Sep 26, 2008

DHB Faces Huge Cost Increase

This just in from the Greenhouse Policy Coalition


Energy Minister David Parker announced a $1.595 million loan to the Otago District Health Board for energy efficiency improvements on 24 September which is predicted to save them $300,000 per year on energy bills, but according to analysis done for the Greenhouse Policy Coalition, the emissions trading legislation will result in a conservative cost increase for the DHB of $1,299,000 for energy.

Catherine Beard, executive director of the Greenhouse Policy Coalition says while it is excellent that the DHB is investing in energy efficiency, the cost savings will be more than wiped out by the higher prices coming the way of all energy users as a result of the emissions trading legislation.

“According to publicly available information the Otago District Health Board has a 30 MW coal fired boiler which uses around 18kt of coal p/a. Assuming efficiencies achieved as a result of the new investment in energy efficiency reduce that consumption to 16,810kt of coal per annum. At today’s carbon price of $40/tonne of carbon you are looking at needing to find an additional $1.3 million per annum.”

Catherine Beard says the increased costs are conservative as they don’t include the increase in electricity costs the DHB will face as a result of the carbon charges.

Catherine Beard said the Greenhouse Policy Coalition, which represents industrials in the energy intensive sector, believes that the emissions trading legislation is high risk for the economy because there are no limits to how high the carbon price can go.

“In the absence of a deep and liquid global carbon market, carbon prices are currently being determined by political decisions in Europe, rather than reflecting least cost emissions abatement.”

“There are many problems with the legislation that will need to be fixed if we don’t want to cause unnecessary economic pain. One such problem is the lack of any mechanism to ensure a low and stable price. Australia is contemplating achieving this via a price cap.”