Europe’s Carbon Price Crashes To $4.45. Australia’s Gillard Government’s Still $23

Posted on Fri 02/01/2013 by


Bolt New 01By Andrew Bolt ~20120303_co2_carbon_dioxide

The Gillard Government’s carbon trading plans are in tatters after two developments in Europe overnight, leaving it staring at billions of dollars in Budget deficits.

First, the EU carbon trading scheme to which the Government linked Australia from 2015 has been rocked with fresh evidence of fraud:

Two board members at Deutsche Bank, including the lender’s co-chief executive, have been drawn into a police investigation into tax evasion related to the group’s carbon trading business...

The investigation is centred on 25 of the bank’s staff, according to German prosecutors, and involves allegations of tax evasion, money laundering and obstruction of justice linked to carbon trading certificates.

But worse, the price for carbon credits has plunged again – to just $4.45 a tonne, a fraction of the current Australian price of $23.

European Union carbon permits had their biggest ever monthly drop as nations in the bloc may object to a regulatory plan to temporarily cut the volume of supply sold at auctions through 2015.

Carbon permits for December declined 10 percent today to close at a record 3.42 euros …. The contract fell 49 percent this month…

This is a disaster for the Gillard Government, whose decision to set our own price at $23 a tonne looks even more reckless.

But also remember how Climate Change Minister Greg Combet hailed the agreement last year to link the Australian carbon scheme to Europe’s from 2015, when the carbon tax will turn into a price set by trading instead:

“Linking the Australian and European Union systems reaffirms that carbon markets are the prime vehicle for tackling climate change and the most efficient means of achieving emissions reductions.” Mr Combet said…

“It is further evidence of strong international cooperation on climate change and will build further momentum towards establishing a robust international carbon market.”

And Combet gave this assurance:

Mr Combet repeated he was confident of the Treasury modelling, which predicts a $29 a tonne carbon price in 2015/16.

He was asked if the government would face a budget shortfall, in contrast to the $9.4 billion of revenue it had predicted the floating price would generate in the 2015/16 budget.

“It is three years away and the Treasury modelling is something that we stand by,” Mr Combet said.

Now Combet’s mendacious spin has been shattered. The European market is not “efficient” but possibly corrupt.

More seriously, the international price is virtually certain to be not $29 two years from now, but much, much less. The price will probably be so low that it will drive no move to green power.

It will also force the Government to slash its carbon tax compensation to consumers – or else rack up massive losses from funding handouts pegged at a $23 tonne tax through the sale of carbon allowances that must fall to worth, what, $10 to keep us competitive?

Note, not all the Australian credits can be bought overseas:

Under present rules, Australian companies can buy 50 per cent of carbon credits from overseas: 37.5?per cent can be from the European market and 12.5 per cent can be even cheaper international permits.

How cheap?

Take New Zealand’s:

Spot permits in the New Zealand Emissions Trading Scheme (ETS) fell 6.5 percent week-on-week to close Thursday at NZ$2.45 ($2.05), the lowest weekly closing price ever recorded as fresh supply continued to find its way to the market.

To summarise. The Government’s carbon price from 2015 is almost certain to be:

– higher on average than prices overseas.

– too low to fund the current compensation to consumers, leaving the Budget short of billions of dollars.

– too low to drive any big cut in emissions.

More from Watts Up with That.

Andrew Bolt is a journalist and columnist writing for The Herald Sun in Melbourne Victoria Australia.

Andrew Bolt’s columns appear in Melbourne’s Herald Sun, Sydney’s Daily Telegraph and Adelaide’s Advertiser. He runs the most-read political blog in Australia and hosts Channel 10’s The Bolt Report each Sunday at 10am. He is also heard from Monday to Friday at 8am on the breakfast show of radio station MTR 1377, and his book  Still Not Sorry remains very widely read.

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