Coal news and updates

Coal savings with direct action

THE coal industry could save $800 million across five years to 2020 through the shift from the carbon price to the Coalition's direct action plan and still achieve the same emissions reductions foreshadowed in Labor's plan.

Modelling by carbon and energy advisory firm RepuTex suggests the direct action plan would provide relief to the coal industry through avoiding the carbon liabilities under Labor's plan.

If calibrated to meet Australia's commitment to reduce emissions by 5 per cent from 2000 levels by 2020, direct action could achieve emissions reductions at far lower cost through direct investment by industry, with support from government.

RepuTex estimated the coal industry's carbon price liability under Labor's scheme at $1.5 billion from 2015 to 2020.

The firm argued the industry could achieve the same level of abatement through a net investment of $700m from 2015 to 2020, a saving of $800m.

RepuTex head of research Bret Harper said direct action would have to consider creating incentives for companies to spend some of their own money on abatement initiatives through baseline and penalty schemes or through a carbon offset scheme, rather than relying on the government's abatement fund."

At present, direct action removes the carbon price and fails to replace it with any effective incentive or target for industry to reduce emissions so, as a result, we would see emissions rise under direct action as it is currently structured," said Mr Harper.

"Should direct action be reconfigured to implement a declining emissions baseline and a high penalty price, it could drive equivalent abatement as the carbon price mechanism, but at far lower cost through direct investment."

Mr Harper said this might be necessary if the Coalition were to win support for direct action from crossbench senators to have it passed in the face of Labor and Greens opposition.

He said if direct action were calibrated to meet equivalent emissions reductions achieved by the carbon price, the coal industry could face an emissions reduction target of between two million to six million tonnes of CO2 a year, which would cost about $1.2bn to abate through coalmining emission reduction projects.

"Under the Coalition's emissions reduction fund, lowest cost abatement will be rewarded, meaning the coal industry, with high abatement costs, is only estimated to be able to capture around $440m in government funds -- leaving a funding shortfall of just over $700m for the industry to abate its full two to six million tonnes of CO2 per annum," he said.

The RepuTex analysis came as Environment Minister Greg Hunt said he was confident direct action could achieve Australia's 5 per cent reduction target by 2020.

Mr Hunt said the cost of emissions reductions had fallen since the Coalition's policy was released three years ago and the pool of potential emissions reductions was likely to be greater than anticipated in 2010.

Mr Hunt said the budget for direct action would be capped at $300m, $500m and $750m during the first three years of the scheme

Source: - The Australian