Isra-Mart srl : Carbon price delay leaves super savings vulnerable

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AUSTRALIA urgently needs a carbon price so superannuation funds can ramp up investment in clean energy and technology industries and future-proof your nest egg.

A study being circulated by the Australian Council of Superannuation Investors warns that three-quarters of coal, oil and gas reserves would be worthless if governments take strong action to control climate change.

ACSI president Michael O'Sullivan said the study showed that Australia needed to put a price on planet-warming carbon emissions in order to spur investment in new low-carbon industries and limit the economic impact of a reduced value for fossil fuel reserves.

The study concluded that new scientific data provided a "clear end-date" for widespread use of coal, oil and gas that is far sooner than expected, and meant serious short and medium-term risks to resource-sector investments.
"While CO2 pollution isn't currently priced in Australia, coal, oil and gas companies have a balance-sheet value of their reserves which is a substantial contributor to their share price. But their share price can change very dramatically if those things are no longer exploitable," said Mr O'Sullivan who advises domestic and international fund members with $250 billion in assets under management.

The study also said there is a strong case for the abandonment of carbon capture and storage technology as a "competitive solution" to providing low-carbon electricity.

"Australian governments and the coal companies have placed a lot of faith in developing scalable carbon capture and storage. The problem is it's going to take 20 years and even then may only reduce emissions by about a third and in the meantime the game is lost," Mr O'Sullivan said.

The study on carbon risks to investments is by Phil Preston, former head of global credit research at Colonial First State Global Asset Management, and Paul Gilding, a climate change corporate adviser to companies including Ford and BHP Billiton.

It was based on research by German Government-funded Potsdam Institute, one of Europe's leading climate advisers, which showed that governments' current commitments to hold global warming to a 2C average rise meant just 890 billion tonnes of greenhouse gases could be emitted between 2000 and 2050 but at current rates would be emitted by 2024.

The Institute concluded that more than 75 per cent of currently proven, economically recoverable fossil fuel reserves would not be burnt and would have no economic value if governments moved effectively to hold the average warming to 2C, which requires global annual emissions to peak and start falling this decade.

"Within that time, governments will have to intervene otherwise it will be too late. What this paper says is that will mean a very rapid conversion to renewable energy - much more rapid than the usual idea of a long phase-in," Mr O'Sullivan said.

"And if it's going to be a much shorter phase-in, then the reserves that resource companies have discovered but are yet to exploit will be downgraded in value very quickly because they won't be able to be utilised," he said.

"The single big-picture thing we need in Australia is a price on carbon because without it people can't invest profitably in most of the renewable energy that's available.

"There is plenty of renewable energy available in Australia - we have abundant geothermal, solar and tidal potential - but they don't become economically viable while pollution is free."

Not-for-profit volunteer group Beyond Zero Emissions and Melbourne University's Energy Institute have produced an award-winning report on how to switch Australia to zero-emission electricity sources by 2020.

BZE holds the Queensland launch of the report at 6pm on Wednesday October 27 at the Brisbane Exhibition and Convention Centre.