Tag Archives: australia
Carbon Supply Crunch Set to Extend Longest Rally: Energy Markets
By Alessandro Vitelli July 18, 2013 The longest-ever rally in United Nations carbon prices shows little sign of easing as traders bet companies running emission-reduction projects will stop creating credits because it’s no longer profitable to do so. UN-approved Certified Emission Reductions, or CERs, for December have more than doubled to 49 cents (64 U.S. cents) from a record low in April on the ICE Futures Europe exchange. It costs a combined 50 to 80 cents a ton to have emission cuts at clean-technology projects verified and the corresponding certificates issued by the UN, said Luca Bertali, an emissions broker in London at TFS Green, a unit of Cie. Financiere Tradition SA, one of the largest inter-dealer brokers. Prices for the credits used by 34 of the richest nations from Germany to Australia to offset domestic emissions by investing in greenhouse-gas-reduction projects elsewhere tumbled 98 percent since peaking at 23.38 euros in 2008 as the global economic slowdown cut demand. The number of CERs being issued by the UN in 2014 may drop 23 percent from this year, according to Bloomberg New Energy Finance. “Unless the price of CERs covers the costs of verification and the UN share of proceeds, people aren’t going to deliver them,” Bertali said in a telephone interview. “We’ll see the result a year from now.” UN contracts climbed to a seven-month high of 56 euro cents a ton on July 3, when the European Parliament approved a plan to reduce the region’s record surplus of permits and buoy prices that had dropped to all-time record lows. They closed at 49 cents on the ICE Futures Europe exchange in London after seven weeks of gains, the longest streak since they were first offered in March 2008. CDM Support The UN’s Clean Development Mechanism, set up by the 1997 Kyoto Protocol, has supported the development of more than 6,900 projects in 87 countries and was worth 6.6 billion euros last year, according to New Energy Finance. Falling UN and European Union carbon prices shrank the value of emissions traded worldwide by 36 percent to 61 billion euros last year, New Energy Finance said in a January report. Investors in CDM projects get CERs that they can sell to companies and governments with pollution caps. The EU allows emitters to use UN offsets to comply with obligations in its cap-and-trade program, the largest in the world. One credit is equivalent to a one-ton reduction of carbon dioxide. One such investor is the Climate Cent Foundation, a group formed by the Swiss Petroleum Federation, the Swiss Trade & Industry Federation and the Swiss Road Traffic Federation, which buys CERs from a 15 megawatt hydroelectric plant in Peru, according to the United Nations Framework Convention on Climate Change, or UNFCCC. The facility is designed to generate 42,000 CERs a year for as many as 21 years from July 2009, which can be used to meet emission caps. Unbuilt Projects The low UN carbon offset price may mean new emission-reduction projects won’t be built or existing facilities are dismantled, according to Renat Heuberger, chief executive officer of project developer South Pole Carbon Asset Management in Zurich. “It’s going to be a significant amount,” he said July 12 in an e-mailed response to questions. “For example, in the landfill and biogas space there is no point keeping the collection systems in place if CER prices are so low.” CER supply in 2014 will total 260 million tons, down from the record 339 million supplied in 2012, according to New Energy Finance. July issuance of CERs will be 12.5 million tons, the fourth consecutive month of declines and the lowest since February, according to UNFCCC data. The UN regulator has issued 202 million credits this year. Limited Gains UN credit price gains may be limited because of caps on demand for existing and future certificates together with oversupply. Market rules will restrict European demand for CERs from 2013 through 2020 to 578 million tons, compared with an immediately available supply of about 500 million tons, according to New Energy Finance. Any shortfall will be met by future issuance, which may be as much as 1.3 billion tons through 2020. “There’s a total of about 500 million tons of offset supply in the market at the moment that hasn’t been submitted as part of compliance,” Richard Chatterton, an analyst at New Energy Finance in London, said by phone on June 19. “That’s a huge overhang, which could push the price back below the cost of issuance.” Trading volume in CER futures has dwindled this year to 10 million tons a week on average, a 67 percent slump from 2012, according to ICE Futures data. This decline in activity is contributing to price volatility as there are fewer parties available to buy or sell at a given time, said Fred Payne, a carbon trader at CF Partners (U.K.) LLP, a risk advisory and investment firm specializing in renewables and commodities. “If you want volume, you’re going to have to pay the offer price, and that’s squeezed prices higher,” Payne said in a July 3 phone interview. Price Recovery Project owners and investors may still be generating CERs on expectations that prices will recover, according to Trevor Sikorski, a London-based analyst at Energy Aspects Ltd. By issuing credits now, they can profit from an increase in price, he said July 12 by e-mail. “It’s hard to understand why issuance occurs at prices below 0.50 euros, which either suggests enough projects have issuance costs below that or you have some project developers that are happy to punt on the CER price going higher,” said Sikorski, a former head of carbon analysis at Barclays Plc. “I think that this would be relatively odd behavior unless you had very deep pockets and a high risk threshold.” To contact the reporter on this story: Alessandro Vitelli in London at avitelli1@bloomberg.net To contact the editor responsible for this story: Rob Verdonck at rverdonck@bloomberg.net Continue reading
Carbon Tax Dumped: How Do We Get To 100% Renewable Energy?
