Australia's LNG nuclear bomb  

The BS's Alan Kohler has an article on the repeal of the carbon tax - Australia's LNG nuclear bomb.

The LNG export boom will make it virtually impossible for Australia to meet the government’s carbon emissions reduction target. The high price of gas in Australia has made replacing coal-fired power stations with gas uneconomic and “fugitive emissions” from the LNG plants mean that reducing overall emissions within Australia by 5 per cent by 2020, as government policy states, will require much bigger cuts in other industries.

Tony Abbott will have to either drop the promise to cut emissions by 5 per cent or the promise to repeal the carbon tax – both together will be impossible without massive government spending under the proposed “direct action” policy of paying companies to reduce emissions.

Actually previous government policy was for a 15 per cent reduction in emissions if the rest of the developed world also took action on climate change. That’s happening, so the 15 per cent would have applied. The Coalition said it would match Labor’s emissions reduction target, but the figure of 15 per cent doesn’t seem to appear in its policy – only 5 per cent.

Anyway, not trying to reduce carbon emissions at all would put Australia at odds with the rest of the world, including China and the US, and endanger trade agreements, so the prime minister and Treasurer Joe Hockey will be, or at least should be, desperately hoping that the Senate never allows the repeal of the emission trading scheme legislation, so it’s not exactly a broken promise – at least they tried. ...

The emissions trading scheme currently in place would eventually produce revenues to the government of up to $10 billion a year. It’s understood Treasury has estimated the eventual cost of the Coalition’s direct action plan at $10 billion.

That’s a $20 billion turnaround and makes climate change a “nuclear bomb” in the federal budget, as Professor Ross Garnaut says and as he puts in his book Dog Days, it would end up “distracting the government and the polity from the great economic challenges facing Australia”.

Like Australia, the United States has enjoyed a huge boom in gas supplies by exploiting smaller and tighter reservoirs – in their case in shale, in ours coal seams.

However the US banned LNG exports and is now allowing them on a case-by-case basis, resulting in a collapse in the domestic gas price to about a third of what it was. The result is wholesale replacement of coal-fired power stations – new and existing -- with lower carbon emitting gas.

In Australia, export pricing has led to a huge increase in the domestic gas price despite the big lift in available supply, with the result that gas is still uneconomic as a replacement electricity fuel for coal.