PM’s Carbon pricing delay to cost $2bn more

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PRIME Minister Julia Gillard’s refusal to set a carbon price will cost households an extra $2 billion a year in even higher electricity prices, a major report by top economists and power companies says.

The damning paper, obtained on the eve of Prime Minister Julia Gillard’s expected policy announcement on climate change, forecasts that the Government’s shelving of the emissions trading scheme will add an extra $60 a year to the average household bill.

TELL US: Are you happy to pay more for electricity to help save the environment?

Ms Gillard has ruled out setting a carbon price until at least 2012 but the report warns that the extra price rise for consumers is already locked in.

The report, produced for the Climate Institute by some of the country’s top energy providers and economists, including Westpac, KPMG, AGL, Pacific Hydro, General Electric and OgilvyEarth, says price rises over the next decade were already factored into future investment to meet rising demand for power.

The price rises are necessary, they claim, because investors refuse to fund any new coal-fired or open gas-fired base-load power plants as long as there is uncertainty over the price of pollution they emit.

Instead, new power sources are being planned around gas-fired peaking power plants which are cheaper to build but more expensive to operate.

The results are based on a scenario where companies continue to build peaking power stations to meet growing demand, instead of intermediate and baseload power stations (such as combined cycle gas plants) which are more efficient, potentially less polluting and have lower running costs, said the economists in a statement.

Across the economy, this equates to an approximate loss of about $2 billion a year to electricity consumers in 2020.

For an average household, this means spending on electricity would increase by $60 a year up to 2020.

The research underscores that uncertainty around the price tag on pollution will increase electricity prices, hurt the economy and lift the cost of living.

Without greater certainty and a clear, credible and detailed plan to reduce our economy’s dependence on pollution and make clean energy cheaper, these costs will be locked in and will increase over time.

Once these investments are made, their cost is effectively locked into the economy and is passed on to consumers.

Climate change policy and uncertainty about long-term policy settings is a critical factor in considering what type of power generation to build.

Ms Gillard is expected to take her climate change policy to Cabinet on Tuesday.

Posted on July 15, 2010 · in Australasia

Tagged as: australia carbon • Carbon Price • climate change