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Australia's electricity prices to rise

CANBERRA, Australia, Feb. 21 (UPI) -- By 2015, Australia's electricity will cost more than double its 2008 price, a new study indicates.

Among the factors responsible for Australia's energy price increases have been massive investment in transmission and distribution networks and movements in the wholesale markets driven by the country's droughts and mining boom, said the report, released Monday by the Australian Industry Group.

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The report comes amid a stalemate in negotiations in Canberra over the shape of the country's carbon pricing scheme.

The government favors a fixed carbon price beginning in July 2012, with an emissions trading scheme kicking in three or four years later.

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In an interview with Australia's Sunday Telegraph newspaper in December, Australian Prime Minister Julia Gillard attributed rising electricity prices to lack of certainty about a carbon price, which she said was causing an under-investment in new electricity generation.

Earlier this month Gillard told a group of Australian business leaders that a price on carbon would drive a technological revolution.

"A carbon price will drive another sweeping technological revolution like the information technology revolution swept through our economy in the 1980s and 1990s. New technologies bringing new jobs and demanding new skills, using the abundant resources of this nation -- solar, wind, geothermal -- that currently go to waste," the prime minister said, Australian Broadcasting Corp. reports.

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AIG in its report urged the government to address climate policy and carbon pricing.

"Without decisions in this area over the next couple of years, damaging uncertainty is likely to lead to suboptimal investments that leave both prices and emissions higher than they need be," it said.

By 2020, Australia aims to cut emissions by at least 5 percent compared with 2000 levels.

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A "badly designed" carbon price, the report states, would put even more pressure on energy costs.

Meantime, coal-fired power, for which Australia relies on for about 80 percent of its electricity, will become more costly as international prices for Australian coal climb, the AIG report says. Weak international climate change policies could push Australian coal prices even higher.

AIG, which represents Australia's manufacturing sector, said in its report that two-thirds of its members surveyed hadn't made any improvements in their energy efficiency during the past five years and more than half said they expect to make no energy efficiency improvement in the next two years.

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''This is a worrying result,'' AIG Group Chief Executive Officer Heather Ridout said in a statement.

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