Carbon Dioxide at $1,000 per Tonne in NSW

For a hint at why a current approaches to mitigation face difficult challenges, consider this real world example of efforts to reduce carbon dioxide emissions by the government of New South Wales, Australia:

THE NSW government spent $104,000 from its Climate Change Fund to save a single tonne of carbon dioxide - worth about $35 under international carbon prices - the fund's annual report shows.

The money, to renovate a building at Sylvania Public School so it used less electricity, was spent on one in a series of projects that appear not to match the Climate Change Fund's main objective: cutting carbon emissions.

More than half the 26 public projects funded in the 2008-09 financial year valued carbon at more than $1000 a tonne, almost 30 times its estimated market value, although many of the projects did fulfil requirements to save large amounts of water.

The Department of Environment and Climate Change and Water says the spending is worthwhile, even though it is not always the most efficient way to slash emissions, because it helps educate about saving energy.

Other projects paid for by the fund, which is sustained by a levy on energy and water bills, included a $20,000 grant to Dungog Shire Council to put a solar heater on its swimming pool, saving one tonne of carbon dioxide. Manly Council was also granted $154,000 to install energy-saving floodlights at Manly Oval, saving 17 tonnes of carbon dioxide and allowing the council to ''educate a segment of the market that does not normally respond to energy-saving messages''.

The fund supported 299 projects and a residential rebate program, saving $100 million on water and energy bills, 731,000 tonnes of greenhouse gas emissions and 17 million litres of water, the department said.

A spokeswoman said the fund was saving money in schools and clubs and demonstrating what can be achieved through improved efficiency and new technology.

But the NSW opposition said the annual report showed taxpayer funds were being used inefficiently. "The [fund] exists to tackle climate change, and you don't do that by spending 5000 times more than you have to save a single tonne of carbon dioxide,'' one MP, Michael Richardson, said.

The department said its Renewable Energy Development Program was the best performer, spending $6.63 for each tonne of carbon. The $700 million fund was set up in July 2007.

The project that worked best is focused on stimulating innovation in renewable energy technology using public funds. The ones that performed the worst were focused on efficiency gains and energy consumption reduction (which some people call conservation). The programs focused on conservation probably could not be justified except for their co-benefits, such as related to water savings.

The annual report referred to in the article above can be downloaded here in PDF.

There are important lessons here about the effectiveness of public investments in innovation and the limits of efforts to promote efficiencies.