Among the various interests at the Paris climate talks, it is arguably the voice of business that has emerged most clearly. Many business leaders are now saying that if the world is intent on reducing greenhouse gas emissions, there must be a worldwide price on carbonand a framework for linking the 55 schemes that exist in areas such as China, the European Union, and California.

Momentum has been building since May, when six of Europe’s largest oil and gas companies, including Royal Dutch Shell and BP, issued a letter calling for global carbon pricing system. That month, leaders from 59 international companies also signed a statement calling for carbon pricing to feature in the Paris agreement.

Advocacy has continued during the Paris negotiations. For example, Patrick Pouyanné, chief executive of French oil and gas giant Total, argued that the shift from coal to gas “will not happen without a carbon price”. He suggested that a price of US$20-$50 in Europe was required (well above the current price).

Oleg Deripaska, president of the world’s largest aluminium producer Rusal, put the issue in stronger terms, describing the idea of voluntary national emissions commitments (upon which the Paris agreement largely hinges) as “balderdash”.

Asked what success would look like from the Paris negotiations, Deripaska replied:

A success [for most people] would be lunch at a nice French banquette with foie gras and oysters. But no, seriously, it is carbon tax or die.

Carbon tax on the menu?

It is not clear whether a carbon price will figure in the Paris agreement. But it is important to consider what is motivating some of the world’s highest-emitting companies to advocate for a carbon price. And what other, perhaps more intrusive plans for tackling climate change would be taken off the table?

Businesses have a stronger presence at COP21 than at any previous climate negotiation. They know which way the wind is blowing and realise that governments might require painful and complex interventions to reduce emissions. Moves are afoot to decarbonise the world economy some time after 2050 (see Article 3 of the latest draft text, and there has been strong advocacy for a moratorium on new coal mines.

Helge Lund, chief executive of British oil multinational BG Group, argues that a carbon price reduces government intervention and attempts at “pick[ing] winners in terms of energy technologies.” Instead, he argues: “the market will dictate the most efficient solution”.

Forecasts from the International Energy Agency suggest that fossil fuels (including coal) will provide the bulk of energy demand for developing countries going into the future. Companies intend to meet that demand. Thus, Shell can simultaneously advocate putting a price on carbon and make plans to drill in the Arctic where production will not begin until 2030.

While that might sound perverse, there is actually nothing inconsistent about those two positions.

One way for energy companies to maintain economic growth in a carbon-priced economy is to shift investments gradually away from coal and oil, and towards gas. That is why Shell has paid US$70 billion for the BG Group.

Of course gas might come under similar pressure in time, but as the Financial Times has reported:

…oil companies’ skills and assets mean that finding and extracting gas is a short and natural step. Moving into renewable energy is a much bigger leap.

This can be seen in the many examples where energy companies have struggled to develop other forms of energy, such as BP’s ill-starred attempt to brand itself as “beyond petroleum” and invest US$8 billion over ten years in renewable energy. The company has since backtracked on that goal, has left the solar market, and has no plans to expand its onshore wind investments.

Beyond markets

Of the 185 countries that have submitted climate targets ahead of the Paris talks, more than 80 have referenced market mechanisms.

Clearly, a price on carbon is going to play a role in attempts to tackle climate change. This is a good thing but it is not sufficient and must not become a distraction from other serious interventions.

Recent research confirms that we do not have time to wait for energy companies to transition at their own pace from fossil fuels to renewable energy. For example, last week Kevin Anderson from the Tyndall Centre for Climate Change Research published a paper in Nature Geoscience which argued:

The carbon budgets associated with a 2℃ threshold demand profound changes to the consumption and production of energy … the IPCC’s 1,000 gigatonne budget requires an end to all carbon emissions from energy systems by 2050.

A carbon budget consistent with 2℃ (let alone 1.5℃) requires a dramatic reversal in energy consumption and emissions growth. Governments should treat overtures from business with caution, even if businesses are making the right moves. They need to ensure that these moves are made at a speed that suits the climate, rather than just business.

Peter Burdon is Senior Lecturer, Adelaide Law School, University of Adelaide. This article was first published in The Conversation on 11 December, 2015

Despite a generally positive reception to the Paris accord on climate change, the ideologues on both sides of the debate regard it as a failure. For the sceptics, the agreement that developing countries (which played a negligible role in causing the problem) can continue to increase emissions is so inequitable that it undermines the whole deal. For the more extreme green groups, given their view that renewables are ready to take over from fossil fuels now, the ambition is not nearly high enough and much more should have been done.

But for the non-ideological majority, the Paris agreement is significantly better than could have been expected even twelve months ago. The nations of the world, including the major emitters, have committed to taking action over time to meet a 2 degree target and even, potentially, a 1.5 degree target. It was always a dream to suppose that a grand global treaty could be achieved, with ambitious, legally binding commitments to cut emissions, sanctions for the underperformers and all achieved by recourse to a global emissions trading scheme. Post Kyoto, the US, China and India, all major emitters, signalled that they would not ratify any legally binding treaty that would commit them to reduce greenhouse gas emissions.

The Paris agreement, supported as it is by the major emitters and with each nation’s efforts subject to regular peer review, is as good as it was ever going to get and better than most observers expected. With the review mechanism and the widespread recognition that greater emissions reductions will be required in the future, countries are unlikely to take their commitments lightly.

To be sure, the current commitments, even if they were met, would not stabilise the global temperature increase at 2, let alone 1.5, degrees Celsius. Taking account of likely recalcitrants, we are now looking at perhaps 3 degrees. But that’s not the point. Dealing with climate change was always going to be a very long game. Even if nations were willing to write-off the current capital stock in the emitting sectors, the inescapable fact is that the world does not yet possess the necessary technologies at an acceptable cost to be able to get rid of fossil fuels. Close to home, the current problems with the South Australian electricity system, with its over-reliance on wind and consequent spikes in power prices, provide some evidence of this.

That is why people such as Bjorn Lomborg suggest that the clean technology fund established at the Paris conference by Bill Gates is more important than the agreement itself. Committing greater resources to R&D and innovation in the area of clean energy is a sine qua non for an effective response to climate change in the medium and longer term. Apart from hydro, nuclear energy is currently the only available technology for the provision of zero emissions base load power at reasonable cost (although outside China the costs remain excessive). If solar is going to provide base load power in any quantity in the future, not only must the problem of storage be solved, but the physical footprint of solar thermal technologies must also be drastically reduced. All this, of course, must also be achieved at an acceptable cost.

What are the implications of the Paris agreement for Australia? First of all, it is quite clear that early reports of the death of coal have been greatly exaggerated although, in the next few years, thermal coal at least may enter a slow but terminal decline. On the one hand we have yet to find a substitute for steel in many of its applications and demand for coking coal will not go away any time soon. On the other hand, developing countries, particularly India, will continue to rely on thermal coal for the foreseeable future to provide low cost electricity to millions of people emerging from poverty.

The main issues, however, are Australia’s emissions targets and the policy measures that are required to achieve them. Although our relatively high population growth needs to be taken into account, Australia’s current emissions targets are not particularly ambitious nor indeed, adequate in the context of stabilising at 2 degrees or less. There is a strong case now for raising Australia’s 2020 target from 5 to at least 10 per cent, which is achievable. The review of targets scheduled for 2017 could well look to increasing the 26-28 per cent target for 2030. Although our 2030 target is comparable to those of Canada and the US, it is now manifestly inadequate in the light of the higher global ambition since enshrined in the Paris agreement.

Finally, Australia has time to design a comprehensive policy approach to reducing emissions significantly post 2020. While most economists always will prefer market-driven mechanisms like a carbon tax and emissions trading, we must recognise that these have become politicised, perhaps fatally, and examine some second-best options such as regulation. The Grattan Institute is currently working on this, with a detailed report to be released early in 2016.[1]

A thorough review of these issues by the Productivity Commission could make a very useful contribution to the government’s consideration of policy options. Yet, fearing that such a review will merely lead to a clarion call for an ETS, the government may be reluctant to establish a Productivity Commission inquiry. This would be unfortunate, and the terms of reference could be crafted so as to address the government’s sensitivities. This could include a requirement to evaluate all major potential policy instruments and how they would impact on the different emitting sectors of the economy, on user industries and on the community in general.

Jon Stanford is a Director of Insight Economics and has undertaken numerous assignments on climate change for government and industry. While he was at the Department of Prime Minister and Cabinet in the 1990s, he was Chair of the Interdepartmental Committee on Greenhouse.

