26 May 2011 – GE one of the world’s largest multinational technology and finance companies has thrown its weight behind the call for a carbon price with a report launched on Thursday that says other countries have proved it is possible to grow the economy while reducing greenhouse gas emissions.

The report, Protecting Prosperity : Lessons from leading low carbon economies, focuses on the emerging concept of carbon productivity – using less energy to generate the same amount of economic wealth and emitting less pollution from the energy used.

It found that Australia’s carbon productivity growth lagged the rest of the world. Average growth rate for the UK and Germany was more than three times faster than Australia’s, that of the US more than twice as fast, and China nearly five times as fast.

“Australia’s carbon productivity in 2007 was just over US$1300 per tonne of CO2 equivalent of greenhouse gas emissions, measured at prices and exchange rates in 2000”  the report said.

“This compared to $4200 in Japan, $2600 in Germany and $1500 in South Korean and Canada.”

China’s new five year plan has adopted a carbon productivity target of 17 per cent lower CO2 emissions per unit of GDP in the next five years as part of its strategy, equivalent to a carbon productivity improvement of 20 per cent.

Produced by Vivid Economics and Norton Rose, the report said Australia’s relatively low carbon productivity means it likely that the transition to a low carbon economy will be felt more keenly in Australia than in some other countries.

Key to an improvement in competitiveness is the electricity sector, the report concludes.

Director of international economics for Vivid Economics, Cameron Hepburn, said that economies that could grow while reducing their carbon emissions would be best positioned for higher prosperity in a carbon-constrained future.

“Carbon productivity is driven by two key levers – energy efficiency, which is about using less energy to generate the same amount of economic wealth; and carbon intensity, which is about emitting less pollution from the energy that you use.

“This research finds that good policy should encourage improvements in both levers, and also provides some insight into the impact and cost of different policy mechanisms on carbon productivity.”

GE Australia and New Zealand president and chief executive officer Steve Sargent said: “This research shows that it is possible to break the nexus between economic growth and the growth of carbon emissions. If we look at the experience of other economies that are already on the move towards higher carbon productivity, we can learn how to do this most efficiently.

“The economies of our major trading partners have already made strong improvements in carbon productivity while we have fallen behind.  Australia should focus on shifting its carbon productivity and the sooner we do this, the more our pace can be steady and in our control. With the right policy mix we can do that while protecting our economic growth.”

Breaking this down into the two levers that drive carbon productivity:

  • Australia’s energy efficiency has improved, but at a slower rate than other countries. Energy efficiency growth in the US, Germany and the UK is almost double that of Australia. All four economies started in a similar position in 1980, but have now diverged considerably.
  • Australia’s carbon intensity is among the highest in the world. While most major economies have been reducing their carbon intensity, Australia’s carbon intensity continues to increase. Australia’s dependence on coal and particularly the use of high-emissions brown coal is driving this comparatively high carbon intensity. Furthermore Australia’s coal and gas plants are less efficient than their global peers.

Key recommendations from the report highlight that:

  • A transformation is needed in Australia’s electricity sector so that more electricity can be efficiently generated with fewer emissions – this will require investment into this sector.
  • A broad-based, market-driven carbon price is the lowest cost method to reach a given emissions target as seen in the markets with an ETS such as the UK and Germany.
  • A well-designed mix of policies with a few broad, complementary measures is most effective and efficient, as seen in markets with measures such as renewable energy targets, clean energy standards or gas incentive schemes.

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