Sticking with the theme currently dominating the media at the moment I thought this post would be a good opportunity to actually do some calculations showing just how much prices will increase for high GHG emitting products such as fuel and electricity.
The coalition would have you believe the country will be ruined by a carbon tax and the Government tells us that it will be okay. In reality it will be somewhere in between with winners and losers although until firm details on the tax are decided all we can do is calculate based on what we know.
To calculate these costs I will use what is known as emissions factors, which are used to convert a measured input to an output of CO2-e or carbon dioxide equivalent. CO2-e is what is generally referred to as carbon in the media. CO2-e values are calculated from the different GHG’s depending upon their global warming potential (GWP). For example one tonne of CO2 released = one tonne of CO2-e.
Whereas one tonne of methane released = 21 tonnes of CO2-e. This is due to the differing effects that these gases have on the atmospheres ability to trap heat. Methane has a higher global warming potential and is primarily released form grazing livestock such as cows as they digest their food. Sulphur hexafluoride, which is released from electrical switchgear and magnesium smelting, has the highest GWP of 23,900 which means for 1kg this equals 23.9 tonnes of CO2-e! When politicians and the media refer to carbon they really mean CO2-e.
The majority of GHG’s from fuel combustion are CO2 with small amounts of Methane and Nitrous Oxide. In a post 2004 vehicle according to the National Greenhouse and Energy Reporting (Measurement) Determination (2008 Schedule 1) each 1,000 litres of fuel burned in your car will produce 2.4 tonnes of CO2-e. So at $25 per tonne of CO2-e this works out at $60 per 1,000L of fuel or 6c per litre. Yes that’s right, 6c per litre which at the moment is less than half the GST component of fuel.
The main GHG from electricity is CO2 created from the burning of coal to boil water to create steam to turn a turbine generator that generates electricity. 80% of Australia’s electricity comes from this source, which is why Australia is the second largest generator of CO2-e per capita in the world. Second only to Kazakhstan. Hmm… let’s not try to beat Kazakhstan.
From the National Greenhouse and Energy Reporting (Measurement) Determination (2008 Schedule 1) each kWh of purchased energy in NSW generates 0.9 kg of CO2-e. If we take the full life cycle into account, which includes mining and transport of the coal, this number becomes 1.06 kg of CO2-e per kWh of electricity. Let’s call it 1kg just to make calculations easier and to put the number somewhere in the middle of this range. Keeping in mind that 0.9 is a more realistic figure in terms of what would actually be used when the carbon price comes in.
At a carbon price of $25 per tonne of CO2-e this works out at 2,500 cents divided by 1,000 the amount of kg in a tonne) which gives us 2.5 cents per kg of CO2-e or per kWh of electricity purchased. That is all. This means your power rate will go up from say 18c per kWh to 20.5c per kWh. As I have stated before the majority of price rises in energy comes from having to build more distribution infrastructure to cope with increasing demand.
If everyone used less energy then demand loads would not be so great and the cost of power would not rise as dramatically as it has recently or is expected to in the future.
As a business of any size you need to measure your GHG emissions, set objectives, avoid then reduce emissions followed by switching, sequestering assessing and offsetting in that order. This will place you in a strong position to reduce your carbon risk as well as giving you the ability to communicate with stakeholders where your organisation stands in terms of managing carbon.
Contact BGB to organise your assessment now so you can start saving!
