If the government were doing its job properly, we wouldn't need this thread.
We should all know how the proposed scheme is intended to work.
Apart from people like you, Smurf, I doubt many of us have any idea.
I'm just really taken aback at the projected 16% rise in electricity charges for a start!
Totally agreed that community understanding of this issue is very low and government needs to be doing better.
Electricity generation is the single largest source of emissions and the one most easily cleaned up, hence the general focus on it. Easiest to clean up for two reasons - a few very large sources of the emissions (power stations) would be much easier to fit capture technology to than, say, 10 million cars.
And you can use solar, wind, hydro etc to generate electricity with the consumer being unaware that anything has changed. It makes no difference if my computer is running on power from Morinna (a tiny 102 year old hydro plant in Tas), Loy Yang (a massive brown coal plant in Vic running since 1984) or Pelican Point (a medium size modern gas-fired plant in SA).
You may not realise it, but if you live in Qld, NSW, Vic, Tas or SA and are on the grid then ultimately you're connected to Morinna, Loy Yang, Pelican Point and all the others. It's all one big system and 99.999% of people would have no idea which power station increased its output when they turned the toaster on this morning. And there's no reason for them to know, or care, since it's exactly the same thing being produced by all of them - electricity.
The industry generally makes investment decisions assuming the long term price of wholesale electricity to be about $40 per MWh.
But if we add a $20 carbon cost (per tonne) then that will increase average industry costs to around $60 per MWh (it's close to 1 tonne of CO2 per MWh on average).
And so $60 becomes the market price which consumers will pay and upon which decisions will be based. That's the key point of how this all works.
So if you have the opportunity to build a renewable source of power at $55 then previously it wasn't economic and so you didn't build it. But now it's economic and so you build it. There's your CO2 saving. And because of the higher prices, consumers will find that solar hot water, insulation, heat pumps etc become more financially attractive and so more will be installed. More CO2 saved.
The market price of the permits will adjust through normal market (like the ASX) operations to find that balance point where sufficient investment in CO2reduction occurs. So overall it's simply using a financial market to address an environmental problem. How the emission reductions occur will be determined by consumers and industry based on what makes financial sense.
All the government is doing is this (my words) - "we've capped total emissions to x level and will issue permits for that. Up to you how you manage that situation - either buy permits at the market price or you can't pollute".
Those who find it cheaper to cut emissions than buy permits will presumably do so, thus reducing emissions and demand for the permits. Those with a higher cost of cutting emissions (or who simply can't) will just pay up. So the emissions end up being limited to where the CO2 emission is of greatest economic value.
As for fuel exports, it's emissions within Australia that count to my understanding. The trouble is with aluminium etc - all the emissions occur in Australia even when the consumption is overseas. At least with coal most of the emissions will be counted as being somewhere other than Australia. In the same way we, not Saudi Arabia, get the blame for petrol etc.
I don't know if that explanation is really going to help, but I'm trying. I should point out that I'm not advocating this scheme, only trying to explain how it works.