Economics and the Governement: Clean Energy Bill, 2011 - Term Paper Example

 CLEAN ENERGY BILL, 2011 Introduction The Clean Energy Bill 2011 was basically created to establish an effective framework that could help realize emissions-reduction targets that have been proposed over time. Indeed, the increase in greenhouse gas emissions across the world has been raising many concerns not only in environmental quarters but across all realms. In this regard, the Clean Energy Bill 2011 is part of the measures that have been put into place to ensure a reduction in the emissions by making it much costly to pollute the environment. This is achieved by imposing a number of costs on certain sectors of the economy which are deemed to be the greatest contributors the greenhouse emissions. The government has therefore developed a very extensive and comprehensive plan which seeks to achieve a clean energy future. In a way, the Bill is very clear and concise both from an environmental and economic perspective. The development of this bill was basically a response to the growing concern over climate change especially by international bodies. It is nevertheless realized that Australia is responsible for only 1.5% of the total Greenhouse gas (GHG) emissions in the world. However, on scientific grounds, this is not a justification for a slow approach in addressing climate change. In any case, the effects of global warming will be realized by all countries irrespective of their contributions to the whole problem. As such, governments across the world have been enacting such legislation to ensure a reduction in GHG emissions. Australia is one of the largest CHG per capita emitters which create an even greater need for the country to enact and implement a number of domestic legislation geared towards mitigating emissions (Lockie, 2012). Carbon Price The bill established a fixed carbon price of $23 per ton which falls squarely on some of the largest GHG emitters from 2012 to 2015 after which the price of carbon will basically be flexible through a trading scheme with the market forces being the biggest price determinants. As a result of the increase in the price of carbon, there is a subsequent increase in the prices of carbon-intensive goods and services. Due to these increases, many producers and consumers will be compelled to seek for cheaper alternatives to the carbon-based products. Indeed, according to basic economic theory, there must be a great reduction in the consumption of carbon based products as long as substitutes are available. In a way, this scheme is very successful since the government sets a limit to the annual GHG emission which can always be achieved (Considine, 2012). Indeed, the Carbon Price Mechanism (CPM) is important in a number of ways. Under the initial flexible price model, there is price certainty since most of the affected parties can accurately predict how much the carbon emissions will cost them for the three years period under operation. In the same way, all the parties down the supply chain of carbon consumption also have a three year period to determine the cost of their emissions. While the initial period focuses on price certainty, the second stage is basically geared towards addressing emission certainty. As such, from 1st July 2015, the government will actually regulate the number of permits given each year so as to cap the country’s net emission. More importantly, considering the few number of permits which shall be granted, they will be auctioned in the market and their prices will therefore be determined by the market forces. With a reduction in the number of permits, companies will definitely a have motivation to trade the excess permits for profits. Under the CPM, a liable entity is one who has an operational control of the facility which is emitting the gasses (Simon, 2011). It is presently estimated that much of the net national emissions results from electricity generation which accounts for 37 percent while industrial fuel consumption accounts for 17 percent. Agricultural and transport have a cumulative emission accounting for 15 percent of the total emissions. In this regard, it is imperative to note that the clean Energy packet will cover half of the total national emissions. The carbon price strategy alone will account for two thirds of these emissions. According to the Kyoto Protocol, there are six greenhouse gasses which should be addressed under these emission reduction measures. The carbon pricing mechanism effectively covers four out of these six which include carbon dioxide, nitrous oxide, methane and per-fluorocarbon which comes from the aluminum sector (Cothran, 2011). The beauty and effectiveness of the carbon pricing strategy further arises out of its wide coverage. Indeed, it extends well and covers all the industry sectors which operate within every territory of Australia. Nevertheless, all the rights which are granted to foreign shipping operations are well respected and recognized. In this case, the Bill does not in any way affect the operations of companies outside the country. Presently, emissions from a number of sectors are covered under the carbon price mechanism. Some of the sectors include non-legacy waste, stationery energy generation, industrial processes and fugitive emissions apart from decomposed coal mines. This is certainly a wide coverage which ensures that most of the critical sectors under the mission scheme are brought on board. It must be realized that addressing greenhouse emission is a major challenge and all players must be brought on board. Unlike in the past where the reduction of emissions was always a government affair, the