Australia’s Ambiguous Carbon Legislation: A Primer

As Australia undergoes a record-level investment boom in its mining sector, the government’s yet-to-be decided price on carbon to be implemented in July 2012 will introduce a new set of costs and investment risks to Australian households and firms. The following primer examines the proposed carbon tax and examines some of its potential costs. The […]

Meeting Japan’s Energy Needs: An Update

It has been two weeks since Japan was devastated by the March 11 earthquake and tsunami, which shuttered in around 20% of the country’s nuclear capacity and 30% of its refining capacity. According to IHS-CERA, 2 GW of Japan’s nuclear capacity have been permanently lost as a result of injecting seawater into reactors, while another 10 GW—8% of Japan’s total electricity—will be shut in “for several years.” The following addresses how Japan will cope with meeting its electricity and fuel shortfalls, and the obstacles facing the energy sector and their broader implications. (See March 17 RGE Analysis on options available to Japan for meeting energy needs.)

Release of strategic oil reserves and reduction in economic activity will limit crude oil import growth.

Impact of the Japanese Quake on Coal

Japan relies on coal to meet around 25% of its electricity needs. According to Platts, as of March 16, five thermal power stations, the equivalent of 10% of Japan’s installed coal-fired generation capacity, were offline. In the short term, this suggests that coal will play less of a role in meeting electricity shortages than LNG and oil. However, once some of these power stations resume operations, coal could play a larger role in meeting electricity needs. According to Barclays, assuming shut in capacity is 12,000 MW, using the same share of coal that was used to meet lost capacity from Kashiwazaki-Kariwa, Japan will increase its exports of coal by 7,800 tonnes per day. Domestic opposition to the use of coal, as well as policies designed to reduce Japan’s coal consumption, mean it is likely that coal will be used to meet demand in the medium term, but will not be a long-term alternative to nuclear power.