 

 

 

[1] Tony Wood, David Blowers and Greg Moran (2015), “Post Paris: Australia’s climate policy options”, Grattan Institute Working Paper, December.

There is a profound disconnect between Australia’s international climate diplomacy and its national climate and energy policies.

The diplomacy could be cast in positive terms, on the surface at least.

During the first week of the climate negotiations in Paris, Australia displayed a preparedness to be flexible and serve as a broker of compromises in the negotiations over the draft Paris Agreement.

Australia has also agreed to support the inclusion of a temperature goal to limit global warming to 1.5℃, which is a matter very dear to the hearts of Pacific Island nations for whom climate change is a fundamental existential threat.

Australia will serve as co-chair (with South Africa) of the Green Climate Fund in 2016, which will be channelling money to the most vulnerable countries in the Pacific and elsewhere to enhance their preparedness for the harmful impacts arising from a much warmer world.

In his address on the opening day of the conference, Prime Minister Malcolm Turnbull announced that Australia would ratify the second commitment period of the Kyoto Protocol (Kyoto II) and commit A$200 million a year in climate finance going forward to 2020.

And on the sidelines of the negotiations, environment minister Greg Hunt announced that Australia would provide A$1.2 million towards the Coral Triangle Initiative for Coral Reefs, Fisheries and Security.

He also unveiled the Blue Carbon research project to explore how the protection of marine and coastal habitats could reduce emissions by storing carbon while also protecting biodiversity and fisheries.

Yet appearances can be deceiving. The A$200 million in annual climate finance comes from the aid budget and is not new or additional. Nor does it represent an enhanced commitment relative to previous contributions.

And it is widely acknowledged that an enhanced commitment to climate finance by rich countries to assist poor countries to develop clean energy and adapt to climate change will be central to garnering the support of developing countries to a Paris agreement.

Australia had every reason to ratify Kyoto II, since it had one of the lowest emissions targets in the developed world for 2020 (5% below 2000 levels).

Australia has also been able to benefit from greenhouse gas accounting rules (including a carry over of surplus emissions allowances from the first commitment period) that will enable achievement of this target at the same time as greenhouse emissions outside the land sector are set to increase by around 11% by 2020.

Contrast this with Germany, the UK and Denmark, which announced that they will cancel their surplus emission allowances and not carry them over for Kyoto II.

Australia’s climate diplomacy is therefore like a doughnut: a few some promising initiatives around the edges but nothing in the middle.

The missing middle, of course, is robust domestic targets and policies for 2020 and the post-2020 period.

Get serious

If Australia was really serious about aiming for a more ambitious temperature target to stand firm with its neighbours in the Pacific, then it would have domestic politics that were commensurate with this ambition.

As the strong contingent of civil society organisations from Australia at COP21 have been quick to point out, Australia’s domestic policy settings, including significant fossil fuel subsidies, actively encourage fossil fuel production and use.

These subsidies, along with the government’s Emissions Reduction Fund, cast the burden on the public to pay for the cost of carbon pollution, rather than the polluters.

The first week of the negotiations included a string of announcements of new initiatives on divestment from fossil fuels and efforts to promote the phase out of fossil fuel subsidies. This included a communiqué on fossil fuel subsidy reform, signed by eight non-G20 countries (including New Zealand and Norway) and supported by France and the United States.

Australia declined to give its support to the communiqué. Turnbull said Australia would have supported it if it had been restricted to “inefficient” fossil fuel subsidies.

Yet economists describe fossil fuel subsides as perverse because they harm the economy (by propping up inefficient industries) and the environment, and soak up scarce public money that could be better spent elsewhere.

To make matters worse, the government’s decision to approve the giant Carmichael coal mine in Queensland will completely cancel out any of the modest goodwill provided by Australia’s diplomacy.

Germanwatch’s Climate Change Performance Index for 2015 ranked Australia 60th out of the 61 countries surveyed – second last to Saudi Arabia. This is down from 57th last year.

No amount of flexible and constructive climate diplomacy, or negotiating support for Pacific Island nations, can hide the fact that Australia’s domestic policies are part of the problem, rather than part of the solution.

Robyn Eckersley is Professor of Political Science, School of Social and Political Sciences, University of Melbourne. Robyn Eckersley is attending COP21 in Paris as an accredited observer. 

Since he became Prime Minister, Malcolm Turnbull has committed himself to Tony Abbott’s policies on climate change. He supports Direct Action. He supports the Abbott government’s carbon reduction targets. At the Paris Conference, the Turnbull government reaffirmed its commitment to the fuel rebate subsidy for miners. It plans to double coal exports.

In his blog on 7 December 2009, after he was dumped as Leader of the Liberal Party, Malcolm Turnbull said:

‘So, as a humble back-bencher I am sure he [Tony Abbott] won’t complain if I tell a few home truths about the farce that the Coalition’s policy, or lack of policy, on climate change has descended into. 

To replace dirty coal-fired power stations with cleaner gas-fired ones, or renewables like wind, let alone nuclear power or even coal-fired power with carbon capture and storage is all going to cost money. 

To get farmers to change the way they manage their land, or plant trees and vegetation all costs money. Somebody has to pay. 

So any suggestion that you can dramatically cut emissions without cost is, to use a favourite term of Mr Abbott “bullshit”. Moreover he knows it. 

It is not possible to criticise the new Coalition policy on climate change because it does not exist. 

As we are being blunt, the fact is that Tony and the people who put him in his job, do not want to do anything about climate change. They do not believe in human-caused global warning. 

As Tony observed on one occasion “Climate change is crap”, or if you consider his mentor, Senator Minchin, the world is not warming, it’s cooling, and the climate change issue is part of a vast left-wing conspiracy to deindustrialise the world. 

The Liberal Party is currently led by people whose conviction on climate change is that it is “crap” and you don’t need to do anything about it. Any policy that is announced will simply be a con, an environmental fig leave to cover a determination to do nothing. 

Tony himself has in just four or five months publicly advocated the blocking of the Emissions Trading System, the passing of the ETS, the amending of the ETS, and if the amendments were satisfactory, passing it, and now the blocking of it. … 

We have given our opponents the irrefutable, undeniable evidence that we cannot be trusted. ‘ 

Malcolm Turnbull is now taking to the Paris Conference, a policy on climate change that a few years ago he described as ‘crap’ and ‘a fraud’!

 

“The greatest trick the devil ever pulled was convincing the world he didn’t exist.”

Twenty years ago Kevin Spacey uttered this famous line about his alter ego, Keyser Söz, in The Usual Suspects. Keyser Söz isn’t climate change, but he might as well be.

Since the film was released an inordinate amount of money has been spent to trick the world that human-induced climate change doesn’t exist.

Recent data from the CSIRO suggests the ‘trick’ is yet to be completely foiled in Australia. Although almost 80 percent of people believe climate change is occurring, every second person routinely changes their mind and there is considerable divergence on whether human activity is a causal factor.

Thankfully, someone who requires no more convincing is Mark Carney, the Canadian Governor of the Bank of England.

“There is a growing international consensus that climate change is unequivocal,” Carney said in September.

“Human drivers are judged extremely likely to have been the dominant cause of global warming since the mid-20th century.”

Carney, like his Chief Economist, Andy Haldane, is what I call an unusual suspect, someone who looks beyond the parapet and leads on an issue when we don’t expect them to.

Think doctors and nurses on children in detention and sporting heroes like David Pocock on marriage equality.

Although we might deem these interventions ‘unusual’ given their infrequency, they can be perfectly natural for the individual speaking out. Often they are based on experience or expertise.

This makes unusual suspects particularly insightful, and especially powerful.

Carney’s incursion into the climate change debate shouldn’t be taken lightly. He also heads up the global Financial Stability Board, established after the Global Financial Crisis.

It was no coincidence Carney gave his speech at Lloyd’s of London.

Insurers know full well the rising cost of weather-related events, aggravated by climate change, from around $10 billion per year in the 1980s to $50 billion today. These losses, Carney conceded, will “pale in significance” to those on the horizon when we consider “broader global impacts on property, migration and political stability, as well as food and water security”.

Carney and Haldane argue the physical, liability and transition risks posed by climate change threaten financial stability.

They are progressives amongst a hitherto conservative central banking set.

Haldane in particular has bemoaned “quarterly capitalism”, which sees public companies over-discounting future income streams by 5-10 percent per year.

He believes “shareholder short-termism may have had material costs for the economy, as well as for individual companies, by constraining investment”.

Haldane is not alone. Larry Fink, Chairman and CEO of BlackRock, wrote to S&P 500 CEOs in April, accusing them of prioritising actions to deliver immediate returns and “underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth”.

