Breaking the carbon addiction
It is truly unfortunate that during this important election campaign, neither of the two major political parties is offering any real concrete steps to begin the crucial process of de-carbonising the Australian economy.
Despite increasingly robust claims by leading scientists that we are running out of time to lower our carbon emissions, that the cost of responding is rising fast over time, and clear statements from major companies and business leaders that this is the greatest investment opportunity of all time, Tony Abbott and Julia Gillard have both lost the carbon plot.
The default position for both major parties is to do nothing as, in their view, Australia accounts for less than 2 per cent of global emissions and we are currently making a lot of money exporting carbon-intensive commodities (coking and thermal coal) and products (alumina) with “cheap” coal-fired electricity. The Prime Minister wants to throw about a billion dollars at connecting renewable energy projects to the grid, and another $100 million at improving the energy efficiency of buildings. At the same time, the federal government is spending billions to ensure that we can ship more and more coal overseas and continue operating our large and inefficient coal-fired power plants.
Pavan Sukhdev, an international expert in attempting to put a price on nature, recently gave a few public lectures in Australia. His robust thesis is that we are spending the natural capital of the planet faster than it is being regenerated and that these real costs are simply not accounted for on the balance sheets of companies or national economies. Extending his argument to the Australian economy has staggering ramifications and suggests that we are actually experiencing negative growth. That is, if you reflect the full cost of the loss of natural capital on our national accounts, Australia’s total GDP is less than zero.
The full cost of coal to Australia, for example, is actually larger than the $1 trillion of GDP that is generated by the Australian economy every year. This imbalance will ultimately be corrected by physical changes in the climate system, large-scale economic corrections, or both. Ross Garnaut and Lord Stern both caution about the gargantuan scale of the damages that would be associated with either type of correction. Avoiding this outcome must become the paramount focus of our national government.
For Tony and Julia, let me suggest a ten-step plan in order to put Australia at the forefront of the world’s biggest economic growth opportunity and to help ensure that a widespread global carbon correction is avoided.
Step 1: Recognise that coal is the world’s most expensive energy carrier. I know this one is difficult, because it means letting go of our large supply of the world’s reserves, but coal has not been commercially viable for decades. Coal is artificially cheap because its production and use is directly subsidised, as well as its transport. If you price in the full health, social, economic and environmental costs then you quickly realise that coal is the world’s most expensive energy carrier – not the cheapest. Eliminate all fossil fuel subsidies and force coal companies to bear the full cost of its extraction, use and waste and you will see how fast renewable and distributed energy technologies grow and flourish.
Step 2: Our national energy system is about 10 per cent efficient – only 10 per cent of the energy that passes through the system finds its way to perform useful work. This should be considered a national disgrace and not something we continually celebrate. Energy regulators have recently approved retail electricity price increases of up to 40 per cent to cover the billions of dollars that will be spent to keep this staggeringly inefficient system operating. Please note that this investment does not improve the system’s efficiency or expand its capacity, it only allows the old inefficient system to keep running.
Tony Abbott does not want Australians to have to pay for a carbon price through, for example, higher electricity prices, but he has no problem forcing us to pay substantially more for a 19th Century energy system relic. Change the focus of the introduction of a carbon price through regulation from one which primarily addresses climate change to one which moves investment into a 21st Century smart grid-distributed energy system that is more than 40 per cent efficient by 2015. If we can afford $43 billion for a National Broadband Network then we can certainly afford a similar amount for a National Smart Energy Network.
Step 3: Start the process of a full phase out of all coal-fired power plants in Australia. Premier Brumby wants to spend a few billion dollars buying and quickly retiring the biggest source of carbon emissions in Australia – the Hazelwood brown coal-fired power plant in Victoria’s Latrobe Valley. A robust carbon price would rapidly correct the inflated value of these Victorian-age clunkers and make the buy-out process much cheaper. Raise tax revenue from either a robust carbon tax or a carbon trading scheme (without a large free allocation of permits) and spend the money on retiring the biggest and least efficient coal-fired power plants once their valuations reflect their true costs. Carbon prices need to start at around $25 per tonne of carbon dioxide in order to sufficiently change the market conditions that keep dirty coal alive.
Step 4: Everywhere possible, start to fuel switch the remaining coal-fired power plants to burn our abundant supplies of gas. Provide both carbon price relief and other tax relief to power companies who invest in these changes early. The goal should be to eliminate all coal-fired power generation as soon as possible, but no later than 2015. This also means not approving any new coal-fired power plants. Burning gas also produces carbon emissions, but the emissions are reduced almost by half and this helps buy time until zero carbon energy sources are fully commercial.
