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Carbon price: what about renewable investment?

By Alice Body - posted Friday, 15 April 2011

Since announcing the carbon price architecture, Labor has indicated that revenue generated in the carbon tax phase will focus on compensating householders, assisting industry and investing in clean tech. Labor has not yet provided detail about how it will divide the revenue between these priorities, yet a clear vision for how carbon price revenue will be invested will help or hinder Gillard's agenda.

To date, the Prime Minister's carbon price rhetoric presumes that market forces alone will guide the nation smoothly into a renewable future. In this way her government seems to regard a carbon price as something akin to flicking a switch to autopilot. Gillard's emphasis misses opportunities that will better sell a carbon price to voters, and showing some open-eyed leadership on climate change and transforming the energy sector.

Professor Roger Pielke Jr, of the University of Colorado, recently questioned the Prime Minister's political strategy, branding her carbon tax messages "muddled and inconsistent", and her general approach to climate policy "a mess." Rather than beating about the bush with vague references to the carbon pricing mechanism, Pielke Jr argues that Gillard can strengthen her case by using revenue for investing in transforming the energy sector. "The purpose of pricing carbon," Pielke Jr writes, "is to raise the revenues needed to invest in this future, just as we invest in health, agriculture and defence."


This is where the opportunity lies for Gillard to align her political interests with policy ones. This means presenting a sensible plan of action and responsibly compensating those who will be adversely impacted while stimulating the decarbonisation of the Australian economy.

The clean energy revolution is already underway across the globe. An intelligent policy response provides a window of opportunity for Australia to be a major contender in these emerging global markets. Yet the longer Australia clings to fossil fuel means of energy generation, the faster this window shrinks.

A carbon price is a practical tool to help Australia establish a firm foothold in the clean technology sector. If a substantial portion of the revenue from taxing carbon emissions is directly invested in green technology such as Concentrating Solar Thermal (CST), it amply equips Australia to flourish in a post-fossil fuel era, and guarantees the health and prosperity of its people.

It's easy enough to see how backward Tony Abbott's Coalition is on climate and energy. Yet while Labor continues to turn a blind eye to energy technology innovation, the current government can also be accused of a myopic view of the situation, presenting only vague promises of support for the nascent clean technology sector.

Economists and other experts concur that a carbon price alone is not enough to kick-start the clean energy revolution in Australia. In a recently updated Garnaut Review paper, senior climate advisor Ross Garnaut called for public investment in clean technology R&D, to the tune of $2.5 billion each year. Concurrently, Garnaut is of the opinion that the fossil fuel industry don't deserve compensation at all.

Investment in clean technology R&D is both useful and important, but there is a growing urgency surrounding the need for renewable energy infrastructure and generation, today. Currently there is a wide range of renewable options that are both technologically feasible and commercially available. Accordingly, it is ridiculous not to use carbon tax revenue support infrastructure that will facilitate the development of renewable energy resources. Like Garnaut, Beyond Zero Emissions' Leigh Ewbank supports investment in R&D but points to the additional need for public investment in enabling infrastructure and demonstration: "Every dollar that Gillard commits to compensating emissions-intensive industry is one less for climate-secure infrastructure." Ewbank argues at The Drum that:


…regardless of whether Australia gets a carbon price, public investment will still be needed to fund large-scale infrastructure projects to create the foundation of a clean economy. New transmission lines, electric vehicle recharge stations, high-speed rail and the first baseload CST plants are currently beyond the capacity of the private sector. This infrastructure, which will not get built by carbon price signals, is the platform needed to deliver Gillard's vision of "a sweeping technological revolution like Information Technology… in the 1980s and 90s.

Using carbon price revenue in this way is nothing new. In India, a coal levy contributes to developing solar energy installations. Similarly, in Germany, a tax on nuclear fuel rods finances clean energy innovation.

The Gillard government has good reasons to allocate a large chunk of carbon price revenue to clean energy R&D, infrastructure and demonstration. It's about time Labor started taking these seriously and make them part of their effort to win public support. Funding renewable energy is central to weaning the economy off carbon-emitting sources and making a strong case for establishing carbon pricing.

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About the Author

Alice Body is a writer opening her eyes while getting by in Melbourne, Australia…

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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