Where are Australia’s unusual suspects in business and finance?

One would find it difficult to locate seminal speeches on climate change and quarterly capitalism by our central bankers or the Business Council of Australia

Much has been made of our tepid growth outlook. Reserve Bank Governor Glenn Stevens challenged the National Reform Summit to ask: “how do we generate more growth? Not temporary, flash in-the-pan growth, but sustainable growth”.

The adjective — sustainable — is key. Focusing on growth at all costs risks missing the wood for the trees. To engineer sustainable growth, one requires a sustainable economy. And that is what Australia lacks most of all.

It is a shame, because sustainability is in Australia’s DNA.

In fact, in 2011, then Treasury Secretary Martin Parkinson told us “the theme of sustainability will need to shape the approach to policy development of this generation”.

Parkinson was and remains spot on: his focus was on how each generation could bequeath to the next a productive base for sustainable wellbeing at least as large as the stock of capital inherited.

How shortsighted it was for one of our best unusual suspects to be dumped by the Abbott government.

His likely reemergence as head of the Department of Prime Minister and Cabinet is timely.

At his alma mater, Princeton, in September, Parkinson echoed Carney by saying company boards and financial market regulators give scant attention to climate change risks. Equally absent was examination of the “knock-on effects to macroeconomic stability of falling demand for carbon-intensive exports”.

Accelerating Australia’s transition to a sustainable economy will require those in business, finance, government and civil society to embrace unusual suspects on climate change and sustainability as the new normal, not the exception. If anyone can do this knitting, it’s Parkinson. Welcome back.

Travers McLeod is Chief Executive of the Centre for Policy Development. This article was first published in the Huffington Post on 26 November 2015.

Leading up to this month’s major climate change conference in Paris, there has been a welcome increase worldwide in the commitment to address climate change generally and, in particular, to restrict global warming to two degrees Celsius. Although they are still insufficient to meet the two degree target, the initial national commitments to be taken to the conference are, perhaps, more ambitious than might have been expected a couple of years ago.

One of the side effects of this increased ambition has been a growing focus on the role of coal in increasing carbon emissions. In particular, there has been a developing sentiment in favour of banning investment in new and expanded coalmines in Australia. The “keep it in the ground” campaign started mainly as a green activist movement, although supported by respected media outlets such as The Guardian. Yet the campaign appeared to be more ideological and emotional than one that would attract the support of rational policy analysts. More recently, however, the campaign has been endorsed in an open letter to world leaders by 60 eminent Australians, including two highly regarded economists, Bernie Fraser, a former Secretary of the Treasury and Governor of the Reserve Bank, and Professor John Quiggin of the University of Queensland.

In this article, I address the following issues:

• The main findings of the recently published World Energy Outlook by the International Energy Agency (IEA), including the projected use of coal in generating electricity out to 2040 and how this would change if the world was on a two degree pathway
• In this context, whether prohibiting new coal mines would be an efficient or effective means of reducing carbon emissions globally so as to meet climate change objectives.

IEA’s World Energy Outlook, 2015[1] 

In its latest projection of global energy use, the IEA has reduced its previous estimates of the role that coal is likely to play in future electricity generation.[2] Its main scenario is based on an assumption that the world will take action along the lines of the national commitments for the Paris summit. It has been suggested that this would put the world on a pathway to stabilising the global temperature increase at around 2.7 degrees Celsius. While this outcome would fail to meet the two-degree target by a significant margin, this outcome remains perhaps the most reasonable assumption at this stage.

In analysing pathways to meeting emissions targets, it needs to be appreciated at the outset that we are not dealing with a slow growing market. The IEA estimates that global demand for electricity will increase by 70 per cent between 2013 and 2040.

The IEA’s main scenario takes account of the Paris commitments to counter climate change. While negotiations at the summit may produce a slightly more ambitious result in terms of pledges, on the other side of the coin it is likely that over time some countries will fall short of meeting their commitments. On that basis, it seems likely that this scenario is based on assumptions that are realistic and may be closest to the eventual outcome.

Under this scenario, fossil fuels would still supply over half of the world’s electricity in 2040, with the main fuel type shares being:

• Coal – 30%
• Gas – 23%
• Nuclear – 12%
• Hydro – 16%
• Wind and Solar PV – <10%

While coal’s global share of the power generation market would fall substantially under this scenario from 41 per cent in 2013, its use in absolute terms would increase by nearly 25 per cent in a much larger market. ‘Conventional’ fuels capable of providing continuous power (coal, gas, nuclear and hydro) would account for over 80 per cent of supply. Under this scenario, the two technologies much favoured by some green groups, wind and solar PV, together would account for less than ten per cent of global power supply in 2040.

The IEA also produced a more optimistic scenario of fuel shares in electricity generation in 2040 should the world follow a pathway consistent with achieving the two-degree target. This would result in the following fuel shares in power generation in 2040:

• Coal – 12%
• Gas – 16%
• Nuclear – 18%
• Hydro – 20%
• Wind and Solar PV – >30%

Depending on which scenario you believe, therefore, coal is still likely to play a considerab;e role in power generation in 2040. Much of the coal combustion is projected to occur in Asia, particularly in India. Of course, much depends on technological changes and their relative costs, which are extremely difficult to predict. If there were a breakthrough in the commercial applicability of carbon capture and storage (CCS), for example, coal could claim a much greater share of future carbon budgets. The same argument applies to renewables, where the development of practical long-term storage solutions is perhaps potentially greater than a CCS breakthrough. Also, the potential of small modular nuclear reactors appears promising, with considerable development work occurring in both the US and China.

An important conclusion from the IEA’s analysis is that even under the optimistic outcome of the nations of the world agreeing to take actions to limit global warming to two degrees, coal could still play a significant role in power generation in 2040. If the outcome falls short of this, as seems likely, coal’s future role will be commensurately greater.

Would banning new coal mines provide an efficient policy approach?

The proposal to ban investment in new and expanded coalmines signifies that substantial public costs, or negative externalities, are associated with the use of coal. There is little doubt that the combustion of coal to produce electricity has made the greatest contribution to increasing carbon concentrations in the atmosphere. Therefore, the most prominent miscreant in bringing about climate change is clear and, except for a few deniers and “sceptics”, overwhelmingly accepted by policy makers globally. Unless the resulting emissions can be captured and stored, there is a substantial negative externality associated with the combustion of coal.

In light of this clear conclusion, the question addressed in this section is how the issue should be addressed in policy terms so as to bring about the most efficient outcome. One widely canvassed approach in recent times is to ban investment in new coalmines and in expansions of existing mines.

Fundamentally, this is a resource allocation issue and is, therefore, more a question for economists than scientists or engineers. Most economists would agree that the most efficient way to deal with negative externalities is to impose a tax on the externality and then allow the market to determine the optimal allocation of resources. For example, if coal-fired power generation threatens the environment in terms of climate change, the most efficient way to deal with this is to tax the resulting emissions of carbon dioxide. Applied over all forms of power generation by means of a carbon tax or an equivalent emissions trading system (ETS), this application of a cost on carbon would help to ensure that carbon emissions from power generation were reduced by means of a strong market signal to investors in the electricity generation market. A carbon tax or ETS would provide a disincentive to invest in coal and other fossil fuel power generation plant and an incentive to invest in low or zero emissions technologies.

Banning new coalmines would reflect an arbitrary approach to reducing emissions. On what basis should various fuels be permitted or banned? Why is coal to be singled out but other fuels with significant emissions such as oil and gas are not? There is also a problem in that many of the interest groups that want to prohibit coal mining would also like to ban other fuels as well. Not only are some environmentalists ideologically opposed to all fossil fuels, including gas, but they also object to competitive zero emissions power generation technologies such as nuclear power and hydro-electricity. Banning coalmines may well be the thin end of the wedge. Some groups would also like to ban uranium mining and the construction of new dams. Then, of course, on the right of the political spectrum, there are groups who are vigorously opposed to wind farms on the grounds of their visual pollution. Once the size of the physical footprint of solar thermal generation is understood and the massive land resource required, some groups would probably be opposed to that technology as well. What would we then be left with?

Restricting the supply of coal by banning new mines would be contradictory to the more efficient approach to climate change of taxing carbon emissions and thereby allowing the market to determine what technologies are adopted to generate electricity. It would give a clear advantage to existing mines, which may be near the end of their economic lives and are often less efficient than new mines. It would also benefit other fossil fuels with a significant carbon footprint, such as oil and gas. The strong market signal arising from the ban would also inhibit, perhaps totally, any incentive to work on more greenhouse friendly ways to utilise the earth’s vast reserves of coal through technologies such as CCS.