Step 5: Invest substantially more public dollars into large-scale renewable energy projects. The Solar Flagships initiative is a good start, but simply not enough. We also need more diversity in the technology mix so more funds should be available to geothermal and wave energy projects on a scale commensurate with their ability to deliver large-scale de-carbonisation benefits quickly. Think of these funds as investments into the biggest energy market opportunity in history and a means to quickly make up for the revenue lost from kicking the old business of coal to the kerb.
Step 6: Recognise that carbon capture and storage is a waste of time and money. No one working on this technology believes it will be commercially viable on any scale meaningful to the carbon management challenge. Former climate change opposition spokesman Ian McFarlane made the same statement just before Malcolm Turnbull lost his Liberal Party leadership last year. If the US and China want to spend money on this technology then let them go for it. It does not make sense for Australia to pursue this option when we have so many better choices in front of us.
Step 7: Move to leverage the massive opportunity around the production and export of sustainable biofuels. We now have an approved drop-in aviation biofuel that is the only option to allow airline travel to remain commercially viable and to achieve the industry’s stated objective of reducing their carbon emissions by half by 2050. Australia is one of a handful of countries that will be able to grow the large quantities of the plants and trees required to meet the global demand for aviation biofuels. With Asia the region with the largest expected growth in airline travel, we are uniquely positioned to service this growing market opportunity. We need much better rules governing the production and use of biofuels in Australia and appropriate assistance to companies wanting to establish large-scale sustainable biofuel feedstock projects.
Step 8: Take improving energy efficiency seriously and create a national market-based scheme that trades in energy efficiency credits. Most green policy initiatives never address the scale or timing of the new investment required to achieve environmental objectives. We need a national energy efficiency scheme that is capable of driving a few billion dollars of new investment towards improving how buildings use energy. If the scheme is not capable of creating new market conditions that make it attractive for this level of annual investment, then it will be a waste of time. This is where most government environmental initiatives fail – they never drive sufficient amounts of new capital to solving the underlying problem. In most cases this does not mean using public treasury dollars – just changes to the tax regulations or a new market-based trading scheme.
Step 9: Dick Smith is correct; we need a sustainable population policy for Australia. The cheapest way to abate carbon emissions is to have fewer people. We do not need more people to pay for the retirement of the baby boomers or to adequately support our national defence. Companies that depend on wasteful and meaningless consumption want more people in order to be able to sell more to them. Let the population slowly rise to 25 million and then move it back down to 20 million by 2020. We will generate more wealth with less people and allow our smaller population to enjoy substantially higher levels of well-being.
Step 10: Pursue fully electric vehicles and battery storage now, before these disruptive technologies force us to make the switch. For more than 90 per cent of Australian drivers, a battery-powered electric vehicle is not only the more environmentally responsible option, it is also going to be much cheaper. Although our national electricity system is only 10 per cent efficient, petrol vehicles – once you subtract the energy used to move the weight of the vehicle – are only about 1 per cent efficient. Yes, 99 per cent of the chemical energy in the petrol is lost to heat and other inefficiencies and only 1 per cent gets you to and from the supermarket. This makes your petrol vehicle the worst piece of antiquated technology you own and a very good reason to pursue 21st century electric vehicles.
Although it is easy to bash the Greens for apparently blocking passage of the meaningless and useless emissions trading scheme, upon closer inspection most of their climate change policy proposals fit nicely with the ten point plan outlined here. I want to create real and sustainable wealth in Australia with a robust carbon price – I leave it to you to guess which party will be getting my vote on 21 August.
Michael Molitor is the CEO of CarbonShift Advisory Pty Ltd, a Sydney based consultancy
Comments on this article
Faulty satellite
Here's some breaking news that may relate to this intense carbon discussion: Last week the US Government admitted that a decade of satellite measurements by NOAA may be undermined by a faulty satellite. One reading of 612 degrees Fahrenheit was recorded in parts of Wisconsin. If similar errors have gone unnoticed for a decade, could this explain global warming?
Here's the link:
http://www.climatechangefraud.com/climate-reports/7491-official-satellite-failure-means-decade-of-global-warming-data-doubtful
Giles, agreed.
Giles, I acknowledge your points, but I don't think they change the bigger picture as I outlined it.
Your wrong about its grid being fossil free. It has 10 coal fired plants and Australia remains its largest supplier of coal.
You're right of course. And I'm also aware of this. Its not fossil free. But the contribution of coal and gas is a few percent of their demand. At any given point in time, the amount of nuclear derived power exported is several times the amount of electricity produced by domestic coal and gas. I chose economy of language over extensive qualification, and I stand corrected. It would be correct to say that their grid is almost fossil free, and it in no way detracts from the point I am making - the French example is a model that we can follow to achieve decarbonization, and there is no other country I am aware that can provide a succesful model for a different strategy.
It is investing massively in renewables, to lift its share of the energy grid to 23%.
