Daily Archives: November 11, 2011

How a Carbon Price Could Reduce Emissions


CleanTechies Guest AuthorPublished on Date November 10th, 2011

Australia has just enacted a carbon tax law that it will implement mid-2012. Is a carbon tax a better policy than a cap and trade policy? Better minds than mine disagree over the answer to that question and the primary reason for disagreement is that they are both susceptible to misuse when in place even though both have the ability to effect the right kind of change – which is to say, to reduce carbon emissions while mitigating the cost of doing so.

I’m going to sidestep that argument and I’m going to concentrate on the Power Sector to the exclusion of all others for this article. And now I will suggest that a “Carbon Price” has three goals to achieve in order to use to realize the ultimate objective of reducing the carbon emissions of the power sector of any given jurisdiction without jacking the price of energy and killing the economy:

1. Reduce Demand for Electricity
2. Re-dispatch (using different generators as first call)
3. Lowering the emission profile of new generation to be brought on-stream

And now I’m going to further suggest that the way to do any of this is to RECYCLE the revenue of a carbon price, not to remit them to a government treasury but to the goal of reducing emissions and mitigating the cost of doing so. How do you ensure that the revenue stream doesn’t end up in the government coffers? Put the revenue stream in the hands of a Trustee charged with the goal of reducing emissions and the cost of electricity where possible.

Will a Carbon Price achieve these three goals? What are the Problems?

Reducing Electricity Demand: The problem here is that the elasticity of price for electricity is actually even smaller than that of gasoline. And as everyone knows, as the price of gasoline goes up so does the grumbling; but not the reduction in use.

Re-dispatch: There is a base demand for electricity that is fulfilled by hydroelectric, nuclear and wind facilities because they have the lowest marginal cost to produce that electricity. They are also low carbon emitting sources. As demand runs above base, other generators are called on-stream such as Coal, Fuel Oil and/or Natural Gas, probably in that order. So how high does a carbon price need to be to turn off coal and run renewable energy generation? To make a broad statement, you could double the price of electricity to consumers and reduce emissions by about 5%.

From a consumers point of view, it is the clearing price of power that matters in a wholesale power market. Without a really high carbon price you can’t displace coal and a really high carbon price ain’t going to fly, politically. So, with, say, a $25 carbon price, if demand runs to a level that requires fossil fueled generators to run then that higher price of electricity is paid for every single MWhr of electricity produced at that time. The result is a windfall in gains for generators with a lower marginal cost of production and that windfall is paid for by consumers. (residential, commercial and industrial). Basically, the carbon price is passed on to consumers in a magnified form because even non-emitting generators get the higher clearing price.

New Generating Capacity: There is a better argument here. A Renewable Portfolio Standard, or a Feed-in Tariff or other proactive government policy allows a market operator to insert renewable generation at the bottom of the bid stack so that the (at this time) higher price of renewables is paid for renewable generation without influencing the clearing price of all other generators.

Now for the Good News

McKinsey & Company have a rather famous carbon abatement curve, as shown below. What it shows is that Energy Efficiency programs can reduce emissions at an incredibly inexpensive rate. Follow the curve, as the cost of abatement climbs steeply (from deeply negative cost) and then less so from left to right. You can find this curve here.

So what is the message here? If you take the carbon revenue stream and apply it to energy efficiency programs to ‘buy’ energy efficiencies the cost has been worked out by Robert Cowart of the Regulatory Assistance Program (RAP) to be about $0.03 per kWhr. Not bad, eh? Take revenue, buy efficiency and reduce demand. Reduce demand and reduce the amount of time that fossil fuel is used to generate electricity and thereby reduce carbon emissions. Better still, there are economies of scale in the purchase of energy efficiency programs.

Putting a price on carbon is a great idea, but it is incomplete. The bottom line is that utilizing energy efficiency programs, renewable portfolio standards, Feed-in-Tariffs and other policies greatly accelerate the reduction in GHG emissions. Putting the carbon revenue stream in the hands of a Trustee with a mandate to reduce GHG emissions ensures that the overarching ambition is achieved.