Were it to be widely adopted, such a policy would also eventually raise the price of coal in developing countries, such as India, where a large proportion of the nation’s population is struggling to emerge from poverty and where currently there are very many households that have no electricity supply. In my view, it ill behoves people in countries like Australia, where their high standards of living have been built, in part, on the foundation of a secure, relatively cheap, coal-based electricity supply, to attempt to force people striving to emerge from poverty in other countries to renounce coal and pay much more for an interrupted electricity supply via renewables. For this reason, among others, nations need to think long and hard before denying natural resources to other countries that may not be so fortunate in terms of their resource endowments.

Would banning new coal mines provide an effective policy approach?

Abstracting from efficiency considerations, if the Australian government prohibited the development of new coal mines, would this be an effective approach to reducing the global use of coal for power generation?

It is difficult to see how this could be an effective policy in the absence of an agreement between all of the major coal-producing countries to restrict supply. Such an agreement would be very unlikely. There are abundant resources of coal worldwide and, hence, many alternative sources of supply to Australian mines. As may be seen from the tables below, many of the countries with abundant coal reserves are less wealthy than Australia and are most unlikely to agree to prohibit investment in their coal industries.

While the Australian coal industry is a very efficient producer, it does not dominate the global market and could not be said to possess any significant market power. Data produced by the US Energy Information Administration, for example, suggest that while Australia’s coal endowments are extensive, they amount to less than nine per cent of global reserves.[3] In 2013, Australia ranked fifth in overall coal production (metallurgical and thermal coal), accounting for less than six per cent of the global total.[4]

Exhibit 1: Major Thermal Coal Producing Countries (2013)

Country	Production (Mt)
China	3,034
USA	756
India	526
Indonesia	486
South Africa	255
AUSTRALIA	239
Russia	201
Kazakhstan	103
Colombia	81
Poland	65

Source: World Coal Association, ‘Coal Statistics’, < http://www.worldcoal.org/resources/coal-statistics/>

In terms of the world’s largest producers of thermal (steaming) coal used for power generation, however, Australia is not ranked in the top five (Exhibit 1). In 2013, China’s production of thermal coal was over 12 times as great as Australia’s. The production of thermal coal in the USA and India was also far higher than in Australia, while Indonesia’s thermal coal production was over twice as great. Importantly, India now has a policy objective of being self-sufficient in coal by the early 2020s. This will require massive new investment in coal production.

Until recently, Australia was ranked first in terms of coal exports. Of Australia’s total coal exports of 336 Mt in 2013, 182 Mt were thermal coal. But in recent years, Indonesia has recorded a very rapid growth in exports (overwhelmingly in thermal coal) and has overtaken Australia. Coal exports from Indonesia more than doubled between 2008 and 2013, compared with a 33 per cent increase from Australia (Exhibit 2).

Exhibit 2: Major Coal Exporting Countries by Volume

Country	Exports, 2013(Mt)	Exports, 2008(Mt)	Growth 2008-13(%)
Indonesia	426	203	110
AUSTRALIA	336	252	33
Russia	141	101	40
USA	107	74	45
Colombia	74	74	0
South Africa	72	62	16

Source: World Coal Association, ‘Coal Statistics’, < http://www.worldcoal.org/resources/coal-statistics/>

Both Indonesia and Mongolia have the capacity to increase their exports substantially. Russia, South Africa and Kazakhstan are also potential rivals. In none of these countries, as far as I am aware, is there any significant questioning of the legitimacy or acceptability of the coal industry or any support for prohibiting new investment in the industry. Indeed, investment in these industries is generally keenly sought. Also, these countries generally have less rigorous approvals processes for new projects, less of an emphasis on environmental protection and lower labour costs than Australia.

In terms of effectiveness, therefore, the question is what environmental benefit would accrue from banning new coal mines in Australia and what would be the costs? It is difficult to see any possible benefits in terms of reducing global emissions, because, as the Prime Minister has pointed out, the investment in new coalmines displaced from Australia would merely take place in other countries. As demonstrated above, Australia lacks any monopoly or even oligopoly power in this market. If Australia took a position based on ideology and emotion, it would be very unlikely to have any impact on the demand for coal globally, but at the same time would provide an opportunity for other countries to step in and capture some of the market previously supplied by Australia. It would be a classic case of carbon leakage, where, in return for no tangible benefit, Australian investment and jobs migrated to other countries. People who depended for their livelihoods on the coal industry would be sacrificed without any offsetting tangible benefit in terms of climate change.

Conclusions

It appears that the governments of the world are likely to step up to the plate and commit to taking substantial action to counter climate change at the Paris summit commencing at the end of November 2015. This is most welcome. Under most plausible scenarios of emissions reductions, however, the forecasts by the IEA suggest that the combustion of coal will continue to generate a significant proportion of the world’s electricity supply until at least 2040.

Proposals to ban investment in new coalmines or expansions, either unilaterally or globally, would be neither an efficient or effective approach to addressing climate change.

First, it would not be an efficient approach because it would be arbitrary and selective and would fly in the face of the more efficient policy of taxing the negative externalities produced by burning coal and other fossil fuels more generally. It would, therefore, provide disproportionately favourable treatment to other fossil fuels such as oil and natural gas. In addition, it would provide a boost to other low emissions base load technologies such as nuclear and hydro, which may also be in the black books of some of the groups that want to ban coal.

Secondly, it would not be an effective approach. Australia has less than 10 per cent of the world’s coal reserves and is not in the top five countries that export thermal coal. Other countries would be happy to step in to fill the gap in coal exports left by Australia. This would be a classic case of carbon leakage. Investment and jobs would be exported from Australia with no tangible benefit in terms of climate change.

There are equity issues here as well, both in terms of people in other countries currently living in poverty who seek access to the cheapest electricity and also those Australians whose livelihoods depend on the coal industry. The people who advocate banning new coal mines would generally not suffer any tangible adverse consequences if their proposal were adopted.

Finally, in the absence of commercial clean technologies such as CCS, those who believe that substantial action needs to be taken to counter climate change will accept and even welcome the longer-term decline of the coal industry. Global action to counter climate change suggests that coal is a declining asset that, in the medium to long term, may well become stranded. Yet the dismal scientist in us also recognises that Australia’s endowments of coal represent a significant asset on our national balance sheet. The industry has given rise to well remunerated employment opportunities as well as very substantial royalty income to the benefit of the Australian community as a whole. In a declining market for coal, therefore, rather than banning new investment in the industry, the rational approach for Australia would be to seek to ensure that as much as possible of the declining future demand for coal is supplied from Australian mines. This is not inconsistent with a policy stance that encompasses strong action to address climate change and achieve the two degree target.

Jon Stanford is a Director of Insight Economics and previously worked in a senior role in the Department of the Prime Minister and Cabinet. He has acted as an expert witness in a number of court cases involving proposals to develop new coal mines.

[1] In reporting this summary of the recent IEA report, I am much indebted to Keith Orchison’s analysis in his This is Power blog and his articles in the Business Spectator.

[2] International Energy Agency, World Energy Outlook 2015, http://www.iea.org/publications/freepublications/publication/WEB_WorldEnergyOutlook2015ExecutiveSummaryEnglishFinal.pdf

[3] US Energy Information Administration, ‘International Energy Statistics’, <http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=1&pid=7&aid=6>

[4] World Coal Association, http://www.worldcoal.org/resources/coal-statistics/

Richard Di Natale has called on the Greens to get ready for government. Well and good. The direction in which he is prodding his party is a rare glimmer of hope in an otherwise bleak Australian political landscape.

Whether in a coalition (likely with Labor), or in its own right (unlikely), what sort of public policy agenda would a Greens government pursue? It is time for it to come up with a broad and innovative policy agenda; otherwise a completely new political party will have to be created.

The other major parties, Labor and Liberal, have become ossified under the thumb of ideologically blinkered, self-perpetuating elites, the consequence of what Robert Michels once called the “iron law of oligarchy.” The Nationals are mostly irrelevant to mainstream policy debates, but they too suffer from the same organisational malaise as the ALP and the Liberals.

For over three decades now Labor and the Coalition parties have been in obsessive thrall to a neoliberal mindset, utterly insensitive to the havoc that neoliberalism has been wreaking on our economy. However, what they are clearly incapable of comprehending today is that the whole neoliberal (or “economic rationalist”) project is about to come crashing down.

