australian carbon pricing mechanism: obligations and opportunities

Australian Carbon Pricing Mechanism - Obligations and Opportunities

Sarah Wang, Senior Consultant

Energy & Power Systems

27 June 2012

2

Focus Points

Section

What is Carbon Tax?

Where Does the Revenue Go to?

Who Are Liable to Pay the Carbon Tax?

Impacts on The Economy

Are Industries Ready for the Carbon Tax?

Opportunities Driven by Consumers’ Desire to Mitigate the Cost on Carbon

Government Funding Program Related Investment in Clean Energy and Energy-efficiency Systems

Opportunities Arising for Low-emission Power-generating Systems

3

What is Carbon Tax?

2001 2009 Jan 2011

Mandatory Renewable Energy Target (MRET)

Renewable Energy Target (RET)

Large‑scale Renewable Energy Target (LRET)

Small-scale Renewable Energy Scheme (SRES)

July 2012 July 2015

Carbon Tax Fixed Price (Per Tonne)

Plans ReducingGHG

Time Line 2007

Introducing National

Greenhouse and Energy Report

Scheme (NGER).

$A23.00 $A24.15 $A25.40

Carbon Pricing Mechanism

Carbon Trading in the World Market

Carbon Price Trading Range

+20.0% +25.0% +30.0%

$A 15.00/tonne $A 16.00/tonne $A 17.05/tonne

July 2015 July 2016 July 2017 July 2018

Floored Price

International Average Price

Ceilinged Price in Australian Carbon Market

Ceilinged Price in Australian Carbon Market

Time Line Source: Frost & Sullivan analysis

4

Market Readiness

Degree of Carbon

Reliance

Investment in Research &

Development

Informed Market

Participants

Effective Policies and Legislation

Existence of Alternative

Energy Sources

Effective Carbon Tax System

Source: Frost & Sullivan Analysis

Better positioned

Worse positioned

Factors determining the success of carbon tax in reducing the carbon

Source: Frost & Sullivan analysis

5

Where Does the Revenue Go to?

Carbon Tax Impact: Carbon Tax Revenue Allocation, Australia, 2011

Industries and Businesses Sup-

port40.0%

Households' Subsidies50.0%

Others10.0% The funds are allocated to

qualified businesses and industries for technology upgrades and other support measures.

5.7 million households will get cash subsidies for increased electricity expenses.

Large Carbon Emitters

Note: Others include administrative cost and operational cost, etc.


6

Who Are Liable to Pay the Carbon Tax?

Electricity Generation14%

Coal and Other Min-ing

23%

Natural Gas Sup-pliers9%

Industrial Processes14%

Waste Disposal Sec-tor

30%

Other Fossil Fuel-in-tensive Sector

11%


7

Agricu

lture

, fore

stry a

nd fis

hing

Min

ing

Man

ufac

turin

g

Constr

uctio

n

Servic

es0.0

10.020.030.040.050.060.070.0

2010

2020 without carbon pricing

2020 with carbon pricing

Per

cen

t

Source: The Treasury, Australian Federal Government

Impacts on The Economy


Series10.0

4.0

8.0

12.0

16.0

20.0

Job

s (M

illi

on

)

Source: The Treasury, Australian Federal Government

2040 2050

Without carbon pricingWith carbon pricing

2010 2020 2030

Carbon Tax Impact: Industry Structure

With/without Carbon Price, Australia, 2011 Carbon Tax Impact: Employment

With/without Carbon Price, Australia, 2011

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Are Industries Ready for the Carbon Tax?

Liable Entities* Non-liable Entities

Awareness of Electricity Price Increase

Awareness of Electricity Price Increase

Participating in EEOParticipating in EEO

Is there a Strategy for Tackling Cost Increase

Challenges

Is there a Strategy for Tackling Cost Increase

Challenges

Low High

* The list of liable companies has not been published until the end of April 2012. The term ‘liable entities’ used here refers to companies that are certain to have a CO2-e emissions that exceed 25,000 tonnes, such as electricity generation companies, smeltering companies, industrial and commercial fleets.


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Opportunities Driven by Consumers’ Desire to Mitigate the Cost on Carbon

Reduced Energy

Bills

Reduced Energy

Bills

Distributed Power Generation

• Combined heat and power generation

• Combined cooling, heat, and power generation

• Alternative power generation

Distributed Power Generation

• Combined heat and power generation

• Combined cooling, heat, and power generation

• Alternative power generation

• Process improvement

• Process control

• Efficiency improvement

• Process improvement

• Process control

• Efficiency improvement

Improved competitivenessImproved financial return

Improved competitivenessImproved financial return


10

Government Funding Program Related Investment in Clean Energy and Energy-efficiency Systems

2012-2013 2013-2014 2014-2015 2015-2016 2012-2013 2013-2014 2014-2015 2015-2016

Gov-ern-ment Fund-ing Pro-gram Related In-vest-ment in Clean Energy and Energy Effi-ciency Sys-tems

4300 5450 6120 7357

Growth Rate

NaN 0.267441860465116

0.122935779816514

0.202124183006536

500

2,500

4,500

6,500

3%

13%

23%

Avail

ab

le G

overn

men

t F

un

ds (

$A

Mil

lio

n)

Gro

wth

Rate


Government Funding Program Related Investment in Clean Energy and Energy Efficiency Systems : Available Funds, Australia, 2012 – 2016

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Who will benefit from the Opportunities? - Energy-saving Solution Providers

Where Are The Opportunities?

