Private investors will have to stump up hundreds of billions of dollars and those costs will ultimately be recouped from consumers.
Even if the government manages to replace coal power with cheaper renewable generation without extra costs to consumers, manufacturing costs could still be driven up by the safeguard mechanism.
Each of the 215 companies captured under the mechanism create more than 100,000 tonnes of greenhouse gases a year, generating a total of 140 million tonnes of greenhouse gases. That’s 28 per cent of Australia’s annual emissions of 501.5 million tonnes.
Under Labor’s plan to tighten pollution caps, these companies have a range of options to cut their emissions, including using clean technology, emissions offsets or emissions capture. For example, an aluminium smelter could use technology to replace its gas-fired furnaces with renewable energy. A coal mine could capture the greenhouse emissions that are typically released into the atmosphere when a coal seam is tapped.
The other option is for a company to buy carbon credits, which are currently trading at more than $30 a tonne, to offset emissions.
Labor promised during the May election campaign there would be exemptions for trade-exposed industries that compete with international companies operating from jurisdictions that don’t impose emissions caps.
Consultation on the details of the safeguard mechanism is set to start as soon as this month, and it’s more than likely that many companies will ask the government for easier emissions reduction targets than their competitors.
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