Some of the catastrophes that neoliberalism has unleashed on us in Australia include: stagnating economic growth rates; sharply increasing socio-economic inequalities that are undermining capitalism itself (though, as with most subtleties, this irony escapes most neoliberals); the running-down of vital public services and the devaluing of public goods (for example, hospitals, schools, public transport); the appalling expansion of what were once termed “repressive state apparatuses” (increased powers for police and border protection authorities, state-sanctioned human rights abuses on Manus Island and Nauru, draconian meta-data gathering laws, the use of legally prescribed secrecy by governments to hide what they are really up to); and a society in which a range of social pathologies (family violence, depression, narcissism, drugs, begging, violent crime) are becoming the sine qua non of everyday life.

The licence that big private sector corporations have been granted by successive neoliberal regimes has not resulted in better services, cheaper credit, or widely shared prosperity across the community. As Milton once observed, licence is not the same thing as liberty. Markets are now being crowded out by start-up ingénues and fraudsters while being bullied by big local and overseas corporations intent on feathering their own profitability nests and with little interest in the needs or rights of their employees and consumers.

For example, the billion dollar profits that the big four banks are presently announcing (even as they increase their lending rates) point to the abject failure of the principles of deregulation and privatisation – that neoliberals have boasted endlessly will free up a shackled market, to benefit everybody. In the case of the banks, the only beneficiaries have been their obscenely overpaid executives and a narrow grouping of major shareholders. And, remember, many of those shareholders are offshore corporations.

Consider, too, the myriad private providers of electricity that have exploded on to the scene since the privatisation of energy generation. Neoliberals promised that privatising the delivery of electricity would bring vigorous competition into a previously lazy and cosseted industry, driving down the price of electricity in household budgets. But, as every household knows only too well, this simply isn’t happening. In fact there are now far too may competitors in the market devising all sorts of byzantine schemes to woo customers, while investing in costly advertising and hustling campaigns to cajole bemused and confused customers into signing up with one or other of them. The result has been a shocking escalation in the costs of a fundamental public good – affordable electricity. The privatisation of electricity has been one of the most spectacular of neoliberalism’s disasters.

These are only two examples of many failures by neoliberalism to progress our economy and enhance people’s lives.

So what sort of agenda should the Greens espouse?

Their first priority must be to counter-attack in neoliberalism’s war on public goods and services. Reimposing regulatory constraints on a private sector that is out of control is an impossible task. That horse has well and truly bolted. However, neoliberals love to extol the virtue of competition in the economy. So why not give them some real competition?

This is where Greens should enter the policy debates. They should can mount a political campaign explaining that there is no competing mechanism in the neoliberal quiver to challenge the social destructiveness and economic vandalising that neoliberalism’s privatising and deregulating have unleashed. They need to explain that the only achievement of neoliberal policies has been to oversee capital roaring up the system, not trickling down.

This should be the prelude for advocating a policy of strategically targeted public competition into the so-called “free market.”

The first item on the post-neoliberal policy agenda should be the setting up of a publicly owned bank, to provide genuine competition in the banking industry. Of course the neoliberal beneficiaries of the current banking order will scream like stuck pigs about the unfairness of a publicly owned competitor in their midst, insisting that only they be allowed to compete on that most sacred of neoliberal cows – the fabled level playing field.

Anyway, why must a publicly owned bank be seen as unfairly tilting the economic arena? Its establishment would simply provide more competition to bring the banking field back to an even keel, while returning profits to the community either though cheaper, more consumer-respectful services, and/or profits being invested in public goods (for example, better schools, railways, medical services).

Another strategic area in the contemporary economy is legal services. Thousands of Australians are locked out of the justice system because of prohibitive fees charged by the big law companies that as greedy as the banks. A publicly owned law firm providing cheap and friendly (dare one say compassionate) legal advice would help address the unjust over-representation of social minorities and the poor who are routinely and unjustly the majority victims of the pointy end of the country’s legal system. When did you last hear of a senior partner in a law firm, or a distinguished surgeon, or a bank CEO going to jail?

Other strategic areas in the Australian economy in urgent need of tough public competition include the real estate industry (agents’ costs and fees are a significant factor in pushing up already escalating house prices), medical (including psychiatric) and dental clinics, a publicly owned pharmaceutical corporation (once a dream of the Whitlam government), childcare centres, a government airline, and a comprehensive news and entertainment media agency (an expanded and properly resourced ABC and SBS).

A cautiously progressive introduction of public competition into strategic sectors of the economy would certainly contribute to improving the barrenness of our contemporary public policy environment. As each new public competition agency is settled in, further competition could be contemplated – for example a publicly owned supermarket chain.

And once people realise that this kind of state intervention doesn’t cause the sky to fall in, then even the nationalisation of certain crucial industries could be considered – an obvious example is urban rail networks and road tollways.

Indeed with the institutionalisation of a healthy culture of public competition in the post-neoliberal economy, further private competition could even be encouraged. But any new private enterprises will have to operate on a truly level playing field. Regulators will require them to demonstrate that their services are consumer-respectful and that the efficiencies they promise are genuine, not bogus as so many are right now.

If the Greens are unable to mount a public policy program for the coming post-neoliberal era, then a new political party will be necessary. That will be the time for all good men and women to come to the aid of the party.

Allan Patience is a political scientist at the Asia Institute in the University of Melbourne.

On a wide front developers and other commercial interests are moving into our public parks, gardens and beaches. They are our new squatters and the community is feeling powerless in the face of this invasion.

In earlier blogs I outlined the historic encroachment of private interests on our ‘public commons’ – the land and facilities we share as citizens.

In Sydney, there are many glaring examples of how the new squatters are moving onto public land.

Darling Harbour has been ‘developed’ to within an inch of its life. Instead of a spacious recreation area we now have a congested and ugly commercial ghetto.

Without due process and with political influence writ large, the public commons at Barangaroo has been dramatically reduced in favour of commercial interests. The original plan was to keep about half of the site, including the whole 1.4 km waterfront, as inalienable public land. That has been junked in favour of James Packer’s six-star casino to bring in ‘high rollers’.

The original architect of Barangaroo, Philip Thalis, said ‘the vibrant public space envisaged seven years ago has shrunk to become basically an enclave of privilege and exclusion’.

But worse is in prospect. The Sydney Morning Herald has reported ‘the city’s newest park, Barangaroo Reserve has attracted 200,000 visitors since August. But kite flyers, soccer players, fishers and musicians will find it off limits from this weekend. Anyone wanting to hire exclusive use of Barangaroo foreshore, lawns, coves and walkways for public functions however are welcome-if they are prepared to pay.’ Slowly the takeover continues.

Another Sydney example of squatter encroachment on public land is the Sydney Botanic Gardens. For many years part of the gardens have been alienated for four months each year for opera and cinema. Wealthy patrons and wealthy sponsors have been the main beneficiaries. But this isn’t enough for the new squatters. The Botanic Gardens and the Domain Trust have released a master plan for the parks to be developed with cafes, an $80 million hotel and year-round concerts. This is desecration of the hallowed grounds bequeathed by Governors Phillip and Macquarie.

In congested Watsons Bay where I live, a developer from Darling Harbour has applied to develop wedding facilities and restaurants within the South Head National Park and spill his patrons onto a beautiful public beach.

Step by step our public commons is being eroded. When governments refuse to adequately fund our parks and gardens it is likely that commercial interests will seize the opportunity for a land grab. The economy is put ahead of society.

In the 18^th and 19^th Century, wealthy and privileged landowners in England passed Enclosure Acts forcing people off common land which they had used for centuries. About 20% of land in England was enclosed.

We followed suit in Australia in the 19^th Century with ‘squatters’, mainly from the upper echelons of colonial society, occupying large tracks of crown land to graze livestock. Over time, this occupation of the pastoral ‘commons’ and the dispossession of indigenous people was enshrined in law and enforced by the police.

History tells us that we need to be very careful about those who want to take possession and erode our public ‘commons’. It happens slowly, almost imperceptibly, often without our knowledge or understanding of what is at stake.  And it is not just about getting shooters out of national parks or protecting waterfront land without public tender. Councils often carelessly allow commercial interests to encroach on public parks, botanic gardens and beaches.

Some council do oppose many crass and vulgar developments, but too often they don’t have the resources to combat a phalanx of celebrity architects, lawyers and public relations lobbyists. Some councils are obviously concerned that if they reject such developments, it will lead to expensive legal appeals to the Land and Environment Court.

We owe a great debt to foresighted citizens and governments in the past who established our public ‘commons’, national parks ,botanic gardens and beaches, for the enjoyment of all.