new bill has created a direct obligation on all entities like companies, partnerships, trusts and individuals that directly emit over 25,000 tons of the gasses every year. It should be realized that the focus of the bill is not simply to reduce missions. It is grounded on several objectives. Considering an increase in the cost of pollution through carbon, there will be much research on alternatives especially clean energy options. Many companies will be willing to invest in such clean technologies and this will propel the country towards a clean energy future. In the same way, individuals will feel the greater need to adopt cleaner and cheaper energy options which will contribute directly towards the GHG emission mitigation measures (Lawson, 2012). While it might seem that the carbon price will discredit a lot of consumers, it is important to note that the household assistance package will greatly benefit millions of consumers. In any case, over half of the carbon price revenue will be directly spent on the consumers. While the cost of living will be affected modestly, there will be an average assistance of $10.10 provided against a cost increase of $9.90 per week. More importantly the prices of common household goods will barely be affected by this increase. Other than gas and electricity, other consumer goods will only experience a less than one percent increase in price attributable to the carbon price. The carbon price will have a range of other benefits in the economy. Considering that it raises a lot of revenue, it provides the government with an opportunity to cut or reduce other forms of taxes like income tax. In this regard, the tax-free threshold has been raised so that one million people no longer need to pay income taxes. In the second stage of the process beginning 2015, there will be further tax reforms and an additional 100,000 people will be excluded from filing the tax reforms. By increasing the tax-free threshold, taxes are greatly reduced and this subsequently leads to other benefits. For instance, there is greater motivation to work especially for low income people. It is presently estimated that the tax-free threshold will has almost trebled from 2011 to 2013 and the focus is the attainment of a figure of $18,200. In the second phase beginning 2015, the threshold will further be raised to a greater figure of $19,400 and many people will therefore keep all their income without paying any income tax (Burke, 2011). Through the Clean Energy bill, 2011, it is seen that the government is really committed towards assisting businesses and individuals to make a smooth transition to clean energy. In many countries, this transition is conducted in a very aggressive manner without regard to the financial implications to the concerned parties. However, in the Australian case, there is a greater commitment on the part of the government. In order to ensure businesses make this transition effectively, the government has formulated a number of measures to assist in the process. These assistance measures cover both large industrial producers to small entrepreneurs. One way is through the carbon revenue of which 40 percent will be used to assists businesses and support jobs. More importantly, there is a greater need to ensure that organizations that account for much pollution still remain very competitive in the international market. This is achieved through the Jobs and Competitiveness Program. Through this program, the organizations will have the incentive to reduce carbon emissions while also remaining very competitive. Activities that generate over 80 percent of emissions in the manufacturing sector will basically be the major focus of the Jobs and Competitiveness program. For smaller businesses, government assistance will majorly cover the improvements needed to enhance energy efficiency. A keen look at these treasurers indicates that they are carefully formulated in order to limit any interference with the carbon price. Over the coming decades, there will be a transformation of the country’s energy sector towards the clean sources. The carbon price will be the major driver in this regard. As the cost of pollution becomes greater, businesses and individuals will feel the greater need to avoid traditional high-pollutant fuels. The adoption of low pollution alternatives will further be facilitated by the increased research into the area. Nevertheless, a lot of innovation and research is still imperative before the shit can be realized. Investment in clean energy is very expensive and this shall require the support of all relevant sectors. The government as the greatest player in this respect will provide much of the funding needed to enhance research into the clean energy sources (Saddler, Diesendorf & Denniss, 2012). The Clean Energy Bill stresses on the need for energy to be used efficiently in the country. Indeed, the efficient use of energy is one of the most critical aspects in reducing carbon emissions. More importantly, it helps in saving money which is normally wasted. As such energy efficiency is the third aspect in the government’s future plan on clean energy. While the government has greatly been helping businesses and individuals to improve efficiency in energy consumption, these efforts will be increased tremendously. Among the low-income households, the Low Carbon Communities program will be greatly expanded as a way of promoting energy efficiency among these categories of people. While the carbon price does not apply to the agricultural emissions, it must be ensured that every player has a responsibility to play with respect to the reduction of emissions. As such, even