Need an example? The Regional Greenhouse Gas Initiative of the Northeast and Mid-Atlantic states of the U.S.A. Read’em and weep.

Article by Miles McDonald.

Top Ten Cleantech Highlights of Sydney, Australia


Published on November 11th, 2011 by Shawn Lesser

Sydney is the largest and most populated city in all of Australia. It is also the capital of New South Wales. Sydney is known as a global center for the arts, culture, fashion, commerce, music, entertainment, tourism, and education. It was home to the 2000 Olympic summer games and the 2003 Rugby World Cup finalmatch. While it is known for so much, many people also know this thriving metropolitan city as a center for clean technology, including renewable energyenergy efficiency, and sustainability. Here are just a few of the highlights of what Sydney has to offer the clean technology industry.

1 ) Sydney Energy Cooperative. As a not-for-profit environmental organization, Sydney Energy Cooperative looks to involve the community in all activities related to energy. The cooperative was created as public awareness regarding energy and environmental issues became the forefront of many discussions. However, with all the talk, there has been little action and the Sydney Energy Cooperative seeks to take those actions. It was established in 2007 by students studying photovoltaic and renewable energy engineering at the University of New South Wales. There are three main areas of activity – education, joint purchase of solar panels, and lighting installations.

2 ) BlueGreen Engineering. BlueGreen Engineering is well known company in Australia dealing with energy efficiency, renewable energy, and sustainable design. Their mission is “To provide cost-effective innovative solutions which reduce energy consumption and cost.” BlueGreen Engineering has been involved in a number of products to assist in reducing energy consumption, including solar systems, lighting, and HVAC systems.

3 ) EcoSave. EcoSave was established in 2002 in Sydney and is one of the largest water and energy conservation companies in the country. Today, EcoSave works with a number of metropolitan and rural communities in Australia as well as New Zealand to provide water and energy saving solutions. For example, their efficient lighting solutions include lighting control systems, light fitting replacements, light fitting refurbishment, and voltage reduction units for fluorescent lighting. Water saving solutions include flow control for taps, water recycling, water efficient showers, cistern retro-fits, leak identification, and water and energy metering consolidation.

4 ) Energy Efficient Building Sydney. For homes in Sydney that are interested in becoming more energy efficient, Energy Efficient Building Sydney, is the best company to call. They provide everything from energy audits to eco-friendly products, energy saving products, heating and cooling, insulation, hot water services, landscaping, water harvesting, geothermal capabilities, and even information about how to get in contact with architects and designers that are able to build energy efficient homes.

5 ) First Electric Vehicle Charging Station in Sydney. In May of 2010, Australian-based company Chargepoint launched the first electric vehicle charging station in Sydney. This charging station is located in Derby Place, Glebe and is able to fully charge an electric vehicle battery in approximately three hours. With this being the first charging station, Chargepoint is now looking to create other stations in various other capital cities, including Perth and Melbourne. However, before these stations are created, the one in Sydney will be used as a “test subject” to see what the public response is like along with energy usage.

6 ) BP Australia. BP Australia is involved with the exploration and production of natural gas, oil, and liquefied natural gas, as well as the refining, transportation, and marketing of petroleum. However, BP Australia also has a long history of looking for measures that address current climate change, and therefore is always looking into the development of much cleaner fuels as well as low-carbon alternatives when it comes to power generation. For example, BP Australia has completed over 170 solar power systems for New South Wales schools and there are currently plans underway for another 75.

7 ) Easy Being Green. With so many Australians worried about the effects of climate change, Easy Being Green looks to help residents in Sydney attach the negative climate changes through a number of easy energy saving methods. Easy Being Green has been able to put a cap on over four million tons of carbon dioxide emissions a year, which is roughly equivalent to removing around one million cars from the roads. Some of the solutions offered include solar photovoltaic, solar hot water, and heat pumps for all residential homes.

