Back to All News

Modelling and the CPRS

Estimates & Committees
Scott Ludlam 26 Oct 2009

Senator LUDLAM-I want to refer to your modelling on the impact of the CPRS on emissions from coalfired power stations. There has been a bit of debate about that this morning already. There is a particular graph that you produced which shows output from the coal sector out to I think about 2050 from now. Can you talk
us through the thinking that is implicit in that modelling? In particular, what drives the reductions in emissions from the coal sector between now and 2020?

Ms Quinn-Do you have a particular graph in mind? Is it one from the report?

Senator LUDLAM-I will just see if I can reference it for you. It was in the modelling that you provided on the impact of the CPRS on emissions from coal-fired power stations.

Ms Quinn-There are several different charts. For instance, chart 6.29, which was under the CPRS minus five scenario-

Senator LUDLAM-Is it 6.24?

Ms Quinn-No, 6.29 on page 179 of the Australia's low pollution future report.

Senator LUDLAM-I do not have that in front of me. The one I am referencing is 6.26. It is just a fairly simple graph. I think it runs out to about 2050.

Ms Quinn-Okay, graph 6.26 is emissions from the entire electricity generation sector, not just from the coal sector.

Senator LUDLAM-Okay, great.

Ms Quinn-It is fair to say that quite a lot of the reduction is related to coal, but if you wanted to particularly talk about coal, then 6.29 is probably more appropriate because it breaks it down between what is happening on black coal, brown coal and carbon capture and storage technology.

Senator LUDLAM-Do you want to just talk us through the assumptions underlying those projections out to 2020, where there is a bit of a dip?

Ms Quinn-Yes. Out to 2020, the reduction in emissions from the electricity generation sector are driven partly through reductions in energy demand as a result of higher electricity prices and through technology switch between different technologies. Out to 2020, there is the renewable energy target, there is switching to
gas and there is reduction in electricity from the coal sector. In terms of the amount of emission reduction that we get from the renewable energy target versus the CPRS component alone, the reduction in emissions is at about twice as much reduction from the CPRS than from the renewable energy target.

Senator LUDLAM-Okay. That assumes carbon prices of what out to 2020?

Ms Quinn-Out to 2020-this is an assumption that it is under the CPRS minus five prior to the government's announcement of a fixed price permit-they go from $20 in real terms in 2010 in that modelling to a carbon price of $35 in 2020. So, under that scenario, this is the CPRS minus five scenario, the actual emission allocation is a five per cent reduction by 2020, which is around 525 million permits in 2020.

Senator LUDLAM-So there is that dip out to 2020 which you are saying is partly the impacts of the CPRS kicking in and partly renewable energy targets and switching technology. Between 2020 and about 2033, and I am still on graph 6.26 here, the emissions have basically flat-lined; they stay fairly stable out to the mid-2030s.

Ms Quinn-The emissions from the electricity generation sector, yes, that is correct. There are two offsetting influences here: there is continued growth in energy demand through time, and the supply of electricity is continuing to grow quite strongly through that period; and the emissions intensity of the electricity supply is falling as a result of fewer switching between different technologies.

Senator LUDLAM-Okay, so those two things are cancelling each other out and emissions staying roughly flat out to 2030 from that sector?

Ms Quinn-That is right.

Senator LUDLAM-What happens after 2033 where we see a big dip and emissions finally start to fall from that sector?

Ms Quinn-In 2033 it is partly that there is a slight slowing in electricity demand in the reference period, and it is also that carbon capture and storage becomes commercially viable in this scenario in 2033. What happens when it becomes commercially viable is that those plants that have previously been built with a
capacity to add carbon capture and storage start to do so slowly over time and as new plant comes in they also come in immediately using carbon capture and storage.

Senator LUDLAM-That is what I thought it might suggest. Can you tell us the name of any consultants or experts in the field that you relied on who have stated or would state publicly that they think clean coal will be invented and affordable by 2033?

Ms Quinn-We received advice going through the process of the review and the analysis from various sources, and the technical assumption made in the modelling report was that from 2020 the technology, the knowledge of how to put the pieces of the puzzle together, would be available. When it was actually adopted
within different scenarios was based on its commercial viability. This modelling was carried out by the MMA modelling group which suggested that carbon capture and storage would become viable at the carbon prices of demand profiles and other considerations in the scenarios between 2026 and 2033. This analysis is consistent
with that also produced by other modelling organisations in Australia such as the modelling done for the Energy Supply Association and modelling done for other organisations.

Senator LUDLAM-I realise that some of this is actually in that study that you have there, but could you provide for us any more details, perhaps on notice if that is necessary, of who MMA actually used and who the experts were that were consulted? We hear very different things about the availability and the timing of the
commercialisation of clean coal, because at the moment, I hope you would agree, things are not going particularly well?

Ms Quinn-I am happy to take that on notice. In broad terms, the sources were organisations such as the International Energy Agency, which does a comprehensive survey of the state of technology, and they provide their technology perspectives report on a regular basis, so there were international analyses. There was also the
analysis in the US done by the Environment Protection Agency and domestically it was done by different engineering companies, the Garnaut review, the carbon capture and storage CRC and various engineering components.

Senator LUDLAM-I realise you do not have them right at the moment, but can you provide those for us on notice and a more detailed breakdown of whose advice you relied on? The picture does not look particularly good if that technology is not available by 2033; we would see no reductions in that sector, presumably.

Ms Quinn-No reductions relative to today, but significant reductions relative to what we expect to happen in the absence of emission pricing. It depends upon which way around you think about it. We do see significant reductions relative to emissions in the reference world. We have a strongly growing population and
continued growth in per capita incomes, so in the absence of a price on emissions, emissions from the electricity generation sector are expected to grow substantially. So a flat lining relative to today is a substantial reduction in emissions relative to what we would otherwise expect.

Senator LUDLAM-Yes. It is certainly better than it could be, but as far as the atmosphere is concerned, emissions from that sector will be the same effectively as they are today, even with the introduction of the CPRS?

Ms Quinn-In the modelling we have provided that Australia is meeting its emission reduction targets in terms of undertaking its share of emission reduction in the globe. An important thing is that the CPRS does not mandate where emissions come from; which particular sector. It is difficult to be precise about what technology will come on board when, and that is precisely one of the reasons why economists suggest that something like a cap and trade system is a more efficient mechanism for reducing emissions rather than andating emission reductions in particular sectors. Australia is meeting its emission reduction targets at the time that we have flat lining emissions from the coal sector.

Senator LUDLAM-I gather it will be a bit difficult to model the costs of future carbon capture and storage when the technology has not been commercialised anywhere yet, but for the purposes of your modelling, can you provide us with information on the basis of your assumptions about the future cost of renewable technologies which are falling quite rapidly?

Ms Quinn-Once again the cost of renewable technologies was obtained through research and discussion with people in the industry, both internationally and domestically. We asked for submissions from people on the cost of renewable energy. We had quite a lot of discussions with people in different components of the
renewable energy sector and a lot of that was fed through to the consultants used in the report, which includes ACIL Tasman and MMA. That built on a body of work that had previously been done through the National Emissions Trading Taskforce with other states and also the Garnaut review analysis of alternative technologies.

Senator LUDLAM-Could you possibly provide those on notice for us as well, including the future cost estimates of renewable technologies across the board.

Ms Quinn-Sure.

Back to All News