News | 23rd Jan, 2013

Emissions drop signals fall in carbon tax take

23 Jan 2013
David Uren, The Australian

Carbon emissions from the electricity sector have dived in the first six months under the carbon tax, with much greater use of renewable energy and cutbacks in consumption.

While the government believes the 8.6 per cent fall in carbon emissions shows its policies are working, it also means it will collect less from the tax than the $4 billion it anticipated this year.

The drop in revenue comes after the minerals resource rent tax, forecast to raise $2bn this year, failed to raise any revenue from the big three miners in the first six months of the year.

Total emissions from the electricity sector in the December half were 7.5 million tonnes lower than in the same half of 2011.

The government cautions that a big abatement task remains, cutting total emissions by 33 million tonnes from 2011 levels by 2020. The fall in electricity demand was not anticipated by the Australian Energy Market Operator and is unlikely to have been included in Treasury's budget forecasts.

Analysis by Climate Change Minister Greg Combet's staff shows that total electricity production in the first half of the financial year fell by 2.7 per cent, compared with the corresponding period of 2011-12.

However, the analysis shows there has also been a big change in the mix of power, with much greater use of renewable energy from hydroelectricity from the Snowy Mountains and Tasmania, and also wind farms, while there have been cuts in use of both black and brown coal.

This has reduced emissions by a further 6 per cent in the first six months of the financial year.

A spokesman for Mr Combet said there were many factors, including the carbon tax and the renewable energy target, influencing emissions in the power sector.

"The government's clean energy policies have been implemented smoothly and are working as intended to cut carbon pollution," the spokesman said.

"Our policies are stimulating more investment in renewable energy and clean technologies which is reducing pollution, helping to tackle climate change for future generations."

The head of Ernst & Young regional climate change operations, Mathew Nelson, said the carbon tax would not suffer shortfalls of the magnitude expected by the government's troubled mining tax.

"It is impacted by production in the economy as a whole and electricity demand; but variations within those are within percentage points," Mr Nelson said.

The decline in electricity emissions could easily slice $300 million from the budget forecast of $4bn cash earnings from the tax this year.

Companies have to pay 75 per cent of their expected 2012-13 carbon tax by June 15, with the balance due in February next year.

The power sector accounts for about half of Australia's emissions and a larger share of the carbon tax, because some of the largest emitters have free permits.

Department of Climate Change projections issued last October envisaged that emissions overall would rise by 0.4 per cent this year while emissions from the electricity sector would fall by 0.5 per cent.

However, there have been huge falls in electricity generation in both Victoria, down 8.6 per cent, and NSW, down 5.3 per cent. With changes in the energy mix, emissions in Victoria dropped 14.6 per cent while they were 10.4 per cent lower in NSW.

Consulting firm Pitt & Sherry says changes of this scale are without precedent in the 120-year history of the electricity supply industry…

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