Emission Trading System (ETS)

Also referred to as a Carbon Trading System when looking specifically at Carbon Dioxide.

In 2007 I attended the Conservation Council (WA) talk on the introduction of a carbon trading system in Australia. The Howard government had announced its introduction and given businesses a deadline to get ready. Beyond this date, no company could start up and use the excuse 'I didn't know' when they were put out of business from paying taxes.

As we have seen however, the Rudd government has failed to push through the necessary legislation due I feel mainly to pressure from within the party from mining company executives, and opposition from the opposing party. A large component of the plan to get on a carbon trading scheme was also to eventually be able to export carbon credits through carbon sequestration in Australia. This can be done expensively by storing in the ground, or by growing plants or algae which convert carbon dioxide into oxygen. There had even been bids from overseas investors looking into arid sequestration where no water was required, simply using combinations of hardy plants by seeds scattered in arid regions and applying initial water, large dry regions could start converting carbon dioxide into oxygen. Unfortunately with massive resistance at Copenhagen by several countries, no agreement was made and Rudd lost a lot of support.

How does it work?

In theory, an emission trading system (ETS) is an excellent idea, and there is no doubt we will have one in coming years. There have been major failings in other Emission Trading Systems around the world (UK and US) where there were too many loop holes in the system, it was too soft or people simply used the system to exploit those who knew little about it. In some ways it is preferable not to have an ETS if our alternative is a half hearted one, as it will just slow things down and force people to find ways around barriers.

For an ETS to be thorough it must:

  • Take into consideration agriculture. This is difficult to do, yet imperative as agriculture accounts for a large percentage of our emissions.
  • Transport - We must pay an environmental tax for the fuel we burn in vehicles. I know this will push the price up for many, but it will allow the introduction of electric vehicles and other fuels which are currently priced out of the market.
  • It must take into consideration the environmental tax associated with exporting goods overseas for development, otherwise we merely artificially create a financial incentive to ship goods to parts of the world where there is no environmental tax as it is cheaper than developing here - i.e. waste of unnecessary fuel.

So what was wrong with the proposed ETS?

The proposed ETS was very shoddy with a lot of these areas unaddressed and the argument from the opposition clearly pointed out that direct investment into renewables and sustainable industry was indeed a positive solution as this is the idea in the first place. Unfortunately sadly this is rarely followed through on, and money handed out can often have less value than placing it in a competitive market place where the quality of the development drives investment.

Unfortunately we have had some very unfavourable press about the 'tax on everything' and then the 'mining super tax'. Personally I wouldn't mind paying more tax if the money was used properly, but with so much being handed out in lump sums to individuals, schools without continuity programs to manage assets, ridiculous internet censorship schemes and poorly executed energy reduction schemes, I would rather hang onto my tax.

One of the biggest challenges of future governments in Australia will be to demonstrate the ability to work with states to roll out schemes in 'the real world'. To acknowledge that if artificial incentives are put in place all of a sudden people will end up taking short cuts and killing people if there is a quick buck to be made, no matter how good the idea is.


So do we really need an ETS?

Yes! Although I think it would work better at a state driven level with a bottom up approach and a top down approach. Here are two examples:

  • A company I found out about emits chlorine into the Swan River at 5 parts per million. It would be totally achievable to reduce this to around 2 parts per million using a fairly inexpensive piece of equipment, however this company would then start to be priced out of the market as its competitor can emit at 5 parts per million. Even though over many parts of the world 2 parts per million is the regulatory standard, no company is going to want to spend its money on something it isn't forced to spend money on.
  • Several workers on a fly in fly out mining job in WA will come back to Perth for their 10 days off every 4 weeks yet leave their air conditioner running full blast over that entire time so that when they return, they walk into a nice cool room. Again, there is no incentive for the worker to save the energy as all electricity is paid for by the company.

These are several examples of areas where environmental development needs to take place urgently. One person can so quickly undo the good work of dozens of other people whether it is through a business decision or a simple bad habit. A carbon trading system will put a lot of pressure on companies to cut back and allow renewable industries entry point into the market.

What do you think?

Although I have listened to several debates on the pros and cons of an ETS, I have to say that I am still unfamiliar with a lot of the internal complications of such a system. I would however like to see a state wide approach as a trial before a full scale system is launched. This would allow the final system to be more rigorous on big emitters in the long run, and we could learn from mistakes before the final system is launched.

It is worth doing some research into this field as politicians I feel take advantage of the average population's naivety on the subject. Some feel it is a big tax on everything and some believe it is a solution to climate change. Actually if done right it should sit in the middle somewhere, but it is not an excuse to avoid direct investment in sustainable industry and it is not to be used as a political tool anymore. It should be done urgently, comprehensively and draw a hard line on polluters.

Carbon Tax

A more sensible approach to handling the increasing carbon emission problem is the introduction of a carbon tax. In 2010 several mining companies publicly announced their support for one, as it would be good for long term business. When the head of a mining company issues such a statement, then heads start turning. A carbon tax will change the playing field by allowing sustainable energy projects to compete financially with fossil fuel projects during their start up phases.

Some have criticised a carbon tax suggesting that it won't actually reduce emissions. Some of the arguments for this claim come from the way humans treat taxes and the psychology of change.

Carbon Emissions

So just how bad is Australia at contributing to global warming? Actually if you look at the emissions from Australia we sit at about 2% of the worlds emissions. So a small reduction in emissions is not going to do anything right? Wrong. There is much more to it than that. Australians are amongst the most wasteful people on this planet and many of the products we purchase have been made overseas. The emissions are due to us, but they appear elsewhere.

The Global Part of Global Warming

I heard someone say once, I think Australians are missing the 'global' bit out of global warming and I agree. Fighting human induced climate change is not just about changing light bulbs, it is about making a global influence to our part of the problem. Australia is only a very small part of the world in terms of population, however we do have a massive impact globally and the potential to dig up and export a large proportion of the material causing so many of the problems. Some of the less obvious ways we impact the rest of the world are:

  • Trading between countries we like to point the finger at
  • Producing technology that can assist less developed countries conform to stricter pollution and emission standards
  • Emission producing procedures which exist because of Australians yet are not in 'our backyard'
  • Political contribution - are we sitting where we need to be politically or dragging down the team.

In fact, cutting down on electricity use and switching to sustainable energy is only a small way in which Australia influences global emissions. As a big exporter of raw materials to our somewhat dirty polluting neighbours, we have a massive responsibility to be part of trade that is low carbon in its entire life cycle, and does account for carbon emissions exported from Australia.

If we don't consider these other areas of 'global warming' and climate change, then we are like the neighbour who dumps their trash in their neighbours back yard and then calls the council and complains about the smell. We must be accountable for all our emissions throughout the life cycle of their production and use.