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Carbon price complexities

3rd May 2013

The Climate Institute has stepped out and said that lower carbon prices will lower the overall price of greater, fairer climate action.

The carbon price has been a source of great controversy of late, with the current government and the opposition differing greatly in their stances coming up to the next election.

Revenue from the carbon price goes towards investment in renewable energy such as solar power, wind energy and other energy efficiency initiatives.

The carbon price started at $23 a tonne for 2012-13.

Initial projections for future prices were in line with inflation, and for 2013-14 were set to reach $24.15, then $25.40 in 2014-15.

From July 2015, the carbon price won't be fixed by the government but will evolve to be set by the market.

"Reports in the Financial Review that [the] Treasury has, on the basis of lower than expected global prices, revised the expected Australian 2015 carbon price down to $15/tonne means the cost of stronger and fairer emissions reduction has gone down too," said John Connor, chief executive officer of The Climate Institute.

Marcus Priest, writing for The Australian Financial Review, reported on May 2 that a recent survey of 12 market analysts found the average forecast for the European price of carbon in 2015-16 was around $9.20 a tonne.

"Australia can and should use low international carbon prices as an opportunity to have stronger targets and to help build global ambition to address accelerating climate change impacts," said Mr Connor.

The Climate Institute assert that both major political parties have committed to reducing Australian carbon emissions by up to 25 per cent on 2000 levels by 2020, dependent on global actions.

It comments that whoever is in government in 2014 will need to indicate its final targets for 2020.

As well as this, the Climate Change Institute noted that its analysis, along with analysis from other international experts, indicates that with current international commitments and actions, Australia's minimum emissions reduction target should be up to 15 per cent by 2020.

Mr Connor also commented that fostering greater global ambition when it comes to combating carbon emissions makes good economic sense, as extreme weather events are already costing the nation billions of dollars.

He notes that while this revision does have an impact on revenue, so do the extreme weather shocks which require an increasing amount of expenditure.

"Some forecasts suggest high prices are more likely and others suggest lower, the core is issue is that lower prices offer an opportunity for Australia to meet strong emission targets at lower cost," Mr Connor said.

Posted by Mike Peacock

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