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Reader riposte: Why government should fund clean coal

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25 September 2008 17:27

Kien Choong sets me straight: 

Mr Roggeveen's post suggests that he hasn't read the Garnaut draft report. Chapter 16 explains why public funding for R&D, particularly for clean coal technology, is appropriate.  If I can attempt to summarise the rationale, the benefits of finding a way to commercialise clean coal technology will be enjoyed by all coal generators. It is a public benefit. If a single coal generator were to invest in clean coal technology, other coal generators will benefit or 'free-ride'. The private incentives to develop clean coal technology are therefore too weak from a social view point.

Of all the nations of the world, Australia will arguably benefit the most if the coal generators overseas also adopt clean coal technology. For example, if China introduces emissions trading, it will cut back on purchasing coal from Australia if its coal generators must purchase carbon emission permits. This applies to all other countries importing coal for electricity generation and which introduce emissions trading (or other carbon reduction schemes).

I might add that the Garnaut draft report also mentioned that local communities that depend on the coal generators for their economic survival could incur significant adaptation costs if Australia did not find a way to make coal generation under an emissions trading scheme. That too, is a social cost not taken into account by private investors deciding whether to invest in commercialising clean coal technology.

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