Carbon trading: hardly a householder’s ruin

How much more will householders pay for electricity under a carbon emissions trading scheme?

Too much, worries the PM: “If we embrace a target that will increase electricity prices more than they should go up, then we’ll do enormous damage to Australian households and the broad economy,” he told us last week.

For now, it’s all pie in the polluted sky. What about setting a responsible target? Will the higher cost of electricity really plunge household budgets into deficit, leading the economy to ruin and vindicate the PM’s reticence to act?

In fact, the National Emissions Trading Taskforce established by the states — which is different from the PM’s Emissions Trading Taskgroup — already has some answers.

The group has projected the additional weekly cost of electricity with an emissions trading scheme in operation. Their workings encompass three possible scenarios:

Scenario 1: Emissions capped at 2000 levels without substantial energy efficiency measures, which offers a 33% reduction in CO2 emissions at forecast 2030 levels.

Scenario 1a: The same as scenario 1 but with higher levels of energy efficiency.

Scenario 2: Emissions capped at approximately 1997 levels, offering a 43% reduction on forecast emissions for 2030.

(For a full explanation of the scenarios click here and scroll to page 91.)

Table: Average price increase for residential customers’ electricity ($/week) under carbon emissions reduction schemes:

Under scenario 2 residents of the Northern Territory will be hardest hit, paying an extra $229.32 a year for their electricity by 2030.

But using these assumptions, that’s as bad as it gets. Under scenario 1a, the national average is over $50 less — $88.68 per annum, or $1.71 per week. Under scenario 1 we’ll be paying an extra $114.77, or $2.20, per week.

The Heat Is On, a report on the future of energy in Australia by the CSIRO’s Energy Futures Forum, which includes corporate players like Xstrata Coal, Origin Energy, BHP Billiton, Orica Australia, and Rio Tinto, adds further context to the price increases:

While retail electricity prices will increase by 2050 by between 7 and 20%, those increases will be below the change in real income per capita in Australia which is expected to rise by over 100% by 2050 as GDP increases. By 2050, the average share of full time wages spent on electricity is expected to decline from around 1.1% in 2006 to 0.5 and 0.7. This is inclusive of carbon prices imposed in the scenarios.

The ABS has some relevant numbers, too. In February 2007, Australian workers (including part timers) took home on average $857.60. An additional $2.20 per week represents only 0.26% of that figure. And as we see above, the Energy Futures Forum caps the additional expense of running our toasters and TVs under an emissions trading scheme at only 0.7% for full-time workers by 2050.

What about the all-important beer and ciggies test? According to the ABS, this is how we allocated our weekly household budget in 2003-4 (for the full table click here).

Source: ABS

As we can see, forgoing one stubby or glass of wine a week would cover the cost. Friday night fish and chips are not under threat. Even accounting for inflation, does that qualify as “enormous damage to Australian households”?