Thursday, May 15, 2008

Climate change: reducing the impact

One of the concerns about the Emissions Trading Scheme is the impact of higher electricity prices on the poor. The standard way of solving this problem is through revenue recycling - using money from the ETS to reduce the impact on the poor by reducing their emissions. And that's exactly what the government is doing. The Greens have convinced the government to spend $53.4 million over 5 years (three quarters of it in the first two) to upgrade the energy efficiency of state houses, installing insulation, draft-proofing, pipe-lagging, hot water cylinder wraps, and energy efficient heating. Not only will this reduce the electricity bills of state housing tenants (thus reducing the impact of the entry of electricity into ETS), it will also significantly improve their health:

"Research indicates that insulated homes use on average a fifth less energy than uninsulated homes. People report health improvements, including half the number of respiratory symptoms. Children in insulated houses had half the number of days off school," Ms Fitzsimons says. "About three-quarters of the money will be spent in the first two years, meaning that by the time electricity is brought into the Emissions Trading Scheme most tenants will be paying lower electricity bills.
It's an excellent move, and a big policy win for the Greens. At the same time, the government needs to do more in this area. State house tenants are not the only people affected by the ETS, and the payoffs for insulation are significant (in colder areas, it pays for itself from the health benefits alone). Given those payoffs, it should be significantly expanding the EECA insulation grant scheme as well.