It is launching a major energy efficiency initiative (its record on this has actually been poor), so it does NOT have to build a third planned new generation nuclear reactor
Sure. But that is not how they got to their present position. They didn't decarbonize their grid by these measures. They decarbonized by changing their baseload generation from fossil fuels to nuclear. How they move forwards from here is a question for the future. But how they got here is unambiguous, and we should observe and learn lessons. And it was not by following a programme of the sort proposed in Michael's article.
It is a major investor in biofuels (2nd largest in Europe) and alternative fuels for jets etc.
It is a huge supporter of the concept of EVs and EV networks.
These are good things which I fully support, provided the EV's are powered from a carbon free grid. But, again, this is not how they moved their power off coal, and it does not point to a path that we can follow to shut down our coal power stations.
reply to ten steps fail
Actually, John, France has done many of these.
It is investing massively in renewables, to lift its share of the energy grid to 23%.
It is launching a major energy efficiency initiative (its record on this has actually been poor), so it does NOT have to build a third planned new generation nuclear reactor
It is a major investor in biofuels (2nd largest in Europe) and alternative fuels for jets etc.
It is a huge supporter of the concept of EVs and EV networks.
Your wrong about its grid being fossil free. It has 10 coal fired plants and Australia remains its largest supplier of coal. It is also a significant investor in CCS, much more so than Australia. It also imports a significant amount of energy from the Euro grid to cope with peak load demands, which nuclear struggles to do.
Ten steps to climate fail
France didn't do any of this, except step 3 - eliminate coal plants (which is the endgame, not a step along the way). How did they do it?
Other countries are doing these steps in various measures, but are not closing fossil fue plants in the process. Is there something terribly wrong with this approach?
Why should we take any of these steps as a prescription for our actions? Shouldn't we do what France did instead, and get a fossil fuel free grid like they now have?
Breaking the carbon addiction
Just build nukes. Then we will have electricity and there won't be any need to mess about with fantasies like wind, solar and wave power.
Or just build more cola plants. The Chinese are doing so as fast as they can.
More spin and hype from those who are trying to con a gullible public.
oh please
I'm with you on some points, but this shows appalling hypocrisy. As a climate consultant, presumably you would do very well out of this plan if executed. You can't occupy the high moral ground if you're going to benefit from all this. I'm in favour of aggressive cuts in carbon production, but you slowly lost me with your economic growth conspiracy theories, your misunderstanding of the place of free permits (they change the relative price of carbon intensive industry) and finally I was gone when you appealled to the grand hypocrite, Dick Smith. Pull up the drawbridge, we're full now.
Population
You may make some valid points Michael, however you'd better stick to your day job on population, unless you want to join Pol Pot or Hitler in history....!
Current Australian population is 22.426m (Aust Bureau of statistics, they have a nice counter online). By 2026 it is forecast to rise to 28.723m in 2026 at a fertility rate of 2.0 (I seem to recall our current rate is around 1.9) and a net immigration of 220,000pa. My simple interpolation (unlikely to be far wrong) that gives us 26.361m in 2020.
Now let's assume migration is cut immediately to zero, subtracting that gives a little over 24m population in 2020.
Michael, if you want a 20m population (which would have unbelievably profound implications in many ways) by 2020 you're going to have to cull 4 million people.
Even putting contraceptive chemicals in the drinking water won't do it - you'll need to euthanase millions. I'd be mildly interested how you propose to do that.
Why we should move first
I can understand the sentiment that says we are only a small part of the global problem so we should wait till the "big polluters" move first but I think that would be missing the great opportunity.
From everything I have read or researched in the renewables space Australia has a competitive advantage in just about every form of renewable energy technology that is currently on the table. Our solar, wind, biomass and wave resources are pretty much unequalled, we have a large amount of space to deploy them and a stable political and legal system to support them. We should be able to produce clean energy more efficiently and cheaply than probably any country on earth. Why would we want to give up this competitive advantage by persisting with old, outdated and dirty technologies until the big polluters take the lead?
It is Economics 101 - We have a Sustainable Competitive Advantage - Not only should we be transitioning our economy to low carbon renewables but we should be working hard in international forums (UN, G20 etc.) to encourage the rest of the world to move too - or be left behind.
In the future energy will become a major limitation on growth and the cheapest providers of clean energy will attract global capital for energy intensive manufacturing. Australia should be in the box seat to benefit from that shift.
PS: For the proponents of nuclear, unfortunately, like the fossil fuel industry, we have no sustainable competitive advantage so lets just export it to countries that do. It is much harder to export wind and sunlight.
we're just 2% of the problem??
But since we're only 22 million people our 2% seems to be rather high?
