Interview with Simon Dawes on Emissions Trading
Written by Karla Bell on Friday, 29 August 2008The Emissions Trading systems of the world are being developed in Australia, New Zealand and will be in the United States over the next year. The Kyoto Protocol itself will also go through further transformation as the 1st commitment period comes to an end in 2012. The next 18 months are critical in the development of the global accords and the individual country commitments.
Simon Dawes of DNV, has agreed to be interviewed on the basis that the following are acknowledged as his personal views not the views of his company, the largest auditor of carbon credits in the world with 50% of the global carbon market.
Mr. Simon Dawes - Heads DNV’s Australasia activities in climate change, and among his many carbon credit roles he helped develop and served as program manager for the Australian Greenhouse Office’s Greenhouse Friendly program and served as the DNV verifier of the New Zealand Government Carbon Neutral Public Service program. He holds an undergraduate degree in electrical engineering from NSW Institute of Technology and a masters degree in Business.
Q1: Do you think that the Australian ETS system should adopt a similar cap and trade system to other global systems or is there any merit in the Opposition Leader’s, Brendon Nelson plan?
A: Simon Dawes: On balance, I think the most effective position will be to prepare for a trading system with caps and an abatement trajectory following the international consensus pathway (whenever that may be achieved and whatever it may be) and to implement an ETS following either the international consensus trajectory or, if there is no agreement, a slower trajectory that does not simply result in emissions intensive industry going off shore for no net environmental gain.
It is clearly to Australia’s benefit to identify and implement each of those actions which provide an immediate economic benefit, and to position the economy and, most importantly, public opinion, to embrace the real cuts which will eventually be required.
Regardless of how much both the Government and Opposition discuss easing the financial pain for the Australian community the cap and trade process is essentially one of increasing prices to force alternative action, in this case low carbon solutions. The “Architecture of Australia’s tax and transfer system” was released by Treasury recently, and one clear message from that document is that all costs (whether it is a tax or the cost of an emission permit) end up with the final consumer.
Q2: Do you think transport meaning oil will be included in the Australian ETS system?
And the related Q: Do you think including petrol in an Australian ETS would make much difference to the rise in petrol, which the CSIRO in the SMH, July 11th has predicted could reach $8.00 a litre by 2018?.
A: Simon Dawes “Yes” to the first question and Fuel pricing is already sensitive. The variability of fuel prices is driven by external market forces, and is likely to progressively increase. From this perspective including a carbon price could be seen as simply bringing forward any overall price increase by a matter of months rather than creating some greater signal for change. The present proposals to offset any ETS cost impact on fuel with a reduction in excise is politically expedient, but will probably have little effect on the final outcome.
Q3: Do you think it is realistic for Australia to embrace hybrid electric vehicle, diesel and natural gas as alternatives?
A: Simon Dawes: Policy makers should not try and pick technology winners - that is better achieved by proving the potential gains in a vigorous free market. It can be helpful for government to provide early mover, technology neutral support to provide a basis for early competition of new technologies with incumbent technologies, particularly if the risk is high and there is a significant barrier to entry - carbon sequestration is a good example.
In terms of transport, even now the most efficient new petrol vehicles can have an equal or lower consumption than comparable diesel fuelled vehicles, and be similar to rival hybrid vehicles. Australian’s will, I think, be looking for means of individual transport for a long time to come and so finding non-petroleum transport energy sources is a critical task.
Q4: Do you believe this is the way forward for the transport sector?
If you take a long view of the use of petroleum fuels, then it makes economic and technological good sense to preserve petroleum fuels for those purposes where it cannot be readily replaced - air transport is one example - and use alternate fuels in other places, such as land transport and stationary energy.
Q5: Could Australian automakers start producing these vehicles?.
Australian manufacturers find it difficult to be cost competitive with existing technologies. A robust and internationally competitive alternate vehicle industry will require more than a small contribution to the largest car maker in the world to encourage it to build hybrid vehicles in Australia.
On the international scene
Q6: Do you think the failure of the G8 to get India and China to agree to 50% reductions in GHG is just round 1 in the negotiations or a more serious position taken by the developing world?
A: Simon Dawes: It does not seem in any sense likely that India and China will choose to leave their citizens deprived of the comforts we in the developed world take for granted for a minute longer than they need to. If politics is the art of the possible, then the possible for these two countries is framed in their respective domestic political and economic realities. The hard truth may well be that for these two countries there will be no reduction (at least in the short term) but an increase along a low emission per capita pathway. That leaves net reductions in the hands of the developed world. Will there ever be a complete contraction and convergence to actual equivalent per capita global emissions? Probably not in any simple analysis because of national differences and the impact of exports and imports to production and consumption emission patterns.
Q7: What are the important signposts along the road to the Copenhagen meeting end of 2009 and How important is the meeting in Copenhagen next year in terms of the post Kyoto 2012 agreements?
A: Simon Dawes: Realistically, if there is no framework in place by that time it is difficult to see other than a continuation of the status quo in terms of CDM type projects and regional trading systems. The Doha round of trade talks may have failed (at least that it is how it appears), but trade still goes on and bilateral and multilateral trade agreements continued to be forged. It should be remembered that there is now a depth of awareness and concern for the impact of climate change in the West that has scarcely been tapped. Businesses are looking to reduce costs through improving efficiency and marketing their green credentials. If the impact of modernisation has been moving progressively from the developed to the developing world then the benefits of low carbon technologies can be the same. Imagine if achieving a low carbon lifestyle had the same sense of benefit as the owning the latest large screen LCD television, and a sense of entitlement was attached to being able to achieve the benefits of modernity with low emissions.
Q8: Are you optimistic about turning around climate change?
Climate change will not be turned around, but it may be slowed with the global climate reaching a new point of relative stability, but at higher temperatures. Thoughts now seem to be moving towards plans to mitigate to a 2 degree rise and plan to adapt to a 4 degree rise.
Q9: What do you think the market needs as the major auditor of carbon credits internationally?
The main difficulties the market faces are getting enough competent human resources and complex administrative systems. The two are linked - complex systems require people with more training and greater skills. Of course, the skills required to manage complex systems are to an extent non-productive if the systems are more complex than is needed. If the systems can be simplified, harmonised and to the extent possible automated the market will grow more quickly and efficiently.
I would like to thank Simon Dawes for his candid comments on the Kyoto Protocol and Emissions Trading system.

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