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Australia's Carbon Pricing Mechanism

Australia's Carbon Pricing Mechanism

December 2011

Download the full brief (PDF)

 

Summary:

Australia’s Clean Energy Future plan is a comprehensive set of national policies aimed at reducing greenhouse gas emissions and driving investments in clean energy. At its core is a carbon pricing mechanism starting in July 2012 and covering approximately 60 percent of Australia’s emissions. The pricing mechanism begins with a fixed carbon price for the first three years, then transitions to a cap-and-trade program. Revenue generated by the carbon price will be used to ease costs for households and industry and for investment in renewable power, energy efficiency, and other low-carbon alternatives. This brief summarizes the carbon price mechanism and other key features of the Clean Energy Future plan.

 

Introduction:

On November 8, 2011, the Australian Senate gave final approval to the government’s Clean Energy Future climate change plan outlining a series of measures to reduce greenhouse gas (GHG) emissions and drive investment in clean energy. A central element of the plan is a carbon pricing mechanism directly covering 50 percent of Australia’s emissions and providing direct financial support for renewable energy, energy efficiency, reducing emissions from land-use and forestry, and other elements. The mechanism starts with a fixed price for the first three years from 2012 to 2015 (AUD 23, rising with inflation to about AUD 25 at the end of the fixed-price period). It then transitions from 2015 to 2018 to a cap-and-trade program, with a price cap and price floor. Regulations to implement the plan are being developed. Other principal elements of the plan include:

  • A long-term target of reducing GHG emissions 80 percent below 2000 levels by 2050;
  • Over 50 percent of revenue generated from the carbon price is returned to households, particularly low-income ones, through tax relief and greater family benefit payments;
  • Revenue generated by the program, along with additional government resources, will be used to ease the impact on trade-exposed industries and workers, and boost investments in renewable power, energy efficiency and other low-carbon alternatives;
  • Implementation of the plan is expected to cost the government AUD 4.3 billion over the first four years, over and above revenue generated;
  • Emissions from sectors not directly covered by the carbon price, such as certain fuels and synthetic gases, are indirectly addressed through changes to existing levies and taxes;
  • Politically sensitive sectors are carved out of the mechanism: agriculture is addressed separately through an incentive-based scheme, and road transport fuels are largely exempt from the carbon price;
  • Three new governance institutions are established to administer, oversee, and advise on all areas of the plan.
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Low-Carbon Innovation for a Strong Defense

As discussed in the first part of this blog series A Strong Defense for Low-Carbon Innovation, the U.S. Department of Defense (DOD) has both the demand for and procurement capabilities to advance the development and deployment of innovative low-carbon technologies. This post highlights a variety of leading businesses innovating and creating new opportunities in response to the U.S. Department of Defense efforts, and some of the challenges businesses encounter along the way.

Strategic public-private partnerships are key to helping the DOD meet its energy goals and present significant low-carbon business opportunities. Employing the expertise of companies, such as those specializing in electricity generation or computer technology, gives the DOD access to specialty skills and knowledge needed to advance innovative low-carbon technologies. Businesses, in turn, have the potential to enhance their competencies through government-funded research and development, or provide new technologies for commercial markets after large-scale demonstration through the DOD.

A Strong Defense for Low-Carbon Innovation

This post is the first of a two-part series on low-carbon innovation in the defense industry. It looks at how the DOD is uniquely positioned to drive low-carbon innovation. The second part in the blog series looks at how businesses are working with the DOD to bring low-carbon solutions to market.

From GPS to the Internet, the U.S. Department of Defense (DOD) has a history of driving the creation of innovative technologies now used every day by Americans. With low-carbon policies a major challenge in Washington today, many clean energy advocates are seeking leadership from the DOD, which is the single largest consumer of energy in the country, to help drive clean energy solutions. Motivated by the need to better protect troops and support its operations, the DOD is becoming more involved in low-carbon technology research, development, and deployment. As stated in the 2010 Quadrennial Defense Review (QDR), this work will shape the future commercial potential of energy technologies, as “military installations [serve] as a test bed to demonstrate and create a market for innovative energy efficiency and renewable energy technologies.”

