This is a back-to-front view. Carbon imposts don't subsidise low carbon generation; rather they handicap dirty energy by making it pay some of its hidden costs. Initially the minimum CO2 price will be set at $20 a tonne. A tonne of black coal burns to 2.4 tonnes of CO2 (call it $50 worth) and creates about 1 Mwh of electricity. 5000 cents divided by 1000 kwh gives 5c per kwh. If labour and financing costs stay the same that's the amount electricity prices should increase. Whether a CO2 price of $100 can ever be reached is unknown.

The beauty of paying those CO2 charges to the government is that it will pay for efficiency measures like insulation, solar water heaters and smart meters. Think of it like compulsory superannuation for retirement. In this case it is compulsory carbon saving. What will bugger it up is exemptions, free permits and dodgy offsets. Also some of the CO2 revenue could be wasted on clean coal which cannot work on a large scale.

As to proxy measures like SO2 limits inconsistencies will arise. The main example here is a switch to gas fired generation which may meet CO2 limits but not the 20% renewables target.

Taswegian
How is the original $20 a tonne arrived at?

Even the people who foolishly believe that Rudd’s emission control initiatives will have the slightest effect on natural climate-change don’t seem concerned about the costs. They seem to think it’s only the rich people who generate such emissions who will be doing the paying. Wrong!

Some of the more savvy greenies know that the cost will be exorbitant, but they wish to ruin the economy, anyway, and return it to something like the middle ages, where man, whom they regard as the biggest environmental problem there is, will have the hard time of it that we deserve.

And, by the way, “The scientists and climatologists at IPCC… (are not necessarily)… competent in the science and modeling of climate change.” In fact, they have used inaccurate and unconnected information to get it entirely wrong. Anyone can see that the climate is not co-operating with their ‘consensus’ and lies.

And the first people to complain, when the hugely increased energy bills and added costs of transport of goods start to flow in, will be those sheep who go along with the CO2 hoax now.

"The scientists and climatologists at IPCC may be competent in the ... modeling of climate change"

Then again, they may not:

http://www.sciencedaily.com/releases/2009/07/090714124956.htm

"In a nutshell, theoretical models cannot explain what we observe in the geological record," said oceanographer Gerald Dickens, a co-author of the study and professor of Earth science at Rice University. "There appears to be something fundamentally wrong with the way temperature and carbon are linked in climate models."

He talks of a "cost per working person of more than $A12,000 per year", and "such costs will be borne by the tax-payer".

This would make perfect sense if the money were to disappear down some black hole.

In fact, with the simplest scheme of a carbon tax, it would simply be collected by the Government, and used to either reduce other taxes, or in some other worthwhile way.

With the proposed scheme, which is more complicated, the same applies - the cost of carbon permits is not money that just disappears from the economy, it just gets distributed differently.

The actual economic cost of carbon reduction schemes is completely different - it comes about from things like wind power generation being more expensive than coal power generation, etc, etc. This cost is not negligible, but it's quite is quite different from the amoount of money which changes hands in a carbon trading scheme.

WAL the ETS floor price (called a 'pathway') could have been $7.50 or $32.95. I guess $20 sounded neither too high nor too low. If all big emitters had to pay it 500 Mt X $20/t = $10 bn. That's a lot of insulation.