At an address to the National Press Club in Canberra yesterday, Stern called on rich nations to slash greenhouse gas emissions by at least 30% by 2020 and 60% by 2050.

“The cost of strong and urgent action on climate change are much less than the cost of inaction,” he said.

But Howard believes Australia’s dependence on coal meant it could not meet these targets without severely damaging the national economy.

“History is littered with examples of nations having overreacted to presumed threats to their great long-term disadvantage,” he said.

However, Stern has warned that the cost of failing to address the climate change problem could be as great as both world wars and the Great Depression and has said that action on climate change is compatible with economic growth.

The release of Britain’s Stern Report last October has prompted politicians around the world to demonstrate policies that will make a tangible difference to future emissions.

The Stern Report’s graphic diagram of the relationship between carbon dioxide volumes and rising temperatures and of the impact on food supplies, water, ecosystems and weather, provided a sobering analysis.

Closer to home, the emotive issues are being felt by Centennial Coal in seeking approval for its 10.5 million tonne per annum Anvil Coal mine with a 21-year mine life in the Hunter Valley.

Local opposition includes comments that, once burned, its coal production in a given year will generate more greenhouse pollution than the entire New South Wales transport sector (4 million cars).

Centennial argues that the power stations importing its coal will simply source their coal from alternative mines and there are significant positive economic and social benefits of the consumption of the coal for electricity in both local and overseas markets.

It is the user, in this case the power station, rather than the supplier that bears the burden of a potential cost on carbon.

But this has not stopped Greens Leader Bob Brown from arguing that Australia should combat climate change by ceasing coal exports.

A recent court decision pushed by Greenpeace and uncontested by the NSW Government means that the NSW Planning Department has to consider the ultimate greenhouse gas impact of projects such as Anvil Hill beyond the emissions involved in mining, processing and selling the coal.

In this exercise, Centennial revised its greenhouse calculations to include the cost of burning the coal and used a cost of $US85 per tonne of CO2 as determined by the Stern Report. This contrasted strongly with the $A10/t cost of CO2 that the company had used in its original environmental assessment.

Not surprisingly, there was a significant adverse affect on the economics of the project. However, while it is inconceivable that a coal project like Anvil is burdened with total emissions from the production and burning of its coal, it is imperative that there is an economic basis to force any power station to consider the CO2 emissions stemming from its selection of energy sources.

Carbon trading

Most governments are adopting a carbon emissions trading scheme, which provides a “re-equilibration” of the true cost of energy production to reflect the cost of the associated CO2 emissions.

In economic theory, this re-equilibration means that currently less competitive but more environmentally friendly electricity generation becomes increasingly viable in comparison to low cost but high CO2-emitting coal-fired power stations.

With this imposed cost burden, coal-fired power stations will strive to minimise their emissions through fuel selection as well as new technology. Conversely, there should be an increase in the development of low CO2-emitting capacity with the improved economics.

The US Department of Energy and the Environmental Protection Agency published a report, Carbon Dioxide Emissions from the Generation of Electric Power in the United States, dated July 2000.

The report included the following table, which estimated the pounds of CO2 per kilowatt hour in electricity generation for coal, petroleum, gas and other fuels, which include municipal solid waste, tyres and other fuels that emit CO2 when burned to generate electricity.

Non-fossil includes nuclear, hydroelectric, solar, wind, geothermal, biomass and other fuels or energy sources with zero or net zero CO2 emissions.

In the output rate, what is noticeable is the considerable difference (38% and 37% in 1998 and 1999, respectively) between coal and gas-generated electricity.

In fact, using Stern’s (2006) value of $US85/t of carbon emissions, this translates into around US8c/kWh. This is a material difference and is likely to affect the development of future global generation capacity despite local factors such as, say, US gas prices. There is no doubt that liquefied natural gas is likely to appear a more attractive option going forward.

Elsewhere, this comparison was presented in the March 2005 POSTnote from Australia's Parliamentary Office of Science and Technology (POST), which followed the 2003 Energy White Paper.

Using 800g of CO2/kWh, the $US85/t carbon dioxide cost equates to US6.8c/kWh.

The graph also outlines the potential impact of carbon capture and storage, which has a significant effect in coal-fired power stations. However, this technology is likely to involve significant technical and logistical problems and will increase generating costs.

Electricity consumers will pay for the “carbon tax” and in a competitive economic environment, lower CO2 fuels will prevail. The issue is more of a concern if there is no global carbon credit scheme and highly CO2-emitting lower grade coals sell cheaply and are eagerly consumed by non-participating nations.