or review by the Intergovernmental Panel on Climate Change (IPCC), requests for raw data were rebuffed, and Freedom of Information Act requests were stonewalled. National science panels were stacked, and qualified dissenters such as NASA prize-winner John Christy were tolerated as “token skeptics.” The CRU circle was in high dudgeon over the small handful of skeptics who insisted on looking over their shoulder, revealing the climate science community to be thin-skinned and in-secure about its enterprise​—​a sign that something is likely amiss. Even if there was no unequivocal “smoking gun” of fraud or wrongdoing, the glimpse deep inside the climate science community was devastating. As I wrote at the time (“In Denial,” March 15, 2010), Climategate did for the global warming controversy what the Pentagon Papers did for the Vietnam war 40 years ago: It changed the narrative decisively.

The new batch of emails, over 5,300 in all (compared with about 1,000 in the 2009 release), contains a number of fresh embarrassments and huge red flags for the same lovable bunch of insider scientists. It stars the same cast, starting with the Godfather of the CRU, Phil “hide the decline” Jones, and featuring Michael “hockey stick” Mann once again in his supporting role as the Fredo of climate science, blustering along despite the misgivings and doubts of many of his peers. Beyond the purely human element, the new cache offers ample confirmation of the rank politicization of climate science and rampant cronyism that ought to trouble even firm believers in catastrophic climate change.

In fact, the emails display candid glimpses of concern inside the CRU circle. Peter Thorne of NOAA (National Oceanographic and Atmospheric Administration), who earned his Ph.D. in climate science at East Anglia in 2001, wrote Phil Jones in a 2005 message, “I also think the science is being manipulated to put a political spin on it which for all our sakes might not be too clever in the long run.” An appeal to “context,” which the climate campaigners say is crucial to understanding why excerpts such as this one are unimportant, does quite the opposite, and only points to the problems the climate change campaigners have brought upon themselves by their tribalism.

This exchange between Thorne and Jones, along with numerous similar threads in the new cache, is concerned with what should and shouldn’t be included in a chapter of the IPCC’s 2007 fourth assessment report​—​a chapter for which Jones was the coordinating lead author along with another key Climategate figure, Kevin Trenberth. The complete chapter (if you’re keeping score at home, it’s Chapter 3 of Working Group I, “Observations: Surface and Atmospheric Climate Change”) lists 10 “lead authors” and 66 “contributing authors” in addition to Jones and Trenberth. One of Jones’s emails from 2004 displays how explicitly political the process of assembling the IPCC report is: “We have a very mixed bag of LAs [lead authors] in our chapter. Being the basic atmos obs. one, we’ve picked up number of people from developing countries so IPCC can claim good geographic representation. This has made our task harder as CLAs [contributing lead authors] as we are working with about 50% good people who can write reasonable assessments and 50% who probably can’t.”

The final chapter was amended along lines Thorne recommended, but several other objections and contrary observations (one in particular from Roger Pielke Jr. about extreme weather events that has been subsequently vindicated) were scornfully dismissed. And appeals to context avoid the question: Is this “science-by-committee” a sensible way to sort out contentious scientific issues that hold immense public policy implications? Perhaps a politicized, semi-chaotic process like the IPCC is unavoidable in a subject as wide-ranging and complex as climate change; future historians of science can debate the issue. But the high stakes involved ought to compel a maximum of open debate and transparency. Instead, the IPCC process places a premium on gatekeepers and arbiters who control what goes in and what doesn’t, and it is exactly in its exercise of the gatekeeping function that the CRU circle has shredded its credibility and trustworthiness.

One thing that emerges from the new emails is that, while a large number of scientists are working on separate, detailed nodes of climate-related issues (the reason for dozens of authors for every IPCC report chapter), the circle of scientists who control the syntheses that go into IPCC reports and the national climate reports that the U.S. and other governments occasionally produce is quite small and partial to particular outcomes of these periodic assessments. The way the process works in practice casts a shadow over one of the favorite claims of the climate campaign​—​namely, that there exists a firm “consensus” about catastrophic future warming among thousands of scientists. This so-called consensus reflects only the views of a much smaller subset of gatekeepers.

