The evidence continues to flood in that the carbon price is weaving its magic in exactly the way it was intended. Greenhouse gas emissions in Australia are falling and it has driven a surge in energy production from renewable sources. There is no question in these two trends.
Now there more good news with indisputable proof that household consumption of energy is falling as consumers respond to price signals and knowledge about the benefits of energy conservation.
According to the national accounts, the volume of electricity, gas and other fuel (“energy”) consumed by households peaked in the December quarter 2010. In the most recent data for the March quarter 2014, the volume of energy consumed by the household sector is 4.4 per cent lower than in the December 2010 peak. It’s a recession in energy consumption!
This is remarkable for two reasons:
- given overall household consumption is up 7.9 per cent over the period since December 2010, consumers are clearly spending freely elsewhere and the drop in energy consumption is not related to a period of overall weakness in consumer spending;
- given that Australia’s population has increased by approximately 5.5 per cent in the period since the December quarter 2010, it means for the household sector, per capita consumption of energy has fallen by close to 10 per cent.
This is a stunning fall in household energy consumption, with the only segment of household consumption to fall further over this period being tobacco and cigarettes, where similar price signals and policy changes have been designed to force consumption lower.
The objective of the carbon price was to encourage the production of energy from renewable sources and to see energy consumption decline. These were the means to reduce carbon emissions and greenhouse gases.
Tick, tick and tick.
The household sector is obviously switching off a few lights, turning the thermostat a degree warmer or cooler (according to the season), using more energy efficient appliances or some combination of these.
You just have to love price signals and economics. They do work.