22 July 2013, 5.24am BST Carbon tax dumped: how do we get to 100% renewable energy? AUTHOR Jenny Riesz Research Associate – Centre for Energy and Environmental Markets at University of New South Wales DISCLOSURE STATEMENT Jenny Riesz receives funding from the CSIRO and the Australian Renewable Energy Agency (ARENA) It’s hard to imagine a future without fossil fuel, but sound modelling can help. Dave Clarke The Federal Government has sparked significant debate with the confirmation it intends to move from a fixed carbon price to an emissions trading scheme next year. But where is the description of the long term, low carbon future for Australia? Aside from the 90% renewable energy target proposed by the Greens, the major parties are slim on long-term vision. International experience suggests that when we start talking about long term futures, it can dramatically shift debate towards a long term vision. It’s particularly important to outline those futures that are most different from the present, so that they can be clearly understood. The Australian Energy Market Operator (AEMO) recently released a landmark report showing that shifting to 100% renewable electricity is a feasible and affordable option for the Australian National Electricity Market. Coming from the highly conservative body responsible for “keeping the lights on”, this carries a hefty credibility. The operator’s modelling shows that a 100% renewable power system could be installed for around a 20‑30% increase from present retail electricity prices. In the context of rising fuel prices and mounting pressure to reduce greenhouse emissions, the cost of a 100% renewable power system could be similar to what we would be paying for electricity anyway by around the year 2030 . But a 100% renewable system is very different from the one we currently operate. We currently source only around 10% of Australia’s electricity from renewables. The energy market operator’s modelling of a 100% renewable future has already significantly shifted the debate within industry. Seen as “crazy talk” only a few years ago, 100% renewable scenarios are now being discussed as genuine and valid options by an increasing number of industry organisations. opment of renewable energy technologies means results from this modelling will date rapidly. For the 100% renewables option to stay on the table we need to update the modelling regularly. This makes sure our leaders are well informed of all the options, and the market understands all possible futures in which they might be operating. Familiarity bias and institutional barriers often make it hard to consider alternatives based upon radical changes in technology, and this is particularly prevalent in the electricity industry. Often, the very methods we use limit possible outcomes, potentially ruling out entire technology classes. This certainly applies in the recent modelling conducted by the electricity operator. The existing models for routine long term planning could not deal with large quantities of wind and photovoltaics. The operator had to develop a whole new model. When the electricity market operator is making long term projections it has to look beyond the three year political cycle and be guided by hard science. It should consider a range of scenarios in line with Australia’s international commitments to do our “fair share” of limiting global warming to 2°C. We have to consider and plan for rapid trajectories for emissions reduction as one of a range of futures that may eventuate. This informs our leaders and helps market participants make effective decisions about large investments. The energy market operator has invested substantial time and effort in developing the modelling tools and methodologies to make this study possible. We should keep using them: the ongoing expense is likely to be very modest in the context of the investment we need to address all the challenges the electricity industry faces. The modelling is vital to properly understanding the limitations, costs, risks and opportunities of the full range of options on the table. We are, after all, talking about Australia’s energy future. Decisions made now will affect our nation for generations to come. Beyond modelling, how would we get to this 100% renewable future in reality? Many policy mechanisms are available – we could expand and extend the Renewable Energy Target as suggested by the Greens , or we could ensure stable carbon prices at a sufficiently high level. Other nations have also applied utility scale feed-in tariffs to great effect, similar to that now being put in place to drive solar development in the ACT . In the short term debate on the carbon price, let’s not forget about the long term vision. Policy makers have a great opportunity to inexpensively shift debate by asking the electricity market operator to continue modelling 100% renewables scenarios in the years to come. This is an essential first step to get us there. Continue reading
