CSIRO says carbon price cap may hit power supply

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AUSTRALIA’S chief scientific body, the CSIRO, says price caps on carbon in Australia’s emissions trading scheme may stifle investment in renewable technologies and threaten Australia’s power supply.

In a submission to the Government’s energy review, CSIRO researchers write that price caps in a carbon market may cause Australia to increase its reliance on high emissions energy, such as coal, as demand for electricity increases. The Rudd Government has proposed price caps in its emissions trading scheme before the Senate of a one-year $10-a-tonne start-up price followed by a $40-a-tonne cap for the following four years.

‘‘If legislative arrangements place a cap on the price signals sent by electricity and carbon markets then it is possible that investment will be impacted, reducing the supply of new electricity generation capacity below what is required to reliably deliver power to customers or delivering less risky but most likely higher emission technologies,’’ the CSIRO submission reads.

Dr Jim Smitham, leader of the CSIRO Energy Transformed Flagship, told the Herald the CSIRO does not have an exact policy position on how much the Government’s proposed price caps on carbon might affect investment in clean energy.

But Dr Smitham said all the ‘‘purely economic’’ modelling done by the CSIRO showed the less interference there was in carbon markets the more likely it was that investment would occur in renewable energy and clean coal technologies.

‘‘If you have set the strategic direction and you want lower emissions but the financial incentive is fairly small because of price caps, people will hold on investing in new [low emissions technology] plants because the incentive is not big enough at the moment,’’ Dr Smitham said.

‘‘Or you could reach the point where you can’t build the plants fast enough and the lights will start to go out.’’

The Climate Change Minister, Penny Wong, did not comment on the CSIRO submission yesterday. The Government’s emissions trading scheme is facing defeat in a Senate vote on August 13 after the Opposition indicated it would not pass the scheme unless nine broad changes were made.

A Greens-commissioned Galaxy poll of 1100 people taken from July 24 to July 26 found that 75 per cent of Australians either agree or strongly agree that tougher conditions should be placed on high-polluting industries in the emissions trading scheme before it passes the Senate.