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Why Any Carbon Price Reform Is Good For Our Economy

The Government’s climate change package should strengthen the economy by raising productivity in three important ways. A lot of attention is going to the income-tax reform, which should boost participation, but just as critically this package will:

  1. Help businesses become more energy efficient and innovative, and that will keep them globally competitive in the 21st century; and
  2. Shift our energy system from an incredibly wasteful model to a smarter mix of local energy plants, energy efficiency, renewables and smarter fossil fuel generators.

The global economy is changing. China and India are rising economic superpowers, creating new opportunities but also challenging our established manufacturing and service industries.


Many Australian companies will need to adjust and innovate to prosper in this new environment. Much as , this means they need to change.

At the same time, oil, gas and coal prices are rising rapidly, in part due to the rapid economic growth in Asia. This will dampen Australia’s economic growth unless we either shift to new forms of energy supply or get dramatically more efficient with fossil fuels.
We should invest massively in new renewable energy technologies, but these investments will take time to bear fruit. As a result, fossil fuels will still play a major role in our energy supply for many years to come, which means that health of Australia’s economy will be strongly affected by their efficiency at turning fossil fuels into useful services


Energy efficiency isn’t just about the way that we use energy, it’s also about the way that we generate and distribute energy. About 70 per cent of the energy in coal is lost as heat when it’s burnt in places like the La Trobe and Hunter Valleys. A further 10 per cent of the energy is lost travelling hundreds of kilometres to cities, and an astonishing 95 per cent of the remaining energy is wasted in a conventional lightbulb. In total, less than two per cent of the energy in coal is turned into light. In other words, we waste 98 per cent of the value of coal.


In contrast, a cogeneration system loses less than 30 per cent of the energy when it turns gas into electricity and uses the waste heat to cool and warm buildings. There are virtually no losses between the generator and the appliances it powers, and if you use a compact florescent bulb you’re getting five times as much light out of the energy in the gas. A smart mix of generation and end use technologies across the economy could dramatically increase the economic benefits we get from each unit of fuel.


When the Labour Party goes out to spruik the low cost of the carbon price, over-selling, and possibly even lying. Although due to her recent history of not keeping her word, and politicians reputation of over-selling and pulling wool over the eys of the public, in fact, Julia Gillard under-selling the benefits of the scheme. While opponents paint Treasury’s modelling as overly rosy, it actually underestimates the huge opportunities in energy efficiency, and doesn’t even consider the impact of programs like the $1.2 billion in grants earmarked for energy efficiency in industry and the $10 billion Clean Energy Finance Corporation.


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