Direct quote from the government’s 2009 budget web site:

“Households and small businesses will be able to calculate the potential dollar savings from their energy efficiency actions and make tax deductible donations to the Energy Efficiency Savings Pledge Fund. The Australian Carbon Trust will use these donations to purchase and retire Australian emissions units or purchase carbon offsets.”

What this means:

• If you voluntarily cut your household energy consumption to save greenhouse gas – sorry the greenhouse savings don’t count! If you want to reduce greenhouse gas emissions, you have to actually now go and pay to “retire” the carbon you’ve saved – and pay the government to do so. See my earlier blog posting rantings about the disincentives in the CPRS (Carbon Pollution Reduction Scheme) for more detail. Basically if you don’t pay to retire the greenhouse gas you’ve saved, the entity generating the energy (say an electricity generator) can claim it. And trade it. And you have contributed no additional greenhouse savings beyond that which the emissions trading scheme would achieve anyway.
• If you are a small business…. hang on… what is a “small business”? As only Australia’s top emitters get to participate in the CPRS doesn’t the definition of a “small business” in this context mean anyone who can’t participate in the CPRS? To participate in the CPRS you either have to directly generate over 25,000 tonnes of carbon a year, or consume more than 100 Terajoules of energy. In other words you are a small business if your annual energy consumption is less than 100 TeraJoules of energy or you directly produce less than 25,000 tonnes of carbon. What is a tera joule? You are probably familiar with kilojoules (1,000 joules), a tera joule is actually 1,000,0000,000,000 Joules. 100 TJ equates to an annual energy expense of about $2 million (as does the production of 25,000 tonnes). So, if you spend less than around $2 million a year on energy you are a “small business”!

So let me rewrite what budget actually means in plain English. “If you spend less than around $2,000,000 a year on energy, and you cut your energy use, in order to be able to also say that you’ve cut Australia’s greenhouse gas emissions you need to pay the government for it to recognise that what you’ve saved is an actual saving.”

Or, lets do a hypothetical here. Lets assume that you are a “small business” – ie your energy expense is less than $2 million a year. (What a tiny, wee business you’ve got if you’re not spending $2 million a year on energy!) You invest $10,000 in upgrading your lighting (using Mirrorlux Reflectors say). This saves you  $5000 a year on your electricity bills and about 25 tonnes of carbon annually. But if you want to say that your investment has reduced Australia’s emissions you actually have to pay. Lets say the carbon price settles at $50 a tonne. You’ll have to spend $1,250 a year to be able to genuinely say that your investment in your lighting upgrade is saving greenhouse gas. Because if you don’t, under the CPRS, the electricity generator supplying you the power that energises your lights has the right to the carbon you’ve saved.

Another hypothetical. This time you invest in a new gas heating system in your school. You spend $300,000 to put in gas space heaters and eliminate the old central heating system. It saves you approximately $20,000 a year in gas costs, and about 160 tonnes of greenhouse gas emissions a year. At $50 a tonne you have to pay the government $8,000 to “retire” the carbon you’ve saved. 40% of the financial savings you’ve realised goes to the government if you want to be able to say that your investment is actually reducing greenhouse gas emissions.

Are, you, like me, someone who believes that personal or “small business” action can do something to avert dangerous climate change? Do you, like me, spend less than TWO MILLION DOLLARS a year on energy? Well the government is clearly telling you and me that if we want to make a difference we have to pay twice. Pay for the investment to cut your emissions. And then pay the government to retire those emissions.

Isn’t there something really really wrong if we have to spend twice to cut our greenhouse gas emissions?

This blog aims to show how acting vigorously to reduce carbon emissions is good for the environment and good for business. That it is possible to create a “win-win” with the right approach. The Emissions Trading Scheme – officially known as the Carbon Pollution Reduction Scheme (CPRS) clearly, as explained in earlier blog posts, is climate negative - its not good for the environment.  

Various blogs today responding to the release of the draft CPRS legislation by Climate Change Minister Penny Wong point out that its not just bad for the environment – it goes so far in its compensation to major emittors that its actually good for big business.  

Crikey.com refer to a study commissioned by the Australian Conservation Foundation which shows that many of the major polluters will actually benefit from the CPRS as a result of the free permits handed out. The Crikey post summarises this as follows “So let’s be clear: the the Government’s rationale for amending its already-generous ETS so that it rewarded big polluters was not to prevent the loss of jobs and emissions overseas, but to ensure the profitability of big polluters.”

Paul Gilding in the Business Spectator writes “This is as good a deal as business will get. It is easy to imagine a future government, when the icecaps have melted, the cyclones are hitting and the fires are burning, imposing a much tougher regime than the one currently on the table. The CPRS is a bad deal for the climate but it’s a great deal for business. Take it and run or you’ll rue the day you didn’t.

So lets summarise the above. The CPRS is bad for the climate, but good for big business. Its lose-win legislation – a loss for the environment and a win for those businesses that are major pollutors. In the short term anyway its a win for the major polluters, but in the long run won’t be - big business managers and shareholders won’t be immune to the effects of dangerous climate change.

Which brings me back to the argument that those of us who want to be climate positive need to be coming up with ways of reducing carbon pollution that are also great for the hip-pocket - in the short to medium term and not just in the long term. With products and services that business willingly buy because its good for the bottom line as well as being good for the environment. And that we need to be making the CPRS irrelevant – by making it so easy to be sustainable that its foolish not to. We have clarity now that the CPRS won’t cut emissions, and may actually put a floor on the amount of emissions reduction that can be achieved. Hopefully this flaw will be removed over the next few months as the legislation is debated. But we have a heck of of an innovation and entrepreneurial challenge!

And there is also a tremendous social challenge – the challenge of changing society to the point where carbon pollution becomes abhorrent and morally repugnant – for most of us.

If you care about future climate stability I’d encourage you to act as a carbon-saving innovator or entrepreneur, or to influence to create a society that is carbon-intolerant, and not put too much faith in the CPRS.