Shane McLeod reported this story on Friday, September 24, 2010 12:38:00

SHANE MCLEOD: The US state of California is showing how those emission reductions might be achieved.



It has announced tough new rules that will mean that a third of the state's electricity has to be generated from renewable sources within a decade.



It's an aggressive push by the state which on its own would be one of the world's top 10 economies to deal with the problem of carbon emissions and climate change.



One energy economist from there is in Australia this week and he says aggressive moves to reduce carbon emissions here will be difficult because of our heavy reliance on coal.



Dr Perry Sioshansi is in Australia to talk about how the US policies on energy and climate change are having an effect in the rest of the world.



PERRY SIOSHANSI: Well right now in US and maybe to some extent in Europe coal is right now, is pretty much a non-starter unless you have specific provisions or make promises that you are going to capture some of the carbon at some point in the future.



So there has been very few new coal-fired plants approvals and the few that have squeezed through in the US that I am aware of made concessions.



For example one plant got a permit because the utility agreed to shut down eight older, more inefficient units. So the trade-off was overwhelmingly in favour of reduced carbon.



And so to get back to you know if there is a future in coal, unfortunately there is lots of coal and it's cheap and it's the easiest and cheapest way to generate electricity in many parts of the world. So I am afraid the answer is yes, we have to find a way to make coal compatible with concerns about climate.



Of course that comes down to doing research on carbon capture and sequestration which I understand Australia is leading in some of the research in this area.



SHANE MCLEOD: How is it if countries in Europe, in North America are moving away from coal because of those emission concerns, how is that Australia is still moving ahead with coal? And really it seems to be relatively uncontroversial that new plants might be built in Victoria, in New South Wales.



PERRY SIOSHANSI: Some of it I think goes back to the fact that your country I believe gets more than 80 per cent of its electricity from coal. And that's just the way it's been. So it's much more difficult to even have that discussion here.



You know US, the national average is about 50 per cent which is still very high. So you know the pain involved in phasing out coal or reducing its emissions really is proportionate to where you are starting from.



Having said that you know the province of Ontario in Canada started a few years back I think it was like 25 per cent coal generation and the state government decided to phase out is coal by 2014. And that was a painful decision and rather controversial as you might expect.



But they are on the way. They are reducing and phasing out the few remaining coal plants and by 2014 it will be coal free. You know so it's, you know, if there is a will there is a way.



But you know in the case of Australia I think this is going to be a much more of a challenge as it is in many parts of the US that are heavily coal dependent.



SHANE MCLEOD: You give the example there of Ontario. How does a government achieve a policy goal like that? Do they use a big stick or do they use something market based to try to achieve that? And if that's a choice how do you sell that to voters, to the public?



PERRY SIOSHANSI: Well in the case of Ontario it was really a public mandate. Of course there were some subsidies for renewables and there was more emphasis on energy efficiency. And those are really the two areas that are going to pick up the 20 per cent that will be vacated by coal.



So there are ways to do it. I am not suggesting that it's easy. But in California for example where I come from we also have a climate change mandate which is unique in America and it requires the state of California state-wide emissions to be reduced to 1990 levels by 2020.



And now there is lots of things that you need to do to achieve that goal but right now that's the deadline and that is the target.



SHANE MCLEOD: Dr Perry Sioshansi, the president of Menlo Energy Economics and the author of several books on the electricity market. He is in Australia to discuss climate change and energy policies on behalf of the Australian Institute of Energy.