A carbon tax is only likely to foster the much more efficient use of energy, and substantially reduce carbon emissions, if it provides a price shock.

Supply/demand economics says that the demand for a product is inversely proportional to price, the higher the price the lower the demand. In theory, as a carbon tax would increase energy prices, then people should search out ways to use less electricity.

However, demand for electricity is largely insensitive to price, unless of course the price increase is large and sudden.

For example, there is no doubt that over the last year or two household electricity prices have increased. Has this reduced demand? I don’t have any access to data, but anecdotally for the large majority of households I think not. And the reason for this, I would argue, is that whilst the increase may have been in the order of say 15%, the increase has not been enough for energy consumers to consciously focus on reducing their energy usage. Sure, the price increase is enough for many of us to complain. But not enough to take action to reduce our consumption.

Electricity prices in Australia are very low compared to wages. For most organisations the cost of energy is only around 1% of their total operating costs. If the price increases by 20% its not exactly damaging the bottom line.

AGLs chief economist has warned of power prices doubling by 2015. Contrary to popular opinion, electricity price rises to 2015 will be driven more by network and generation capacity constraints than by carbon pricing.

Surely a doubling in electricity prices over the next 5 years would reduce electricity consumption? Yes, I think it will, but not by much. But a doubling over a one or two year period would probably significantly reduce electricity consumption.

For example, lets take a business that has a 20% gross profit margin, and spends 1% of its income on energy. An increase over one year of energy prices of 20%, will reduce its gross profit by just 1%. This is unlikely to get much interest. On the other hand, if electricity prices doubled, the gross profit would by cut by 5%. This is more likely to get attention drawn to it and foster action to reduce electricity usage.

The science, as recently highlighted again by Professor Ross Garnaut,  is very clear that we must reduce carbon emissions. Therefore a carbon tax, if it significantly increases the price of power over a short time period, is likely to drive energy consumers to use less energy. Many energy consumers will seek to use energy more efficiently, whilst still getting the same outcome from their use of energy.

And, contrary to popular perception, cutting energy consumption by 50% or more is possible with today’s technology. But you have to genuinely want to reduce your energy use to do that. A number of our clients have halved or nearly halved energy consumption in their schools or offices, with a payback typically of 5 years or less.

If you really want to, you can probably cut your energy consumption by 15% to 20% AT NO COST. A company of lawyers we worked with cut electricity usage in their office by 19% without any investment in equipment, just by choosing to waste less power. Our low electricity prices relative to wages mean that Australians are very wasteful of energy.

From a scientific perspective we must reduce GHG emissions rapidly. Anything that therefore reduces the consumption of fossil fuels and drives the demand for renewable energy is to be welcomed.

To be confident of a stable future climate, the science says slash carbon emissions now. A carbon tax that produces a price shock will help achieve this. Energy efficiency will help us cope with the price shock. Electricity at $0.50/kWh in 2012 would be great to help slash emissions.

Across Australia power bills are going up and the climate is clearly changing. So you would think that our mainstream media would be  bringing us good news stories about how we can cut our power bills and reduce carbon emissions, with a fast payback on investment.

But no. The focus is doom and gloom.The reporting I see is about how reducing carbon emissions is expensive, about how programs to reduce carbon emissions push up prices.

Have you ever picked up The Australian, The Age, The Sydney Morning Herald, The Courier Mail, the Australian Financial Review or any of our major papers and seen a good news story about how much money someone has saved from energy efficiency? I haven’t.

Have you ever seen a TV program that shows how different businesses are saving money and reducing carbon emissions through energy efficiency? I haven’t (but I admit I hardly ever watch TV).

Want a bit of cheer from your mainstream media. Sorry, you have to go to other side of the world.  Such as to the NY Times.

Why aren’t we seeing a lot of article like this in Australia? Believe me, there are lots of good news stories from energy efficiency if you want to look. Check out the good news interviews on our website for some of them.

According to many commentators the recent weather in Australia cannot be linked to climate change.

So check out this weather map… (caution, contains strong language)

Today’s Financial Review front page news was about the desperate need for more power stations in Australia. The article stated that according to the Australian Energy Market Operator electricity consumption is increasing at 2.5% per year, and we need between 700 and 900 MWh of extra generating capacity per year. And that to cope with increased demand and a carbon price, Australian power generators will have to invest up to $120 billion in new electricity assets over the next 20 years.

