Carbon trading scheme close to collapse

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A number of companies involved in the New South Wales carbon credit scheme are on the brink of going under because the value of carbon credits has plunged, dropping by half since the Federal Government said it would introduce a national scheme to replace the state one.

Transcript:

KERRY O'BRIEN: It's estimated that more than 1,000 jobs could be at risk this week in one of Australia's most effective new industries to combat climate change. The New South Wales Greenhouse Gas Abatement Scheme, known as GGAS, is a carbon emissions trading scheme where electricity retailers and big energy users offset their impact on the environment by supporting green-friendly projects. Established in 2003, the scheme has spawned a string of companies that specialise in reducing the nation's power consumption by helping householders install things like energy-efficient lightbulbs. But this month the market has crashed, with the price of carbon falling by half, and as a result these green programs are under threat. Matt Peacock reports.

MATT PEACOCK: It's one of the world's oldest and largest carbon trading schemes, second only to the giant EU (European Union) market.

TONY WOOD, ORIGIN ENERGY: It actually has resulted in reduced emissions driven through the state of New South Wales. So, the New South Wales Government at the time was incredibly far-sighted in setting it up.

JEFF ANGEL, TOTAL ENVIRONMENT CENTRE: Up to 50 million tonnes of greenhouse gases has been prevented from being emitted. Now, that's a pretty large contribution to the Australian effort.

MATT PEACOCK: Last year, New South Wales GGAS stopped 20 million tonnes of carbon dioxide going into the atmosphere. But just as in Europe, this scheme now has its problems. Over the past few weeks, the carbon price has halved, driving some green operations to the wall.

PAUL GILDING, EASY BEING GREEN: If this is not resolved this week, then we're going to have to take some very significant action to scale back the operation [and] possibly close it entirely in New South Wales.

TONY WOOD: We're now seeing the prices move around significantly in the New South Wales scheme and that is probably having an impact on various players in the market, but it's working like a market.

MATT PEACOCK: For the past four years, the New South Wales Government set a target of CO2 emissions per person that electricity retailers and big users must meet. Until this year, the targets have steadily been tightened. Retailers can meet their targets by buying credits from generators like Victoria's Hazelwood Power Station, that's reduced its emissions from dirty brown coal by using cleaner technology. Retailers can also buy credits from companies like Paul Gilding's Easy Being Green that have reduced how much power is used through the installation of things like energy-efficient lightbulbs.

PAUL GILDING: There's over 1,000 people employed every day installing lightbulbs, giving advice to householders, putting in water-saving showerheads.

MATT PEACOCK: But with the sudden price slump, all this could be gone.

EASY BEING GREEN EMPLOYEE: They're holding in to see how they can do their bit to save this company.

PAUL GILDING: Those 1,000 jobs could be gone within weeks if we don't see some action very quickly.

MATT PEACOCK: The question is, 'why has the price so suddenly crashed?' New South Wales points the finger at the lack of detail about the Federal Government's proposed scheme.

PHIL KOPERBERG, NSW ENVIRONMENT MINISTER: The reason the price is where it is, is because the Prime Minister simply has not enunciated a clear direction on the future of carbon trading in Australia, nor have any carbon ... pricing signals been sent out and that's fairly essential for this sort of market.

MATT PEACOCK: But the New South Wales Government itself could be to blame. Earlier this year it suddenly levelled off its emissions targets for the next 14 years. Jeff Angel of the Total Environment Centre sat on its advisory committee.

JEFF ANGEL: They totally ignored our submissions and recommendations that you should make the target tougher, that you should increase the penalty in order to get a much better greenhouse result from this scheme.

PHIL KOPERBERG: If we kept tightening the targets and thus raising the bar, so to speak, there was a very real danger of a national scheme when it was introduced and we were hoping that it would be imminent. 2012 is just one target date, that it would in fact set the bar at a different level which would in fact negate of much of what we would do, and therefore it would caution instability across the market.

MATT PEACOCK: That was a year ago, it's clear that Mr Howard isn't planning to introduce it for some time, so why haven't you tweaked the targets since?

PHIL KOPERBERG: Because, it is less than a month since that became clear. And to this day, we're still calling on them to clearly identify the framework required to have a national scheme.

PAUL GILDING: Sometimes the rules need to be rewritten to take account of human behaviour, and in this case I think the Government needs to intervene and reshape the market to make it easier again to be green in New South Wales.

MATT PEACOCK: There could be other less public forces at work here too. The more companies like Gilding succeed, the less power is sold by retailers, giving them an obvious motive to want them out of business.

PAUL GILDING: If Easy Being Green and similar businesses go out of business, then there is a lot less activity happening to cut electricity consumption, and that means they'll sell more power. So, add it up for yourself as to what their self interest is and where their behaviour will, as a result, be driven.

MATT PEACOCK: That's a view given credence in the latest newsletter of the Business Council for Sustainable Energy, that suggests there may be sellers on the market who are pushing the price down further, perhaps in the interests of buying back again at a lower price. James Cox is the scheme's regulator:

JAMES COX, INDEPENDENT PRICING AND REGULATORY TRIBUNAL: I'm not aware of any of that, no.

MATT PEACOCK: Would you be in a position to know?

JAMES COX: Probably not, unless someone brought it to our attention. As I say, our role is simply to make sure certificates represent genuine abatement and people meet their obligations. It's not our role to monitor what's going on in the market.

MATT PEACOCK: One trader, Origin Energy, denies any nefarious activity. Tony Wood thinks what we're seeing is simply market forces at work.

TONY WOOD: I think we certainly compete vigorously, and it's certainly also the case that small companies are coming all the time. Some small companies being big companies. Origin certainly five or six years ago was not a big company. So, I think that's just the dynamic of the way markets work, and I don't think that is changing, and probably nor should it.

MATT PEACOCK: And Origin Energy hasn't been flooding the market with cheap emissions trade?

TONY WOOD: No, I don't think there's any evidence that I've seen that Origin was involved in that sort of thing.

MATT PEACOCK: But whatever's to blame, the hard fact is that the very industry that's been driving immediate cuts to greenhouse emissions at the source by making Australian homes more energy efficient, may now be doomed.

PHIL KOPERBERG: Of course we're sympathetic. These companies have contributed significantly to our ability to drive down emissions.

MATT PEACOCK: So, is there anything you can do to save them?

PHIL KOPERBERG: No.

JEFF ANGEL: We've been told just recently by APEC we have to improve energy efficiency. We're being told by the Federal Government, we're being told by state governments, you can't do that without a robust, healthy energy efficiency industry. This scheme is collapsing and causing the destruction of that very important industry.

Broadcast: 11/09/2007

Reporter: Matt Peacock

http://www.abc.net.au/7.30/content/2007/s2029970.htm