I think maybe we need to refocus our efforts on reducing energy consumption as much as possible. Unfortunately with the nergy retailers getting a free kick to upgrade networks to allow higher use, rather than coming up with some incentives to reduce consumption, we're stuck on the escalator.
With the huge amounts of land that could be used to convert solar power to more useful forms of energy surely Australia can migrate from coal to an alternative form of energy.
Maybe we need every house to have a solar hot water system with gas boost. I'd say that would be 1 of the cheapest ways to help reduce energy consumoption, esp if it's out repalcing off peak electric hot water systems.
Much stricter construction rules so that a house is livable without aircon running all the time is another direction we could take.
Concern for Australians
Ron Matthews, I share your concern for future generations of Australians. However, I disagree with your conclusions. There are ways to significantly reduce (or even eliminate) Australia's carbon emissions that actually save us more money than they cost - the cited inefficient electricity industry is a prime example, but there are many other opportunities to reduce energy usage that are cost-negative over periods of as little as 3-5 years. (see http://www.nytimes.com/2009/04/07/science/earth/07empire.html for an example with a 4.5year payback period, and $4.4million in annual savings every year after that!)
Regarding the oft-repeated statement that because Australia is only 2% of emissions, we shouldn't have to do anything until the big emitters do - well, that's like saying it's ok to pour a bucket of toxic waste down the drain, because it's only a little bit, and the factory down the road is dumping it by the barrel.
The flipside of the argument is this: what happens to the Australian economy if the rest of the world takes decisive action on carbon? The Chinese are already investing vast sums into renewable energy, and even the US is providing a favourable investment environment, by way of tax credits and loan guarantees, with some large-scale baseload renewable energy plants under development. The wind power installations in China alone are close to being able to supply as much electricity as the entire Australian coal-fired industry does.
So to say the rest of the world is doing nothing is incorrect. They are doing something, and we are being left behind.
Breaking Australia's Carbon Addiction
Well done, Michael Molitor! A call for Australia to really "Move Forward"! And set out in an easy-to-follow package that even politicians should understand.
There remains but the small issue of injecting the leadership of our two principal political parties with a touch of vision and enough guts to wean vested interests off the teat of Big Coal.
For the Libs, doubting Tony A says he will tinker, in a possibly helpful but decidely small-scale fashion. Bringing back Malcolm T could lend impetus. For Labor, alas, the prospect seems more daunting. Kevin R & Julia G have both used the right words. And then followed up - with nothing.
Perhaps there are pollies in both main parties who do appreciate what is at stake. And who see the opportunities, and some survivable pain, that will go to early adjusters. So what is the conclusion: that they lack the bottle to act?
The Greens are a long way from perfect. Unless refined, their enthusiasm to pursue miners could cause domestic grief and do as much damage to external perceptions of Australia's sovereign risk as Labor's ineptitude. But the climate change outlook demands we kick off somewhere - so: "Go Bob Brown"!
EP
We are the the worst
Ron - a simple fact for you - we are (among) the worst carbon emitters by far on a per capita basis.
Great article
Great article, Michael, heartiest congratulations.
Here we go again
Sorry, David Bentley et al, but contributions such as this are just asking for it. The apparent failure to even consider that nuclear might be able to make a major contribution, or that there might be shortcomings with "large-scale renewable energy projects", marks this as a fantasy, not a plan.
All the author needed to do was insert one word in his Step 5 sentence, thus: "We also need more diversity in the technology mix so more funds should be available to geothermal, nuclear and wave energy projects on a scale commensurate with their ability to deliver large-scale de-carbonisation benefits quickly", and we'd all be happy.
Australia and Carbon Emissions
As a father and scientist, I have followed the debate over carbon closely. The aspect that gives me the greatest concern is that so many people seem to be pushing for Australia to be the leader in the world. My understanding is that compare it to the USA and China, and in fact other Southeast Asian countries, Australia pales into insignificance for carbon emissions.
Frankly, it is inappropriate for Australia to lead the way when there are so many other countries who are causing far more of a problem than Australia. Until these countries get their collective acts together and agreed to operate in the best interests of the globe, then it seems to me to be pointless to disadvantage the Australian people in comparison to the big guys.
Providing every country plays its part in reducing carbon emissions, which they must do, then why disadvantage Australia.
in so many other ways, particularly with both people and immigration, Australia is expected to pickup the problems of other countries. it is more than high time these countries were called to account for their own problems and stop expecting everyone else to help–that is unless they are prepared to allow us to manage their countries for them.
thanks
A welcome and much-needed antidote to the unhelpful noise of the election campaign.. thankyou. Bob Katter may well seem mad, but he's the only politician I've heard on the airwaves talking about biofuels in the last few weeks. Why have the ABC so vehemently ignored the Greens position on such things in favour of a personality-based media coverage of the two major parties? Oh for some real leadership.