These comments, and the failure of the article to mention energy efficiency, clearly show that by and large most people just don’t “get” energy efficiency. Because if as a society we really got energy efficiency, we wouldn’t need any new power stations.

So if you “get” energy efficiency, tell someone. Let me give you some examples of what energy efficiency means:

• A local government client has cut electricity consumption in its office complex by 32% (2010 vs 2006). The office complex contains three major buildings, two of which are over one hundred years old and subject to heritage constraints.


Local government electricity consumption

• One of our earliest clients, Westernport Secondary college, used 31% less electricity in 2010 than it did in 2004. Roughly same number of students. Maximum peak demand at the college has also dropped, by39%.


WPSC electricity consumption

• The all-electric CarbonetiX office uses 35 kWh/m2/year – that’s everything – light, power, heating, cooling. Most comparable offices would use over 100 kWh/m2/year. We are certainly using much less than the previous tenant.

All these examples show what energy efficiency can do to reduce the demand for energy – and cut carbon emissions -whether a building be old or new, owned or leased. And the energy efficiency measures implemented at the local government office,  Westernport Secondary College and the CarbonetiX office haven’t been particularly complex or used leading edge technology. In fact some of the savings come not from technology, but from choice. Choosing to switch off, to only switch on when necessary, choosing to change the air conditioner temperature settings, choosing to be conscious of energy usage.

The example of Westernport Secondary College is particularly interesting. If every household and organisation that uses electricity could do what Westernport Secondary College has done we would need about 39% fewer power stations, not more.

I’m not the only one who “gets” it. New Scientist has recently reported on a study by Cambridge University which found that energy efficiency could cut world energy usage by over 70%.

Energy efficiency has multiple benefits:

• It reduces carbon emissions
• It saves money for the energy consumer
• It reduces peak demand
• It reduces upward pressure on electricity prices

So, if you “get” energy efficiency tell someone!

As with many people climate change science has been on my mind with the devastation of the floods and now hurricane Yasi in Queensland.

Sea level rise is one of the likely impacts of climate change, driven by a melting of the Greenland Ice cap. The melting of the Greenland Ice cap will lead to a sea level rise of around 7 metres. I was a bit sceptical about this number when I learnt of it. How could the ice melt from such a seemingly insignificant place on the world (after all, who do you know who has been to Greenland?) cause such a high sea level rise? So I did some quick investigation, found out that most of the Greenland ice shelf was over one km thick, and a rough calc showed that this estimate of sea level rise was about right. But how long would this take? Surely it would be over hundreds or thousands of years?

If you have ever seen a presentation by David Suzuki or can remember your high school science, or understand compound interest, you should appreciate the concept of exponential growth. For example, which would you prefer – $1 million or 1 cent that doubles every day for the next thirty days? If you opted for the 1 cent that doubles after 20 days you’d only have a little over $5,000, but after 30 days you would have over $5 million. With exponential growth nothing much seems to be happening, then suddenly things seem to change very quickly.

The Climate Code Red blog has recently reported on research by NASA scientist James Hansen that indicates that the rate of mass loss from the Greenland ice shelf is doubling roughly every 5 to 6 years. Hansen is quick to point out that the data records are too short to be sure of the doubling time. But if the rate of mass loss does double every 6 years, after 60 years the rate of mass loss will be over 500 times what it is today. And this exponential growth in the rate of loss of ice is what Hansen has predicted could translate into a 5 metre sea level rise by 2095.

Over the last century the sea level rose by somewhere between 150 to 200mm (according to the USA’s environment protection authority). Lets assume that that the sea level rose by say 2mm in 2010, in line with the average yearly rise in the century before. If we take the crude approximation that sea level rise also takes place exponentially, and we are looking at a sea level rise of 5 metres by 2095, by how much will the sea have risen between 2010 and 2020? By just 30mm – surely nothing to make the alarm bells ring or make coastal property values plummet. By 2030 the rise will be 80mm – mmm. By 2050 the rise would be 330mm. Probably still not enough for some sceptics to acknowledge climate change. In fact it would only be until 2068 that sea levels were a metre above 2010 levels.

Now I’m not a climate change scientist and the numbers above have been generated from some very rough calculations that wouldn’t stand up to peer review. But my point is that sea level rise – seen as one of the great threats of climate change – will probably creep up on us. Just because its happening slowly now doesn’t mean sea level rise will always be slow.