8 ) Sydney Water’s Pledge to Renewable Energy. Sydney Water recently created their ownRenewable Energy Generation Program to assist in its pledge to become a carbon neutral company by the year 2020. The objective of this program is to reduce carbon dioxide emissions by 54,000 tons annually. Through this project, Sydney Water installed five biogas cogeneration facilities, along with three hydro-electric generators at wastewater treatment plants and pipelines throughout Sydney.

9 ) 2010 Multi-Million Dollar Smart Grid Project. EnergyAustralia in June of 2010 rolled out a $100 million trial of a smart grid project known as Smart Grid, Smart City across 50,000 homes in New South Wales, including Sydney. This is the first commercial-scale smart grid in all of Australia. Around 15,000 homes involved in the project will also have in-house displays and websites to allow them to track their utility use as well as their emissions levels.

10 ) Sydney Opera House Becomes More Energy Efficient. The Sydney Opera House, a multi-venue performance center that is easily one of the most recognizable landmarks in all of Australia, is looking togo green by installing a number of energy efficient measures. For example, the opera house replaced all the pumps of their air conditioning system with more efficient ones and changed the way in which seawater cooling is utilized in the air conditioning system to allow the equipment to work much more efficiently. Not only that, but the opera house is also starting to replace all their lighting with much more energy efficient lighting, including the utilization of LEDs.

Article by Shawn Lesser, Co-founder & Managing Partner of Atlanta-based Watershed Capital Group – an investment bank assisting sustainable fund and companies raise capital, perform acquisitions, and in other strategic financial decisions. He is also a Co-founder of the GCCA Global Cleantech Cluster Association”The Global Voice of Cleantech”. He writes for various cleantech publications and is known as the David Letterman of Cleantech for his “Top 10″ series. He can be reached at shawn@watershedcapital.com

AUS is second best in pension system

This article from Mercer while much about the US pension system mentions about they index and shows Australia as the second best after Netherlands. Makes me really lucky to be residing in the lucky country.


US pension system holds onto Top 10 ranking in global index – but reform needed


United States
New York, 11 October 2011


The United States’ retirement income has held onto its tenth-place ranking in a global comparison of pension systems, but the sustainability of the system is at risk due to a fall in asset values and a rise in government debt.  According to the 2011 Melbourne Mercer Global Pension Index, the US system requires further reform to withstand the pressures of its ageing population and help Americans secure sufficient retirement savings.


According to the Melbourne Mercer Global Pension Index many of the world’s retirement systems are under significant stress and even the world’s most advanced retirement income systems require ongoing reform to ensure they’re robust enough to support a rapidly ageing population.Ranking is based upon three factors: 1) the adequacy of the retirement income system to replace pre-retirement income, 2) the sustainability of that system, and 3) the integrity of the system.   


The US index value increased from 57.3 in 2010 to 58.1 in 2011, due to an increase in adequacy, however this was offset by a decline in sustainability.  Netherlands held its position as number one on the index.  Australia regained its ranking as second in the world, with Switzerland again making up the top three.

There is no perfect retirement income system according to the index.  No country received an A grade, and 10 countries received either a C (major risks or shortcomings) or a D (major weaknesses and omissions).  But this index can provide valuable lessons and insights into how countries are grappling with the economic and social challenges of an ageing population. 


Mercer Senior Partner and author of the report, Dr David Knox, said, in these uncertain economic times the risk of governments not being able to financially support their aging population is becoming more of a reality unless some significant pension reform is made now.


“The best pension systems adopt a multi-pillar approach to spread these long term risks between governments, employers and individuals. Such an approach is also particularly relevant in periods of economic uncertainty, as we are now facing,” he said.


“Much needs to be done to help Americans secure sufficient retirement savings,” said Arthur Noonan, senior consultant in Mercer’s Retirement, Risk and Finance Group. “Among the challenges that the US retirement system faces is the decline in the percentage of employees covered by a Defined Benefit (DB) plan. The funding deficit of such plans, which at the end of September reached a post-World War II high among S&P 1500 companies, may force additional plans to be frozen or closed if market conditions do not improve.