The Business Behind Low-Carbon Solutions

Business leaders from across the country convened in Atlanta last month to share critical lessons from developing and deploying low-carbon solutions.  At our Business of Innovating conference, dozens of company leaders—from Coca-Cola and Mars to Dow and Bayer—discussed new products and solutions that are beginning to drive business growth in clean energy while limiting greenhouse gas emissions.  Their efforts reflect a deepening understanding of changes in market preferences and demand for low-carbon solutions. 

NPR Not Plugged In to All the Facts on Electric Vehicles

A recent story on NPR’s Morning Edition about plug-in electric vehicles (PEVs) misses the mark. At C2ES, we don’t believe PEVs are the single answer to our transportation energy security and environmental problems, but we think they could make a contribution if they’re given a fair shot. That’s why we started an initiative on PEVs almost a year ago to take a practical look at the challenges and opportunities of PEV technology.

First, the story mentions plug-in hybrid electric vehicles (PHEVs) like the Chevrolet Volt at the outset, but then ignores how that vehicle type overcomes the problem at the heart of the story – range anxiety. The fear of being stranded due to inadequate driving range and deficient charging infrastructure is a legitimate critique of battery electric vehicles (BEVs). BEvs are battery-only vehicles, i.e. they cannot run on gasoline. But, the Volt and soon-to-be-released Toyota Prius Plug-in Hybrid can run on gasoline or electricity and have the same range as a conventional car. You can travel 25 to 50 miles in a Volt or up to 15 miles in a plug-in Prius without using gasoline and then rely on gasoline to fuel the rest of your trip. It’s difficult to estimate how many trips these electric-only ranges will accommodate, but a plug-in hybrid overcomes the need for a consumer to make that determination. In case you’re wondering, the average car trip length is 9.34 miles according to the National Household Transportation Survey.

2011 Boston Solutions Lab: "Business of Innovating"

Promoted in Energy Efficiency section: 
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Speaker presentations now available

In partnership with EDF’s Innovation Exchange, DIG IN, and the Green Innovators in Business Network (GIBN), C2ES co-hosted a “Business of Innovating” Solutions Lab on December 8, 2011, exploring how we conceive of innovation and its role in addressing key environmental and sustainability challenges, including climate change. This event drew on insights from this project’s research of corporate strategies for bringing low-carbon solutions to market. Designed to engage interested business professionals in an ongoing learning community, the Solutions Lab brought together hundreds of professionals engaged in making their organizations more efficient, sustainable, and leading-edge.

Confirmed catalyst presenters include:

  • Andy Hargadon, Professor, UC Davis Center for Entrepreneurship (Download PDF presentation)
  • Bob Hilton, VP, Power Technologies for Government Affairs, Alstom Power (Download PDF presentation)
  • Stephen Todd, Distinguished Engineer & Director, Global Innovation Network, EMC
  • Kathrin Winkler, VP & Chief Sustainability Officer, EMC

Interactive Innovation Breakout Sessions with:

Eileen Claussen Highlights C2ES's Goals, Energy Policy on E&E TV

Watch the Interview

November 16, 2011

On E&E TV's OnPoint, Eileen Claussen discusses goals of the newly-launched Center for Climate and Energy Solutions (C2ES) and assesses the current state of energy policy talks in Washington. Claussen also gives her views on the Obama administration's handling of energy policy. Click here to watch the interview.

Click here for additional details on C2ES.

Yes, You’ve Come to the Right Place

For those of you who came to our website today expecting to find information and resources from the Pew Center on Global Climate Change, please don’t click away. Today we announced an exciting transition. We are now C2ES — the Center for Climate and Energy Solutions. In addition to changing our name, we’ve refreshed our mission and strategic approach, updated our website, and made other changes to ensure that we can continue to craft real solutions to the energy and climate challenges we face today.

Yes, a great deal has changed in the last 24 hours. But what hasn’t changed is the need for straight talk, common sense and common ground. Today’s climate and energy issues present us with real challenges — and real opportunities as well. This is about protecting the environment, our communities and our economy. And it is about building the foundation for a prosperous and sustainable future.

‘Business of Innovating’: Keys to success

This blog post is co-authored by Engelina Jaspers, Vice President, Sustainability at HP

How can we address climate change and achieve robust economic growth? Innovation in low-carbon technologies is critical, and businesses are the engines of innovation. With this in mind, we—the C2ES and HP—set out to explore how leading companies successfully execute low-carbon innovation strategies, with the aim of sharing lessons learned.  Today we release the key findings in a new report, The Business of Innovating: Bringing Low-Carbon Solutions to Market, which will also be the focus of a conference in Atlanta on October 25-26.

