ETS - Too much "stick" and not enough "carrot"

Although any strategy that targets reductions in carbon emissions should be applauded, I am not sure that an extremely complex theoretical modeling program such as the proposed ETS is the answer.

After all, in terms of commercial buildings, shouldn't we start by turning the lights off? Drive through any capital city at night, and you have to ask yourself, how serious are we in reducing emissions? Really?

The scary thing for me about the ETS is the complexity of the scheme and the tuning required to deliver the desired outcomes. Get it wrong and the economy could come to a screaming halt, but make them too soft and we will have created a costly paper churning burden without much benefit.

The outcome would likely be the latter, given the soft approach required to sell such a system. Unfortunately the proposed ETS is all "stick" and not enough "carrot" - it's the carrot that's going to provide an incentive for the creation of new, clean technologies in creating sustainable growth.

So here's a different approach - why couldn't energy be treated like water entitlements to farmers?

For example, you get an energy entitlement for your building (let's say its 20% less than last year), and this entitlement is very inexpensive, however use more than your entitlement and you will have to buy it from the free (real) market at market rates of say 5 or 10 times the allocation rate. Now you have an incentive!

This would drive the simple things such as turning the lights off, and at the same time provide reasonable paybacks for new energy efficient technology. This way the incentive is based on actual savings rather than artificial, theoretically constructed markets or schemes. Politically it would be favourable also, as there would actually be a substantial reduction in the underlying cost while rewarding those who value the resource.

An allocation system would be simple to implement (given all of the simple metering technology available today), and the market would allocate financial resources to new technology based on its "real" energy saving performance, as opposed to some theoretical modeling.

Unfortunately however, we are frozen with inaction - waiting and waiting……for something.

Grant Hall
Managing Director