How will a carbon price affect the solar power market?

As you may have heard, Prime Minister Julia Gillard has recently proclaimed her government’s intention to put a price on carbon dioxide pollution by July 2012. Although at this point in time none of the particulars have been decided, a price is expected drive up home electricity by as much as $300 a year and petrol prices $0.06 a litre. The Gillard government says that the carbon price will pave the way for the eventual implementation of a Carbon Emissions Trading Scheme (ETS). The term ‘carbon tax’ has been conscientiously avoided by the government, but it has admitted that the price would essentially function like a tax.

In this previous blog entry, we talked about corporate power providers’ collective call for a ‘clear price signal’ for carbon emissions in order to create stable market conditions in which to work. The purpose of a potential carbon price/tax would essentially be to drive up the price of power originating in sources which emit carbon pollution, such as coal-fired power plants, which are implicated in climate change. The tax will therefore, in theory, result in a reduction of carbon pollution as the ‘price signal’ becomes more apparent to electricity users, i.e. as coal-generated electricity becomes less affordable. An ensuing ‘cap and trade’ ETS would then set a limit to the amount of carbon emitted nationally, with permits issued by the government. Corporations would have to buy, sell, and a certain number of permits relative to their emissions in order to ‘cover’ their pollution. An ETS is already in effect and functioning in the European Union.

With electricity prices set to rise and solar technology becoming more and more affordable and widespread, it will soon make economic sense for individuals to install solar power systems for their homes even in the absence of the generous solar power incentive mechanisms that are currently in place across Australia. The solar power market saw unprecedented growth in 2010 (as discussed previously here and here), and is slated to continue to grow for the foreseeable future.

© 2010 Solar Choice Pty Ltd

Sources and Links:

ABC News, “Carbon price ‘a conspiracy against the people’

The Herald Sun, “PM gambles on carbon tax slug” (Above image also taken from here)

Sydney Morning Herald, “Green light for tax on carbon

Previous Solar Choice Blog Entries: About incentive schemes such as feed-in tariffs and RECs : Power providers call for ‘clear price signal’ : 2010: A record year for the solar industry : The land of beauty and terror (solar tsunami and its fallout)