Australia’s carbon tax – how much impact on global warming?

Regular Seekerblog readers know that we have been arguing for the efficacy of carbon taxes for a long time. In particular revenue-neutral carbon taxes, harmonized across all the major emitting countries. See e.g., Why revenue-neutral carbon taxes are superior to “cap and trade” schemes. Over these years of advocacy we’ve also learned to respect Roger Pielke’s “Iron Law“. In fact, the first Kindle book bought for our iPad was Pielke’s “The Climate Fix“.

We continue to favour energy policies that include harmonized revenue-neutral carbon taxes. But the Iron Law helps us appreciate that no effective carbon pricing is going to happen in the real world anytime soon — particularly where it matters: the developing countries such as China, India, Brazil. What we need to focus upon is promoting policies that directly accelerate conversion to sustainable low-carbon energy that is “cheaper than coal”. That is happily the focus of Google.org REC initiative. Sadly the “Google guys” are backing only “renewables” and completely ignore the only energy source able to contribute significantly to our goal of zero carbon electricity by 2050. That source is nuclear power, with an emphasis on the next generation of nuclear plants such as the IFR and LFTR.

Australian politicians are all in a lather over the Labour-proposed carbon tax. Their proposal is theoretically a not-bad design of a carbon tax. My view is that it will make no meaningful difference to global emissions — and critically, it distracts attention from what matters, and that is implementing low carbon energy sources, mainly nuclear power for electrical generation. Nothing else is going to get the job done, and the longer Australian politicians fail to adjust the more costly will be the ultimate conversion.

The reason I don’t believe the Australian carbon tax is effective is simple. First, if it ever should actually be enacted, it cannot survive politically because a unilateral economy can’t bear the competitive burden of meaningful carbon taxes (i.e., $25/ton+). Second, even if Australia enacted and sustained a “perfect” unilateral tax, the impact on global emissions is in the noise.

Here’s why: Australia’s CO2 emissions are about the same as Brazil or France, around 1.3% of global emissions (2007 UN Statistics). Number one emitter China was at 22.3% in 2007. On a “business as usual” track, if Australia’s total emissions grew at the same rate as China’s emissions, then by 2050-60 the Australian contribution would be the same proportion, around 1.3%. If Australia’s unilateral carbon tax scheme was a successful as we could hope, the tax effect might incentivize Australian emissions reductions of (optimistically) 25%. So the proposed carbon tax contribution to the global CO2 stock would be around 0.3%.

But Australia will become an even smaller future carbon contributor, because of the relative emissions growth path of China and the other developing countries. The U.S. Energy Information Administration / International Energy Outlook 2010 forecasts primary energy consumption to 2035. Taking the EIA “High Economic Growth” case for 2007 vs 2035, we find for China the emissions growth ratio is 200 quads vs 70 quads = 285%. For Australia and NZ combined the ratio is 10 quads vs. 7.2 quads = 138%. So through 2035 the unilateral Australian carbon tax might contribute 1/3% x 138/285% = about 0.16% to our zero-carbon future. By 2050 I’m guessing that contribution will be halved again by the relative emissions growth rates of Australia vs. the developing economies. So my estimate for Australia’s best-case 2050 carbon-tax contribution is an insignificant 0.10%.

Instead of wasting political energy on the carbon tax, we want to see Australia focus on “cheaper than coal”; i.e., decarbonization of energy supply. There are dozens of articles on Seekerblog on this topic. For more background, try “How to Get Climate Policy Back on Course“. And please enjoy Bill Gates’ excellent 2010 TED presentation – we thought he explained the key ideas very clearly in Bill Gates wishes for more than “cheaper than coal.

The best single source for science-based energy policy is BraveNewClimate.com. In particular, I recommend a review of Scenarios for 2060.

In the supporting essays Barry Brook estimates that we need to build a daily average of about 680 MWe of new generation to achieve the low-carbon capacity required to meet 10 TWe of global demand in the 2050 timeframe. Achieving this goal gets harder and more costly every day that politicians squander the future of our children.

For reference: This 2010 Energy paper by Martin Nicholsona, Tom Bieglerb and Barry W. Brook is probably the best up to date source of levelized cost of electricity (LCOE), LCA emission intensity and the relative impacts of carbon pricing on baseload energy options.