Prepare to transition: EV

RELATED COVERAGE: Millions to be wiped

A LEADING environment group has advised Latrobe Valley to prepare for a transition away from brown coal, despite the Federal Government sending mixed messages on its policy direction this week.

On Tuesday the Federal Government announced it would move to an Emissions Trading Scheme earlier than expected, and recoup lost revenue from the current ‘carbon tax’ by reducing compensation to power generators and cutting funds to clean coal-oriented technologies, including carbon capture and storage.

Environment Victoria welcomed moves by the Federal Government to scrap the final two years of its Energy Security Fund, which provides cash payments to power stations so they can buy free carbon permits as compensation for the imposition of a carbon tax.

EV released a report in February this year which claimed generators including Hazelwood power station were “profiting from compensation arrangements” at taxpayers’ expense.

“Cancelling the final two years of payments to our dirtiest power stations is a step towards levelling the playing field and reducing fossil fuel subsidies,” EV campaigns director Mark Wakeham said.

“The total value of generator compensation is now $2.5 billion instead of the original $5.5 billion proposed.

“However there is still another billion dollar payment to our dirtiest power stations on September 1 that is unnecessary and should be cancelled.”

Of the Federal Government’s proposal to shift to an ETS one year early, Mr Wakeham said he did not expect the move would “have a significant environmental impact” though EV said budget shortfalls forecast from the change would be recouped “from sensible places” including reducing CCS programs.

EV has long lobbied against government funds being directed to ‘clean coal’ objectives, instead arguing in favour of boosts to renewable technologies.

When asked whether the Federal Government’s move towards a floating price on carbon – currently much cheaper than the fixed price in Australia – and reduced support for efforts to clean up coal, could mean it would be ‘business as usual’ for the brown coal industry, Mr Wakeham said it was “hard to know what their motivation is”.

He insisted, however, that few people now took CCS seriously and “I think the government’s patience with it is running out”.

Mr Wakeham also maintained the Valley needed to prepare for a low-carbon economy regardless of the government’s intentions given current forecasts indicated the two per cent drop in energy demand observed in Australia over the past three years would continue.

The fall in demand impacted on brown coal’s long-term viability, he said.

Energy efficiency programs coupled with widespread use of solar power and changed consumer behaviour because of rising energy bills had conspired to impact on energy demand, he said.

Though Prime Minister Ken Rudd predicted lower energy bills for households, with the move to an ETS, Mr Wakeham said “I will believe electricity retailers will cut bills when I see it”.

With the current floating price on carbon at between $6 and $10 per tonne, Mr Wakeham agreed the cost impact on local generators meant reductions to pollution would still be minimal.

He anticipated the carbon price would rise considerably over time, however.

Mr Wakeham said one Bloomberg forecast estimated carbon could cost $70 per tonne by 2020.

When The Express suggested such an increase could see local power stations forced to close within seven years and asked what this would mean for Victoria’s power supply, Mr Wakeham conceded “that is all crystal ball stuff”, adding “the price might not be that high”.