If governments and their agencies are unwilling or unable to protect our natural and built environment, I would hope that our unions would take up again what the BLF pioneered 40 years ago in Kelly’s Bush in Hunters Hill, Sydney. We need an association of professional and community groups, including unions to develop a charter to safeguard our public commons.

With the rapid increase in our urban populations, protecting and expanding our public commons is more important than ever. The new squatters must be turned back.

 

The following are extracts from a speech given by Mark Carney, The Governor of the Bank of England at a Lloyd’s of London dinner on 29 September 2015

He outlines how climate change is a huge financial risk, particularly for investments in unburnable fossil fuel assets. He points out that  the vast majority of these assets could be ‘stranded ‘and that the window of opportunity to address climate change is ‘finite and shrinking’

The media has described this as a ‘milestone speech’   See link  to full speech and references.

Extracts follow   John Menadue

The tragedy on the horizon

There is a growing international consensus that climate change is unequivocal. ²

Many of the changes in our world since the 1950s are without precedent: not merely over decades but over millennia.

Research tells us with a high degree of confidence that:

• In the Northern Hemisphere the last 30 years have been the warmest since Anglo-Saxon times; indeed, eight of the ten warmest years on record in the UK have occurred since 2002; ³
• Atmospheric concentrations of greenhouse gases are at levels not seen in 800,000 years; and
• The rate of sea level rise is quicker now than at any time over the last 2 millennia. ⁴

Evidence is mounting of man’s role in climate change. Human drivers are judged extremely likely to have been the dominant cause of global warming since the mid-20th century. ⁵  While natural fluctuations may mask it temporarily, the underlying human-induced warming trend of two-tenths of a degree per decade has continued unabated since the 1970s. ⁶

While there is always room for scientific disagreement about climate change (as there is with any scientific issue) I have found that insurers are amongst the most determined advocates for tackling it sooner rather than later.  And little wonder.  While others have been debating the theory, you have been dealing with the reality:

Since the 1980s the number of registered weather-related loss events has tripled; and inflation-adjusted insurance losses from these events have increased from an annual average of around $10bn in the 1980s to around $50bn over the past decade. ⁷

The challenges currently posed by climate change pale in significance compared with what might come.  The far-sighted amongst you are anticipating broader global impacts on property, migration and political stability, as well as food and water security.

We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix.

That means beyond:

• the business cycle; ⁹
• the political cycle; and
• the horizon of technocratic authorities, like central banks, who are bound by their mandates.

The horizon for monetary policy extends out to 2-3 years. For financial stability it is a bit longer, but typically only to the outer boundaries of the credit cycle – about a decade. ¹⁰

In other words, once climate change becomes a defining issue for financial stability, it may already be too late.

This paradox is deeper, as Lord Stern and others have amply demonstrated. As risks are a function of cumulative emissions, earlier action will mean less costly adjustment. ¹¹

The desirability of restricting climate change to 2 degrees above pre-industrial levels ¹² leads to the notion of a carbon ‘budget’, an assessment of the amount of emissions the world can ‘afford’.

Such a budget – like the one produced by the IPCC ¹³  – highlights the consequences of inaction today for the scale of reaction required tomorrow.

These actions will be influenced by policy choices that are rightly the responsibility of elected governments, advised by scientific experts.  In ten weeks representatives of 196 countries will gather in Paris at the COP21 summit to consider the world’s response to climate change. It is governments who must choose whether, and how, to pursue that 2 degree world.

Climate change and financial stability

There are three broad channels through which climate change can affect financial stability:

– First, physical risks: the impacts today on insurance liabilities and the value of financial assets that arise from climate- and weather-related events, such as floods and storms that damage property or disrupt trade;

– Second, liability risks: the impacts that could arise tomorrow if parties who have suffered loss or damage from the effects of climate change seek compensation from those they hold responsible.  Such claims could come decades in the future, but have the potential to hit carbon extractors and emitters – and, if they have liability cover, their insurers – the hardest;

– Finally, transition risks: the financial risks which could result from the process of adjustment towards a lower-carbon economy.  Changes in policy, technology and physical risks could prompt a reassessment of the value of a large range of assets as costs and opportunities become apparent.

The speed at which such re-pricing occurs is uncertain and could be decisive for financial stability.  There have already been a few high profile examples of jump-to-distress pricing because of shifts in environmental policy or performance.

Risks to financial stability will be minimised if the transition begins early and follows a predictable path, thereby helping the market anticipate the transition to a 2 degree world.

Transition risks

The UK insurance sector manages almost £2tn in assets to match liabilities that often span decades. While a given physical manifestation of climate change – a flood or storm – may not directly affect a corporate bond’s value, policy action to promote the transition towards a low-carbon economy could spark a fundamental reassessment.

Take, for example, the IPCC’s estimate of a carbon budget that would likely limit global temperature rises to 2 degrees above pre-industrial levels.

That budget amounts to between 1/5th and 1/3rd world’s proven reserves of oil, gas and coal. ²⁴

If that estimate is even approximately correct it would render the vast majority of reserves “stranded” – oil, gas and coal that will be literally unburnable without expensive carbon capture technology, which itself alters fossil fuel economics. ²⁵

The exposure of UK investors, including insurance companies, to these shifts is potentially huge.

Conclusion

Our societies face a series of profound environmental and social challenges.

The combination of the weight of scientific evidence and the dynamics of the financial system suggest that, in the fullness of time, climate change will threaten financial resilience and longer-term prosperity.

While there is still time to act, the window of opportunity is finite and shrinking. ³¹

Others will need to learn from Lloyd’s example in combining data, technology and expert judgment to measure and manage risks.

The December meetings in Paris will work towards plans to curb carbon emissions and encourage the funding of new technologies.

We will need the market to work alongside in order to maximise their impact.

With better information as a foundation, we can build a virtuous circle of better understanding of tomorrow’s risks, better pricing for investors, better decisions by policymakers, and a smoother transition to a lower-carbon economy.

By managing what gets measured, we can break the Tragedy of the Horizon.

Amidst growing pressure and heightening expectations, on Tuesday Australia announced its intended nationally determined contribution (INDC) target to take to the Conference of Parties in Paris in December. It reinforces the notion of Australia as climate laggard going against the tide of science, action and opinion.

Tuesday’s announcement provides a meek objective of 26% emissions reduction by 2030 based on 2005 levels. The Government’s INDC is extremely inadequate for several reasons. Primarily it does not contribute to keeping temperature increases to 2⁰C above preindustrial levels. It does not aid Australia’s decarbonisation of the economy over the longer term. By comparison, the Climate Change Authority called for a minimum reduction of 45% on 2005 levels. Overall Australia will remain the highest per capita emitter commensurate with its role as a major contributor to the global fossil fuel industry. It reaffirms that Australia will be a fringe player at COP 21 in Paris, seen as marginal at best and obstructionist at worst in achieving genuine progress. Our commitment is less than Canada, another mining-centric climate-sceptic nation. The Australian Financial Review called the announcement ‘policy rubbish’.

In remaining a climate laggard, Australia continues to go against the global trend. What has become increasingly obvious recently is that the tide is coming back in on climate change action at home and abroad. A growing international community consensus for action is noticeable. Recent research by the Pew Center showed that climate change was seen globally as the biggest international challenge. New momentum on climate leadership has been provided by the United States and China. The two great powers made a bilateral agreement in November 2014 to substantially reduce emissions by 2030. China reaffirmed its commitment to peak emissions by this date in its INDC target released in June. On 4 August President Obama announced the Clean Power Plan mandating American power plants to reduce carbon emissions by 32% by 2030. One of the most conservative institutions in the United States, the Department of Defence, has been addressing climate change for years, even releasing a new report in early August showing how it is working with international allies on adapting to a changing climate. With these two great powers providing strong leadership, the prospect of substantive progress with the rest of the international community in Paris is high.

The pressure from business, civil society and the public on the Australian Government to follow suit is intensifying, and the demands will only persist after this latest announcement. In late June a roundtable comprising divergent stakeholders such as the Business Council of Australia, the Australian Industry Group, the Climate Institute, the Australian Council on Social Service, the Investor Group on Climate Change, and the ACTU demanded the end of the politicking and uncertainty over climate policy and demanded Australia catch up with the rest of the world. Australians want climate change taken much more seriously. A total of 59 per cent of respondents to a recent Climate Institute survey agreed that the Government is under-estimating the seriousness of climate change, and agree that Australia should be a world leader in finding solutions. The Australian community also understands the impact climate change has on other areas of life. In a poll recently done for CPD, 68 per cent of respondents agree that damage to our food supply chain and our agriculture due to increases in extreme weather is a national security threat.