Our partnership leveraged the insights and expertise of C2ES staff, members of the Center’s Business Environmental Leadership Council (BELC), and HP’s commitment to applying innovative technologies and approaches to environmental challenges. The report’s author, Andrew Hargadon, Professor at University of California, Davis’ Graduate School of Management, studied the BELC members and other leading companies, including an in-depth study of eight low-carbon solutions from HP and three other companies: Alstom, Daimler and Johnson Controls. The report outlines the barriers particular to low-carbon innovation efforts and provides a set of seven practical lessons for companies.

Business of Innovating: Bringing Low-Carbon Solutions to Market

October 2011

by Andrew Hargadon

Download this report (pdf)

Press Release

Press teleconference (mp3)

'Business of Innovating': Keys to Success blog post


Executive Summary:

Climate change—and efforts to mitigate it—are creating an increasingly uncertain future for businesses. The long-term effects of a warming climate are enormously difficult to predict. In the near term, however, new policies, technologies, and market preferences are already altering the competitive landscape of entire industries. That is creating opportunities for companies that effectively produce and manage low-carbon innovations in their markets—and threatening those that, by choice or circumstance, do not.

Today’s policy environment, particularly in the United States, is creating an extraordinarily uncertain environment for business decision-making. In the face of such uncertainties, corporate executives must still make decisions that affect their company’s strategy and competitive opportunities for years. The challenge is to walk a narrow line, investing in low-carbon innovation strategies that keep them competitive without moving too far ahead of the curve. Some companies, like those in the transportation sector, have some regulatory certainty in the form of fleet fuel economy standards, which enables them to commit to low-carbon innovations. But without such industry-wide standards in many sectors, the demand for low-carbon innovations is less clear.

Opportunities for low-carbon innovations exist throughout the economy, especially anywhere that energy is used in the manufacture, delivery, and consumption of goods and services. And with world energy consumption expected to grow by 40 percent in the next two decades,1 these opportunities are growing. The replacement value of today’s aging global energy supply infrastructure is estimated to be $12 trillion, and that of existing energy consuming technologies is even larger.2 Global revenues from new low-carbon energy solutions, energy efficiency technologies and services, and other climate-related businesses reached $530 billion in 2009, and are projected to surpass $2 trillion by 2020.3 Moreover, between 2010 and 2020, the projected cumulative total investment in clean energy generation alone is expected to reach $2.3 trillion.4 Companies able to bring low-carbon innovations to market quickly and at scale will gain early advantages over competitors, such as product leadership, higher market share, and influence over emerging policies and standards.

Leading companies are already bringing low-carbon innovations to a wide range of markets, offering valuable lessons for others facing similar opportunities and uncertainties. This report documents the challenges and best practices of these companies, distilling insights for other businesses pursuing low-carbon innovation strategies. It was developed by the report author, by Center staff, and with members of the Center’s Business Environmental Leadership Council (BELC). The research project included a detailed innovation survey of BELC members and other leading companies, a series of BELC workshops, broader research on innovation, and in-depth case studies of eight low-carbon innovation projects from four large multinational companies:

Taken in its entirety, the report presents a set of practical lessons for organizations pursuing low-carbon innovation strategies. The results should be of interest to corporate decision-makers who are developing or considering low-carbon innovation strategies and to others seeking to understand how companies can effectively bring low-carbon innovations to market, including financial analysts, institutional investors, state and federal officials, non-governmental organizations (NGOs), scholars, and participants in international efforts to address climate change.

The report is authored by Andrew Hargadon, the Charles J. Soderquist Chair in Entrepreneurship and Professor of Technology Management at the Graduate School of Management at University of California, Davis and a Senior Fellow at the Kauffman Foundation. He is the author of How Breakthroughs Happen: The Surprising Truth About How Companies Innovate (Harvard Business School Press 2003).

Check out our podcasts on low-carbon business innovation

 

Learn about the top three technologies available today that will have the biggest impact on achieving low emissions growth.

 

Andrew Hargadon
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