The Real Politics Behind A Floating Price On Carbon
Discussion has been locked in fact-free debate for so long it’s easy to forget reducing emissions is the point of the exercise Follow Lenore Taylor BETA Lenore Taylor guardian.co.uk , Sunday 14 July 2013 A protester holds a placard during a rally in Sydney against Julia Gillard’s ‘carbon tax’. Photograph: Greg Wood/AFP/Getty Starting a “floating” carbon price one year early is not such a big deal, really. The fact that every political party is screaming about it just proves how twisted the politics of this issue has become. For Kevin Rudd , it’s a way to reboot a debate Labor has been comprehensively losing, and provide businesses and households with some very short term cost relief. The $3 billion or more the government now has to find in budget savings is the same amount business won’t have to pay for carbon permits next year. And that gets passed through to households in the form of savings of $210 a year for a sole parent on benefits, $300 to $400 a year for average couples with children and $180 a year for an aged pensioner couple, according to helpfully provided Treasury modelling. But it’s a price reduction that would have happened when the system moved into line with international prices one year later anyway. The real impact Labor is hoping for is political. For the Greens it’s an opportunity for product differentiation ahead of an election that’s looking very difficult for the minor party. But Christine Milne ‘s argument that Australia’s economic transformation will be somehow fundamentally interrupted by allowing the price to drop to international levels just one year earlier than planned doesn’t make sense. And for Tony Abbott it turns back against him his own successful blurring of the difference between a carbon tax (which Julia Gillard promised not to have) and a floating price emissions trading scheme (which has always been Labor’s policy in one way or another, and until Abbott became leader was the Coalition ‘s policy as well). A one year shift in the start of the floating price could never have resulted in front page headlines proclaiming “carbon tax to go” if it hadn’t been for Abbott’s own hard work decrying the fixed price “tax” for the last three years. For their very different political reasons both Abbott and Milne are labelling the decision a “fraud” and a “con”. But, putting the politics aside, we actually don’t yet have the most important pieces of information to make that judgement. What we really need to know is whether the government intends to keep the independent Climate Change Authority and listen to its advice about how hard we should be cutting our greenhouse gas emissions. The domestic discussion has been locked in this senseless, fact-free headbutt of a debate about “axing the tax” for so long, it’s been easy to forget that reducing emissions – probably by more than the minimum 5% by 2020 agreed by both major parties – is the point of the exercise. The “tax”, the trading scheme and even the Coalition’s “Direct Action” are all just different means to get there. If bringing forward a floating price means we can do more, while imposing lower costs on the domestic economy because the international price is lower than we thought it was going to be, surely that’s a good thing. And if Tony Abbott really thinks he has found a cheaper way to make deep, long term cuts to Australia’s emissions than can be achieved by participating in an international market, now would be the time to finally unveil the detail of his Direct Action policy to try to prove it. If Labor is keeping the climate authority and leaving open the possibility of tougher targets – by far the most important change negotiated by Milne in the deal with Julia Gillard compared with Labor’s first emissions trading scheme – are the Greens really going to stand in the way? Properly assessing Australia’s share of the global effort to slow climate change, and then figuring out how we most efficiently do it – that is a really big deal. Continue reading