Beyond additional bad news for the hockey stick graph, is there anything new in these emails about scientific aspects of the issue? This will take time to sort out, but I suspect anyone with the patience to go through the weeds of all 5,300 messages and cross check them against published results may well discover troubling new aspects of how climate modeling is done, and how weak the models still are on crucial points (such as cloud behavior). Some of the new emails frankly acknowledge such problems. There are arcane discussions about how to interpolate gaps in the data, how to harmonize different data sets, and how to resolve the frequent and often inconvenient (because contradictory) anomalies in modeling results. Definite examples of political influence have emerged already from a first pass over a sample of the massive cache.

In the editing process before the IPCC’s 2001 third assessment report, Timothy Carter of the Finnish Environmental Institute wrote in 2000 to three chapter authors with the observation, “It seems that a few people have a very strong say, and no matter how much talking goes on beforehand, the big decisions are made at the eleventh hour by a select core group.” In this case, decisions at the highest levels of what specific figures and conclusions were to appear in the short “summary for policy makers”​—​usually the only part of the IPCC’s multivolume reports that the media and politicians read​—​required changing what appeared in individual chapters, a case of the conclusions driving the findings in the detailed chapters instead of the other way around. This has been a frequent complaint of scientists participating in the IPCC process since the beginning, and the new emails show that even scientists within the “consensus” recognize the problem. Comments such as one from Jonathan Overpeck, writing in 2004 about how to summarize some ocean data in a half-page, reinforce the impression that politics drives the process: “The trick may be to decide on the main message and use that to guid[e] what’s included and what is left out.”

No amount of context can possibly exonerate the CRU gang from some of the damning expressions and contrivances that appear repeatedly in the new emails. More so than the 2009 batch, these emails make clear the close collaboration between the leading IPCC scientists and environmental advocacy groups, government agencies, and partisan journalists. There are repeated instances of scientists tipping their hand that they’ve thrown in their lot with the climate ideologues. If there were only a handful of such dubious messages, they might be explained away through “context,” or as conciliatory habits of expression. But they are so numerous that it doesn’t require an advanced degree in pattern recognition to make out that these emails constitute not just a “smoking gun” of scientific bias, but a belching howitzer. Throughout the emails numerous participants refer to “the cause,” “our cause,” and other nonscientific, value-laden terms to describe the implications of one dispute or another, while demonizing scientists who express even partial dissent about the subject, such as Judith Curry of Georgia Tech.

Since the beginning of the climate change story more than 20 years ago, it has been hard to sort out whether the IPCC represents the “best” science, or merely the findings most compatible with the politically driven climate policy agenda. Both sets of emails have lifted the lid on the insides of the process, and it isn’t pretty.

A good example of how the political-scientific complex works hand-in-glove to tightly control the results comes from May 2009, when the IPCC authors were working on a “weather generator,” which they hoped would produce climate change scenarios tailored to localities, so as to promote favored adaptive measures (sea walls, flood control, drought readiness, etc.).

This is a small but hugely controversial aspect of climate modeling, and one where politicians and advocacy groups (the World Wildlife Fund was especially keen to have this kind of work done) may well be asking scientists to do the impossible. But there’s research money in it, so scientists are only too happy to oblige. Kathryn Humphrey, a science adviser in Britain’s DEFRA (Department of Environment, Forestry, and Rural Affairs​—​Britain’s EPA) wrote a worried note to Phil Jones and several other scientists involved in the project about criticisms of the cloistered working group behind the weather generator scheme, noting, “Ministers have also raised questions about this so we will need to go back to them with some further advice.”

Jones tries to reassure Humphrey that he’s got the working group under control: “As I’ve said on numerous occasions, if the WG [working group] isn’t there, all the people that need [the weather generator] will go off and do their own thing.

Climategate (Part II) A sequel as ugly as the original.

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