The Government framed the INDC announcement around being economically responsible when it is in fact reckless for both the short and long term given the acceleration of climate impacts. The business and investment community are increasingly anxious over the future cost to the economy of inaction. Australia is poised to miss out on the trade and employment opportunities climate action presents through the development of renewable energy and other climate based industries, technologies and services. Large scale renewable energy investment in Australia has fallen a staggering 90 per cent in 12 months prior to the announcement of the RET review. Whilst the Government talks of protecting the ordinary household, it ignores the economic pain already being brought by climate change. The Assistant Treasurer even admitted that skyrocketing insurance premiums in North Queensland (over 80 percent between 2005 and 2013) are due to frequent extreme weather over recent years. Climate change will directly affect our primary industries, our food supply as well as place enormous strain on economic and social infrastructure. Yet Direct Action has been labeled a ‘holding policy’ that fills the vacuum of not having a genuine policy. The economic costs of inaction are mounting whilst the Government makes the hollow case that climate action means a weaker economy.

The Abbott Government seems determined to ignore the climate science, dispute the emerging solutions, downplay international agreements, stymie renewable energy proposals and refuse to accept our responsibility to lead. Tuesday’s announcement is another symptom of our broader policy failure. Despite the fact that we are one of the most vulnerable developed nations to climate change, we will remain unwilling to find adequate solutions in our own interests. As a concert of nations go to Paris to capitalise on international momentum, Australia will sit on its own on the shoreline, trying desperately to push back the incoming tide.

Ian Dunlop is a Fellow of the Centre for Policy Development and was formerly an international oil, gas and coal industry executive, chair of the Australian Coal Association and CEO of the Australian Institute of Company Directors. He is a Member of the Club of Rome, and a Director of Australia21. 

Rob Sturrock is a CPD Analyst and author of ‘The Longest Conflict: Australia’s Climate Security Challenge’.

This article for appeared in The Age on August 14, 2015.

The former head of NAB, Cameron Clyne, has published an opinion piece in the SMH about the failure of political and business leaders to address the issue of climate change. He said that business leaders overwhelmingly support the need for a market based carbon trading system. In respect of Maurice Newman, he said that he had never encountered such thinking in the Australian business community. For a full report of Cameron Clyne’s article, see link below:

 

http://www.smh.com.au/environment/cameron-clyne-former-head-of-nab-criticises-canberras-wilful-blindness-over-climate-change-20150802-gion1o.html

Climate campaigner Al Gore has been in Australia again – but this time he didn’t share a stage with a beaming Clive Palmer. He didn’t go anywhere near Canberra. And he had good reason.

Gore, the former US vice-president who travels the world spruiking action on climate change, wanted to meet with state governments and city councils instead. He has jumped on an emerging trend: a broadening of responsibility for addressing climate change.

Under the United Nations system it is national governments that are supposed to make emissions pledges and enact policies. Some are doing so.

But the reality is it’s often provincial governments or city councils who are the most ambitious, especially where national governments leave a policy void.

From the ground up

A global patchwork of thousands of provinces and councils enacting separate climate policies may sound messy, and it’s very much Plan B for the UN Framework Convention on Climate Change. But this bottom-up mish-mash might just prove efficient at reducing greenhouse gas emissions – while some national politicians grandstand and dither on the sidelines.

Gore, a Nobel laureate who gave his trademark slideshow to 1,000 staff and students at the University of Melbourne on Monday, talked about states that are “moving” on climate change: California, Washington and Oregon in the United States, and Canada’s British Columbia.

“I have a feeling that some parts of Australia are thinking of moving,” he added in his breezy Tennessee accent. “I’m stoked about that.”

Earlier in the day Gore met with ministers from the Labor states of Victoria, Queensland and South Australia, plus senior public servants from New South Wales and the ACT.

Later he told the university event, organised by the Melbourne Sustainable Society Institute, that those state governments “understand this crisis and the nature of the opportunity” (such as renewable energy).

It’s a different approach to Gore’s memorable joint press conference with federal MP Clive Palmer in Parliament House a year ago. The pair announced that Palmer would vote to scrap the carbon price, while saving the furniture (the Renewable Energy Target, the Clean Energy Finance Corporation etc).

This time around, Gore didn’t target federal politicians – he could hardly show his slide of a Hawaiian wind farm surrounded by flowers to Prime Minister Tony Abbott, who finds them “ugly”. (Gore did have a quick lunch with Opposition Leader Bill Shorten.)

Instead, Gore looked to the states to ginger up Australians ahead of the major UN climate summit in Paris in December.

Top of his mind was California, the example he cited frequently on this trip. Former Republican Governor Arnold Schwarzenegger got an emissions trading scheme through state parliament and it started under the Democrats in 2012. (The design is fairly similar to Australia’s first emissions trading scheme under Kevin Rudd.)

California now has bills on the table to cut transport emissions and increase renewable energy, as well as a legislated emissions target. The Victorian government is particularly interested in the Californian example.

Gore also name-checked the Canadian province of British Columbia, which has had a carbon tax since 2008, introduced by the centre-Right Liberal Party. Petrol pumps in Vancouver now show the carbon tax ticking over.

British Columbia has relatively strict energy-efficiency regulations on buildings and their contents, a requirement that 93% of new electricity supply be renewable, and all government agencies offset emissions.

Gore didn’t mention Chinese provinces but there are seven state or city-based carbon trading schemes in China; the Beijing ETS covers everyone from Microsoft to news agency Xinhua.

The climate see-saw

So can Australian states follow suit? They already have. NSW had an ETS, which was scrapped in 2012 to avoid duplication with the (now defunct) federal carbon tax.

Victoria’s Labor government passed a bill in 2009 to cut emissions by 20% by 2020 and had a plan for the staged closure of the Hazelwood coal-fired power plant. The Liberals won government in 2010 and reversed those plans.

So there’s an Australian policy pattern best described as messy, regardless of one’s view on climate change. Sometimes the states act, sometimes the federal government does, but governments keep changing. Climate change has been caught in a federal-state see-saw which has left little policy intact.

That’s why Gore’s list of frontrunner states doesn’t include any Australian examples.

That’s also perhaps why no premiers met Gore on Monday. They face a tough choice – are they really ready to ramp up climate ambition, and cope with the risks of a hostile media campaign and a possible voter backlash?

Climate policy has helped see off three Australian prime ministers and two opposition leaders since 2007. The temptation to back away quietly is real.

South Australia and Queensland are talking up their climate ambition, while Victoria is formally reviewing its climate options, including an energy efficiency campaign, new emissions targets, and more renewable energy. (They’re all Labor states.)

Meanwhile, insiders are closely watching the Liberal NSW government, which is a different beast ideologically to the federal Abbott government. Watch to see if ministers from any state go to the UN Paris summit.

So it was perhaps the state premiers, and not the Melbourne University students present, that Gore had in mind when he called for “moral courage” on climate change, as he stood in front of a huge slide of the planet.

Cathy Alexander is Research Fellow. Melbourne Sustainable Society Institute at University of Melbourne. This article was first published in The Conversation on 28 July 2015.

For those who believe that Australian elections should be based on a contest of ideas about public policy, developments at the national conference of the ALP in July 2015 will provide some basis for optimism. In contrast to some previous Opposition leaders who have been content to maintain a small target strategy, Bill Shorten is starting to make himself quite a large target in policy areas such as the republic, gender equality and climate change.

Why has Shorten taken this risk? It certainly helps to be opposed by a prime minister who is a high conviction politician, driven by a conservative ideology that many on the progressive side of politics would characterise as swimming hopelessly against the tide of history. Yet Tony Abbott’s ideological self-indulgence only goes so far. There is a warning signal for the opposition in the long list of issues, mainly economic, where the Prime Minister appears to have no particular conviction and is ruthless in his willingness to play politics with those who do. The corollary is that the few issues where his ideology does dominate may not be that significant. To be sure, they make for lively debate around the barbecue and may even give Tony Abbott the look of a ‘mad uncle’, but they do not threaten the punter’s hip pocket. They are not, therefore, likely to be issues where elections are won or lost.

