CANBERRA (Reuters) - Electricity prices could rise by up to 75 percent from 2020 if Australia’s government refuses to take strong climate change action and set up a carbon trading system, Australia’s Climate Institute said on Monday.
In a report on the impact of emissions trading, the institute said electricity prices could rise 20 percent in the next 20 years if the government acted decisively, but a soft response and a low carbon price would mean a greater shock from 2020.
“A wait-and-see scenario with a soft start to carbon pricing does not significantly reduce emissions in the short-term, leads to higher carbon prices and electricity prices over the medium to long-term, and does not promote the deployment of clean energy over the next decade,” the independent institute said said.
Australia is poised to overturn its long-held opposition to carbon trading with the government to receive a report by the end of the week into how it can price carbon emissions without hurting the country’s coal industry.
Australia is the world’s largest coal exporter and Prime Minister John Howard has regularly ruled out carbon trading or setting caps on pollution, saying to do so would hurt Australia’s economy and lead to job losses.
Carbon trading sets caps on pollution for companies and puts a price on carbon emissions, providing a financial incentive for companies to clean up pollution so they can sell leftover allocations to others.
Australia and the United States have also refused to ratify the Kyoto Protocol on climate change, which sets binding limits on greenhouse gas emissions, blamed for global warming, from developed nations.
Climate Institute chief executive John Connor said Australia needed to set a strong price for carbon emissions by 2010 to ensure carbon trading was effective, and also introduce an energy efficiency plan and a clean energy target.
With no domestic nuclear power, Australia relies heavily on coal for about 85 percent of its electricity. Less than four percent of its electricity is from renewable energy sources.
Connor said electricity accounted for 30 percent of Australia’s Greenhouse Gas emissions, with electricity generation accounting for half the growth in emissions since 1990.
A soft option of setting a carbon price at about A$10 a tonne ($8.20/tonne), he said, would not offer enough incentives for investment in clean energy and would force carbon prices to jump significantly after about 2020.
Connor said Australia may need to move away from coal-fired electricity, but he was confident job losses would be offset by job gains in the renewable energy sector.
“We think it is economically reckless to delay action, or only to take half-measures,” he said.
The report came as 75 economics professors at Australian universities signed an open letter calling for the government to ratify the Kyoto Protocol.
Global warming, they said, carried serious environmental, economic and social risks and urgent action was needed, particularly from developed nations.
“The refusal by Australia and the United States to ratify the Kyoto Protocol is undermining global efforts to tackle climate change,” they wrote.