Smurf - like others, I'm very grateful to you for your incredibly informative posts.
For that reason, I'm trying to understand in detail what you think the long-term mistakes (or white elephants) are occurring as a result of this carbon tax.
40 years ago it was viable to use oil for power generation and new oil-fired plants were popping up everywhere much like gas-fired ones are today. Likwise, most factory boilers ran on oil (likewise hospitals, hotels etc) and in many areas just about all new homes were built with oil-fired heaters installed as standard. Oil supplied about 50% of world energy and rising.
Then the inevitable happened. Political tensions in the Middle East combined with a rapidly growing gap between Western world oil production and consumption, lead to a supply crunch and associated price shock first in late 1973, and again in early 1979. Economic crises followed, and for the next 30 years the term "energy" was almost universally taken to mean "oil physical supply and price risk" in the context of government policy and the like.
Oil had gone from being in massive over supply, to the point that new construction of coal and even hydro power was increasingly uncompetitive, to increasingly valued as a transport fuel and petrochemical feedstock. As supplies tightened, it ceased to be an economic fuel for boilers and the like. Australia, along with most other industrialised countries, formally committed via the IEA to minimising the use of oil in electricity generation as a result of this situation.
We are now approaching a similar situation with natural gas. Sure, we have plenty of it here in Australia but then we also have a boom in LNG plants under construction such that domestic supply is only available at international market prices.
The big mistake, as I see it, is that we are failing to learn from history. We have rapidly growing demand for gas globally with a lot of future growth "baked in the cake" by decisions already made, and over half of total reserves in the hands of Russia and the Middle East countries. Meanwhile there's a move to build new ships with gas engines (already happening in Australia), likewise trucks are headed the same way too. And yet despite all of this, we are planning our electricity generation on the basis that gas remains cheap. That's an awfully big gamble in my opinion especially given that we've already got local industry (notably Rio Tinto) saying they are having trouble securing long term gas supplies for Australian operations.
To some extent this situation would exist without the carbon tax, but the tax is clearly intended to increase reliance on gas. That is perhaps the only thing anyone can say with certainty - introducing a carbon tax will, in due course, mean we use more gas than would otherwise have been the case.
What would I do? I think Australia needs some sort of a plan for energy in view of all of this (including the CO2 issue).
1. What are we going to use for transport fuel 30 years from now? It's not likely to be crude oil, at least not at an affordable cost, and there's not much hope for battery powered trucks or planes. So what's our plan? I'd expect that we'll be using quite a bit of gas for this. Other countries are locking up oil supplies under long term contract, thus taking this oil off traded markets, and we're just hoping for the best.
2. What about fuel for process heat? That's a big one that is widely overlooked. Most likely, we'll still be using gas.
3. What about electricity? Are we sure it's a good idea to shift to gas for this as well? That's an awful lot of eggs in the one basket.
4. Is exporting most of our gas resources, and a large chunk of the coal, really in the national interest? That's a question that can't really be answered without first having an answer to the others.
Leave it to the market? Perhaps we should, but that's not really an option in practice for the simple reason best explained by saying that this thread is essentially about government involvement in the energy industry via taxation. Energy is a strategic industry, and it's rare to find a government that keeps away from it for long.
Nuclear power? I hope not, for a very simple reason. It would be the height of lunacy both economically and environmentally to be shipping coal half way around the world (using lots of oil in the process), whilst using nuclear energy to power the coal mines and the country they are in.
It would make far more sense to just use the coal where it is mined, and use nuclear energy in place of coal in those places relying on imports. That makes far more sense in every way from the environment to energy security. It's actually why France and Japan (and others) have historically been so keen on nuclear - they don't have local coal etc reserves of any note, and if you're going to rely on imports then using uranium does make a lot of sense simply in terms of supply security.
I'm not hard line anti-nuclear, but it undeniably does entail various risks and I see no valid reason why we would need to use it in Australia at the present time. As long as we are mining coal, and this coal costs less than building and operating a nuclear plant, there is no economic or environmental gain in going nuclear in Australia. Nuclear only cuts CO2 if we actually stop mining the coal - simply shipping more of it overseas doesn't help in the slightest.
It would make sense to put nuclear in China (for example) as a means of closing an Australian coal mine if the objective is to reduce CO2 but it doesn't make sense to put the nuclear plant in Qld or NSW and continue shipping out the coal (and using lots of oil in the process).
If you look at countries with nucelar power then they basically fit into these categories:
1. The plants are old and there has been little or no ongoing construction program once nuclear power was found to be uneconomic (eg USA).
2. There is insufficient local supply of coal, gas or hydro, thus necessitating that something be imported (eg France, UK) and nuclear is chosen for reasons of fuel diversification and hence supply security.
3. Done for reasons of national pride etc.
4. Electricity is a sideline, or a smokescreen, to the real objective of a nuclear industry aimed at producing weapons grade materials.
Obviously there are exceptions, but there aren't too many nuclear plants which are actually viable in direct competition with locally produced coal, hydro or in some cases gas. It could also be said that it's rare to find a nuclear plant which is not in some way subsidised or at least underwritten by taxpayers.