Agreed on geothermal. Lets see one work reliably for a few years.

Regarding a carbon price why not use $30/tonne and lower income tax accordingly. Assuming Australia produces about 500 million tonnes of CO2 per year that can be relatively easily counted, that would raise a paltry $15 billion per year in tax revenue. Income tax raises about $200 billion per year. $15 billion is about 7.5%. Lower the income tax rates by 7.5% across the board. Treasury does those kind of caluclations in their sleep.

The coal industry will scream but it will have the effect of reducing the demand for high carbon energy and making renewables cheaper. That is a good thing not just for climate change but for preserving fossil fuels which have lost of other uses than for burning. There will be criticism that it is implemented too quickly. I say implement it over 5 years at $6/tonne the first year, $12 the second, $18 the third up to $30. At the same time reduce income tax by 1.5% the first year, then 3.0% the second, 4.5% the third etc.

Eric,
I would agree that coal should be preserved, as there may be other uses for coal in the future. There are even some experiments underway to produce a form of oil from coal.

However, we are extremely dependant on coal to keep our economy alive, and not have the IMF knocking at the door.

So, what would be done with the tax cuts? Allow people to spend them on imports?

I think not. I would think any extra revenue from the burning of coal should go towards stimulating Australian manufacturing, so we don't become so dependent on selling coal in the future.

Vanna -

The tax cut will have to go to paying higher energy prices. The reduction in income tax will equal the increase in the carbon tax.

Promoting manufacturing is a very difficult job. I'm not even sure that the government is capable of doing it efficiently.

The le Mesurier article points out that if a price is placed on CO2 emissions (most likely as a result of government introducing an ETS), it will have three effects.

1, It will increase the price of electricity produced by existing highly polluting power stations.
2, It will make electricity produced from renewable sources (including nuclear) much more competitive with coal and gas burning power stations.
3, this will reduce domestic use of coal to generate electricity and our ability to sell the stuff overseas when major coal using countries are forced to price carbon – or pay a carbon tariff on their exports.

The effect on coal production over the next decade is predicted to be initial growth then a decline for domestic use and export over the next decade. Seems a reasonable argument.

For political (ALP opposition) and planning/building (15 year time span) reasons, this appears to rule out nuclear electricity generation in Australia, though not in countries which import our coal, such as Japan, China, India etc.

The idea that Australia can overcome its difficulties with nuclear by expanding its use of other renewable electricity, include geothermal, seems to offend some commentators as unrealistic.

The Australian government apparently thinks otherwise. It has provided several grants to assist companies mining for geothermal energy, including $90m to assist with building the first commercial 25MW power station, expected to start in 2013.

By deciding that a price will be placed on CO2 and by stipulating low emission standards for new power stations, Government at State and Federal levels has given power station proponents encouragement to use lower emitting gas rather than coal.

This too gives support to the argument that coal production in Australia may expand in the short term but, in the longer term, is destined to contract.

Agnostic, the gas you want to burn, instead of coal, is a much more valuable resource for use in manufacturing. It is ridiculous to replace coal with gas for power generation, when billions of dollars has been wasted on trying to pin CO2 with some environmental damage, totally without success.

Until someone can come up with something even resembling proof that coal fired power has a detrimental effect on the environment, it is industrial vandalism to burn gas, when coal is available.

Vanna, you are a bit out of date there, with your coal to petrol "experiments". Germany fought the second world war using petrol synthesised from coal, & South Africa have been producing a moderate percentage of their liquid fuel that way for years.

Still it makes no sense to spend much energy converting coal to transport fuel, & burning gas in big boilers, [power houses], when we can burn coal in the boilers, with no waste energy, & use the gas for transport fuel, with little waste energy.

I guess by now, John Le Mesurier has got the message that he probably needs to do a bit more research into the electricity generating field so he can get a more informed view of what is actually possible.

A carbon price of $30 will actually have very little impact on the use of coal. Combined cycle gas probably needs something north of $35 to make replacing a coal plant worth considering. Only the RET scheme will encourage the build of renewable energy systems and solar thermal could need a carbon price north of $200 to replace coal plants. Others have discussed the highly speculative nature of engineered geothermal solutions. A 1 MW power plant is 3 orders of magnitude smaller than a typical new coal plant. It's no small feat of mechanical engineering to move relatively new technology 3 orders of magnitude.

The inconvenient truth for John, and the Australian government, is that there really is only one technology that can replace coal plants for a carbon price around $30. It's the one the government currently dismisses out of hand. I am hopeful that this will change over the next couple of years. As with the Americans, they will get it right in the end only after they have tried everything else first.