Alumina Steel Mining Chemicals


EQUIPMENTManufacturers,

Installers, Distributors

SOFTWAREVendors, Installers and

System Integrators, Resellers

SERVICEEnergy service companies

(ESCOs), Consultants, Architect & Engineering Design/Build Firms, Contractors, Project Financiers, Maintenance

Service Providers

12

Customer Opportunity/Fit Matrix

EXISTING Product / Service NEW Product / Service

Efficiency Improvements

• Opportunity to leverage existing products (equipment and software) for energy/carbon gains by layering information solutions over them to ensure improved visibility, control and agility for the customer.

Value-Adding Strategy • Opportunity to brand and promote energy

management services (that are typically embedded in total service contracts) as specialist solutions.

• Opportunity to position improved energy-efficiency products at a premium.

• Large untapped opportunity for carbon/energy consulting and training.

Diversification

• Opportunity to widen product portfolio with niche or specialist solutions focused on energy/carbon metrics.

• Opportunity to shift away from stand-alone solutions to integrated offerings capable of delivering system-wide energy/carbon benefits.

Customer/Geographic Expansion

• Allocate more marketing and delivery resources to geographical clusters of large emitters (e.g. in the major mining states (Western Australia and Queensland)).

• Strategically segment customer groups by energy consumption intensity and focus more on the upper 50% energy consumers.

EX

IST

ING

Mar

ket

NE

W M

ark

et

13

Closure of emission intensive coal fired power generation

capacity

Cash and carbon permits (administrative allocation)

Purpose of Funds Eligibility

Generators with capacity > 1.2 tCO2-

e/MWh


e/MWh

Energy Efficiency Opportunities

En

erg

y S

ecu

rity

F

un

ds

En

erg

y E

ffic

ien

t O

pp

ort

un

ity


e/MWh

Available Government fiscal support for Power Generation Sector

• It is estimated that about 2,000 MW of highly emission intensive coal fired power generation capacity is going to be closed by 2020. The funds are used to provide transitional subsidies into gas and other low emission intensive power generation. .

Government Funding - 1


14


Coal Mining Abatement Technology Support Package

($A 70 Million)

Coal Sector Jobs Package ($A 1.26 Billion)

With fugitive emission intensity of > 0.1 tCO2-e /tonne

in 2008 - 09

Small and medium coal sector participants

• The total subsidies is estimated to cover about over 80 percent of the emissions covering about 25 mines with 18 in New South Wales and 7 in Queensland.

• The Australian cola mining sector is largely affected by the carbon tax for its ‘fugitive emission’ from coal seam gases (CSG), mainly methane. The coal sector has been denied the access to the EITES program, therefore Australian coal mines will not receive free carbon permits.

Available Government fiscal support for Coal Mining Sector



15


Jobs and competitiveness program

Steel transformation plan Steel manufacturing industry

steel manufacturing, aluminium smelting, and petroleum refining

Annual energy consumption > 0.5 PJ, subject to assessment

process

Targeting energy intensive industrial processing sectors. The funding is expected to encourage energy efficiency in the sectors

Available to broader large energy consumers across all industry sectors

Clean Technology Investment Program

Available Government fiscal support for Manufacturing Sector



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Today’s Presenter

• With over 7 years of experience in industry research and business consulting, Sarah has undertaken research and consulting projects in renewable energy, environment, power generation and transmission, building technologies, and chemicals and materials.

• She is now a Senior Consultant at Industrial Practice, Australia and New Zealand; focuses on managing and conducting industry trends research and analysis, to generate customised reports, briefings, and other content for the subscription services.

Sarah Wang, Senior Consultant

Frost & SullivanAustralia and New ZealandSydney

For any other enquiries, email us: [email protected]

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For Additional Information

Donna JeremiahCorporate CommunicationsAsia Pacific+61 (0) 8247 8927 [email protected]

Carrie LowCorporate CommunicationsAsia Pacific+603 6204 [email protected]

Jessie LohCorporate CommunicationsAsia Pacific+65 6890 [email protected]

australian carbon pricing mechanism: obligations and opportunities

Business

success of carbon tax

carbon pricing source

carbon tax fixed price

economy carbon tax impact

carbon tax revenue allocation

large carbon emitters

energy efficiency systems

frost sullivan analysissource