farmers have major role to ensure that emissions from their activities are kept to the minimum. The land sector which includes farming and forestry must therefore be part of the future energy plan for the government. Farmers will therefore benefit much from the Carbon Farming Initiative which is meant to enable land managers and farmers to have credits for the storage of carbon and pollution reduction activities on the land. Most of these activities and programs arise out of the growing concern on climate change which has become more real than ever. The decade running between 2000 and 2010 was the warmest in Australia and human activity is blamed on the increase in global temperatures. The Clean Energy Bill talks about innovation as an important consideration in the shift towards clean energy. Indeed, innovation is an important way to transform the energy sector. Considering that the country has many scientists and researchers in addition to a very competitive and dynamic business sector, innovation can greatly help to address this challenge. More importantly, the country has abundant sources of renewable energy which can be harnessed to enable the realization of the clean energy goal. Sunshine and wind power in much available in the country in addition to geothermal energy found on hot underground rocks. There must be a greater focus on producing a lot of energy through these sources in order to reduce carbon emission. It is further recognized that the move towards clean energy will pose many challenges related to adaptation. There will be a need to redesign many processes and operations in order to make them compatible with the low-emission economy. According to the bill, the government will therefore implement a very effective energy market transition geared towards maintaining secure energy supplies and limiting the challenges that might occur during the transitions. For instance, the Bill has provided for Energy Security Fund which offers assistance to the country’s emission-intensive coal generators. This will instill the much needed confidence in the sector and attract greater investment on new sources of energy and infrastructure. In order to ensure compliance, much of the assistance will be offered on conditional basis upon meeting the tests related to energy security. In addition, it will depend on publishing the Clean Energy Investment Plans which indicate the investment and other matters related to energy security. In the same way, the government is considering closing down close to 2000 megawatts of power generation capacity which is considered highly polluting. This goal will is set to be achieved by 2020. The closing down will encourage investment into clean sources of energy and thereby contribute effectively towards the energy revolution in the country. In order to support the carbon pricing arrangements, the government has established very strong governance structures. In this respect, the Clean Energy Regulator will collaborate with liable entities in order to ensure compliance and provide guidance and education to businesses and individuals on how to comply with the regulations. To facilitate this, the Regulator has powers to monitor compliance and also to take action against those who fail to observe the regulations. It should also be noted that the Regulator is essentially a public body that is bound by the law on public interests in addition to other constraints created within the bill. The Bill provides much advice to the government on aspects like pollution caps and that the process will be reviewed by an independent expert Climate Change Authority. This is basically a scrutiny that is aimed at ensuring the relevance, intergrity and robustness of the whole process of achieving Clean Energy. In any case, it is certainly expected that any challenges will be faced in the process. Considering the present situation on the usage of carbon based fuels in the country, there will be many challenges related to adaptation of the new measures. In this case, there must be periodic scrutiny aimed at ensuring that everything occurs in the right manner and addressing any challenges realized in the process. In conclusion, it is seen that the clean Energy Bill, 2011 has certainly come at the right time when the challenge of climate change seems very imminent. Like other governments across the world, the Australian government must play a great role in reducing GHG emissions as much as possible. The benefits of such a reduction will not only benefit the country but will also be part of the global solutions to this challenge. Clean energy will also reduce the present overdependence on fossil fuels. References Burke, A. (2011). Advisory report on the Clean Energy bills and the Steel Transformation Bill 2011. Canberra: Joint Select Committee on Australia's Clean Energy Future Legislation. Clean energy Australia: investing in the clean energy sources of the future. (2011). Canberra: Clean Energy Future]. Considine, M. (2012, April 1). A New Challenge for the Clean Energy Sector. Ecos, 3, pp. 12. Cothran, H. (2011). Energy alternatives: opposing viewpoints. San Diego, CA: Greenhaven Press. Lawson, B. (2012). Building materials energy and the environment: towards ecologically sustainable development. Red Hill, ACT, Australia: Royal Australian Institute of Architects. Lockie, D. (2012). Clean energy law in Australia. Chatswood, N.S.W.: LexisNexis. Saddler, H., Diesendorf, M., & Denniss, R. (2012). A clean energy future for Australia a study by Energy Strategies for the Clean Energy Future Group. Ultimo, N.S.W.: WWF Australia. Simon, S. (2011). Global warming. New York: Collins. Read More