Mr. Noonan said, “Too few Americans are accumulating sufficient assets in their Defined Contribution (DC) 401k plans. Not only are the savings levels inadequate to provide for a sustainable retirement income, but regulations allow  participants to borrow against their 401k assets, make withdrawals albeit with penalties, or take a lump sum upon retirement which can easily be spent leaving them nothing for their later retirement years.


“Finally, Americans may simply have to work longer than in the past in order to accumulate the retirement savings that will provide a secure retirement,” said Mr. Noonan.


 The overall index value for the US system could be increased by:


  • Raising the minimum pension for low-income pensioners;
  • Adjusting the level of mandatory contributions to increase the net replacements for median-income earners;
  • Improving the vesting of benefits for all plan members and maintain the real value of retained benefits through to retirement;
  • Reducing pre-retirement leakage by further limiting the access to funds before retirement; and
  • Introducing a requirement that part of the retirement benefit must be taken as an income stream.



The Index is in its third year and has grown from 11 to 16 countries, now covering over half of the world’s population.  It objectively looks at both the publicly funded and private funded components of each retirement system as well as personal assets and savings outside the pension system.  It is produced by Mercer and the Australian Centre for Financial Studies and funded by the Victorian State Government.  It is based on more than 40 indicators grouped into three sub-indices: adequacy, sustainability and integrity.


Dr Knox said, “Each country has to consider its own social, economic, political, cultural and historical circumstances, but despite the differences in the history and development of each country’s system there are some common challenges around the world.”


Positive responses to common global challenges include:


  • Increasing the state pension age and/or retirement age to reflect increasing life expectancy, both now and in the future, and thereby reduce the level of costs of the publicly financed pension pillar;


  • Promoting higher labor force participation at older ages including the provision of phased retirement;


  • Encouraging or requiring higher levels of private saving, both within and beyond the pension system, to reduce the future dependence on the public pension;


  • Increasing the coverage of employees and/or the self-employed in the private pension system, recognizing that many individuals will not save for the future without an element of compulsion or automatic enrolment; and


  • Reducing the leakage of funds from the retirement savings system prior to retirement thereby ensuring the funds saved, often with the associated taxation support, are used for the provision of retirement income.


Professor Deborah Ralston, Director of the Australian Centre for Financial Studies said the Melbourne Mercer Global Pension Index remains critical for governments, industry and academia with an ageing population a top priority for government’s the world over.


“One again, this third edition of the Melbourne Mercer Global Pension Index highlights the areas of policy debate in pensions around the world.  The on-going difficulty of developing systems that provide an adequate level of retirement income and yet maintain sustainability, especially in countries with an ageing population, warrants further research and discussion world wide.  We hope the Index will make a contribution to that end.”


See below for table containing the 16-country ranking (2009-2011) and a fact sheet on survey methodology.





  • The first Melbourne Mercer Global Pension Index was created in 2009 with 11 countries ranked.  There are now 16 countries in the index that represent a diversity of experience and pension systems and are reflective of the considerable range of approaches selected around the world.
  • Each country is given a score between 0 and 100.  The overall index value represents the weighted average of the three sub-indices – adequacy, sustainability and integrity.
  • More than 40 indicators of desirable factors in all retirement income systems were used to score each country
  • Weightings used for index value are:
  • 40% for the adequacy sub-index
  • 35% for the sustainability sub-index
  • 25% for the integrity sub-index
  • The countries that do well in adequacy have an above average base pension to relieve poverty; a good net replacement rate which allows for all the “compulsory” pillars and a system that requires the benefits to be taken as an income stream
  • The countries that do well in sustainability have good pension coverage (normally through some form of compulsion or auto-enrolment); a high level of pension assets compared to GDP; a level of mandatory contributions, and a relatively low level of government debt.
  • Several countries do well with integrity due to the presence of comprehensive regulation protecting members and a robust regulator


In 2011 a new chapter has been introduced called – The Gold Standard – which outlines how countries can achieve an A grade ranking.


About Mercer:

Mercer is a global leader in human resource consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 20,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York and Chicago stock exchanges.


For more information, visitwww.mercer.com

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