Climate change: missing the point

The Sunday Star-Times today has a piece complaining that renewable generators will reap windfall profits from any move to price carbon. Of course they will - that's the point. And those complaining about it - chiefly coal generator Genesis energy - are deliberately missing it.

The point of any policy is to influence behaviour. Price-based instruments such as carbon taxes and emissions-trading systems do this through the market, using the price mechanism to affect supply and demand. One goal of such measures is to ensure that electricity prices reflect the true costs of generation, rather than dirty generators effectively receiving a massive environmental subsidy from the taxpayer. But the real goal (and one which conveniently follows from the first) is to affect the relative profitability of different generation types, with the aim of driving a long-term shift towards more renewables and relegating inefficient and dirty coal plants like Huntly to dry-year backup. So, complaining that under such a policy wind and hydro will be massively more profitable than coal is really missing the point.