But one of Abbott’s high conviction issues may be different. Climate change is at the forefront of global policy concerns and is highly challenging for national governments encompassing, as it does, complex problems around science, diplomacy, technology and economics. Notably, the Prime Minister has managed to place himself on the wrong side of the debate, not just in one or two of these areas, but in all four. He has lampooned climate science as “absolute crap”, identifying instead a conspiracy to attack the fossil fuel industry. In diplomatic terms, since 2013 Australia has run dead on climate change in international forums, with Abbott not allowing Ministerial representation at UN conferences and thereby eliminating any chance of Australia securing a better deal in the upcoming negotiations. His attitude to new energy technologies is that of a Neo-Luddite; he eulogises coal as “king” while deriding renewable energy and cutting funding for the development of low emissions energy solutions. His economic policy response to climate change has been to move as far as possible away from an efficient, least cost approach to reducing emissions and instead, extraordinarily for a conservative, draws on taxpayers’ money to pay polluters not to pollute.

Little wonder then that the ALP would place climate change at the Schwerpunkt of their political assault on the Coalition leading up to next year’s election. The strategic attractiveness of the issue is also strengthened by the fact that Abbott is not in a position to downplay its significance or remove it from the front pages. With the key Conference of the Parties (COP21) on post-2020 emissions reductions to be held in Paris in December this year, it has developed a transparency and momentum that is all its own.

In the lead up to COP21, nations are required to propose emissions reduction commitments beyond 2020 that are consistent with the agreed international objective of containing global warming to a maximum of two degrees Celsius. These commitments were formally due by end-March 2015. Every other developed country has now published its proposed commitment, but Australia is again playing the laggard. Australia’s commitment, we were originally told, would be published in June this year. Then the date slipped again, first to July and now to August.

These delays might lead one to speculate that the Cabinet is having difficulties in reaching an agreed position on an acceptable commitment. This would not be surprising, because the split in the Coalition on climate change extends beyond the idiosyncratic views of the Prime Minister. On the one hand there is a strong element in the Ministry that is progressive on the issue – and reflective of the attitudes of most conservative parties around the world. On the other hand, there is also a vocal rump of climate change deniers and strong supporters of Australia’s coal industry who, encouraged by the overthrow of Malcolm Turnbull’s leadership on this issue, are waiting to claim their pound of flesh.

Nevertheless, as a nation that has acceded to the two degree target, in practical terms Australia cannot put forward a weak abatement target that is seriously out of kilter with the ambitions of other countries. Responsible Ministers such as Julie Bishop and Greg Hunt would be particularly strong on this issue and would point to the ambitious approach of other conservative governments such as those headed by David Cameron and Angela Merkel. Not only would the government be pilloried by other countries, including its allies and friends, but it also seems likely that the domestic reaction would be highly unfavourable.

Pledges by other developed countries to date include:

• The US, with a commitment to reduce emissions by 26 to 28 per cent below 2005 levels by 2025
• The European Union, committing to reduce emissions by 40 per cent by 2030 relative to 1990 levels
• Canada, proposing a 30 per cent reduction in emissions from 2005 levels by 2030
• New Zealand, with a similar commitment to Canada.

In this context it seems unlikely that Australia would be able to get away with a commitment below those of Canada and New Zealand, particularly since emissions reductions of this magnitude, while substantial, still fall well short in aggregate of the abatement required to limit global temperature rises to two degrees Celsius. As Ross Garnaut has suggested, a 30 per cent reduction by 2030 from 2005 levels would be at the bottom end of what Australia could “get away with”. Nevertheless, it may well be a reasonable initial position while providing some comfort to the Prime Minister that he can march bras en bras with his Canadian friend and fellow climate sceptic Stephen Harper. Also, in the context of insufficient ambition overall and the consequent pressure that will be applied to all parties to up the ante in Paris, from a diplomatic perspective it may not be a bad initial negotiating position.

But the big problem for Tony Abbott will be in delineating the policies he will employ in meeting the target. Even a 30 per cent reduction from 2005 levels by 2030 would require significant policy intervention. Abbott has been very successful in the past in demonising almost every approach to emissions abatement by characterising it as a carbon tax or some other sneaky impost that will increase electricity prices and thereby destroy the world as we know it. For example, he was quick this week to attack Shorten’s suggestion that the renewable energy target could be increased (“we’ve got quite enough renewables”) by pointing to the significant increase in electricity prices that would be required.

So what is left? Direct Action may have been acceptable in achieving a minor reduction in emissions at a time when electricity prices were increasing, and thus driving down demand, and energy efficiency was increasing rapidly mainly thanks to LED lighting. But it could never bring about a reduction in emissions on the scale being discussed here without a substantial increase in tax revenue to fund higher subsidies. It would be very difficult to argue that increasing income tax or the GST to pay polluters to reduce emissions would provide a better outcome for the average punter than taxing polluters’ emissions directly.

One option would be for Australia to participate in an international emissions trading system (ETS) that would allow the purchase of emissions permits from overseas, often from developing countries. This option was taken to the 2007 election by the Howard government, of which Tony Abbott was a member. It also consistently featured in the modelling by Treasury of the Rudd and Gillard governments’ carbon reduction policies, which demonstrated that the economic cost of emissions reduction to the Australian community would be substantially reduced by this approach. By purchasing cheaper carbon abatement from overseas, this option would also enable some coal plant to be retained in Australia’s power generation network out almost to 2050 while at the same time we met challenging emissions reduction targets. All this would be balm, one might think, to Tony Abbott’s ears. But no; the Prime Minister has already ruled this option out on the grounds that an ETS is the equivalent of a carbon tax and hence a proscribed instrument under his ideology.

There are, therefore, significant problems, largely of their own making, for the government both in putting forward a commitment for COP21 and then in designing the policies to deliver it. The opportunity for the ALP is clear. But now that Bill Shorten has initiated the debate about climate change policy and invited the Prime Minister to “bring it on”, where should he go from here?

First of all, although he may reasonably criticise the government for a lack of ambition in its commitment and a failure in diplomacy in the process leading up to COP21, Shorten does not need to propose any abatement targets at this point in time. These are subject to negotiation at COP21 and it would be premature for an Opposition to intervene at this stage. Should Australia be regarded by the international community to be a “leaner” rather than a “lifter” during the Paris negotiations it may be appropriate for Shorten to indicate that he would consider a more testing target were the ALP to win government. He may also remind Abbott that a sustained and clever diplomatic effort in the lead up to Kyoto enabled the Howard government to obtain for Australia by far the most generous abatement targets for any significant developed country under that protocol. Australia’s minimalist, if not surly, diplomatic engagement in the lead up to COP21 may well make a repeat performance impossible.

In this context it also needs to be remembered, however, that while it is in Australia’s interests for the world to agree to significant action to counter climate change and even for our delegation to punch above its weight in that discussion, there are no prizes for Australia in exceeding the commitments made by other countries. The impact on climate change from an excess of zeal on Australia’s part would be negligible while the costs to our industry in terms of carbon leakage could be significant.

Secondly, Shorten should propose a policy framework for achieving substantial emissions reductions at least cost to the Australian economy. He has already taken a major step in that direction by endorsing an emissions trading system with the capacity to gain access to international abatement opportunities. But almost immediately Shorten then proposed a policy, fortunately at this stage only as an aspirational goal, in direct contradiction to his ETS, namely a 50 per cent renewable energy target by 2030. Such a target would override the least cost approach of the ETS, negate many of the benefits of buying emission permits on the international market and, according to Danny Price of Frontier Economics, have a major impact on electricity prices by requiring a carbon price of up to $200/tonne.

Finally, this illustrates that one lesson Shorten can learn from Abbott is that relying on ideology is unlikely to be effective in determining the most efficient policy solutions. For example, in pursuing carbon abatement, what we need is the most economic lower emissions energy solutions that can be made available. These may be renewable, they may be lower emissions fossil fuel technologies or may even be nuclear. There is no need for religion here. Only the Greens believe that there is anything particularly wonderful about renewable energy and this belief is based not on science but ideology. Managing a grid with half of its generation being provided by interruptible sources would be extremely difficult. Of course it could be managed – but only by simultaneously investing in open cycle gas turbines (OCGT) to provide instant reliable power to the grid when the wind is not blowing and the sun isn’t shining. Overall, by virtually doubling the cost, this can be a very expensive solution and the emissions footprint of OCGT is not far short of coal.

While the punters like renewable energy in the abstract, they clearly don’t like higher electricity prices. Rather than succumbing to simple populism, it would be worthwhile for the ALP to do the hard yards here, such as in working out ways to increase gas supplies so as to bring the price down and thinking about how to respond down the track to the South Australian Royal Commission into nuclear energy. In the latter case, a finding in favour of small modular reactors (think plug-in nuclear submarine power plants) would merit a more considered response than the knee jerk reaction that ideology is likely to dictate.

Jon Stanford headed climate change policy while with the Department of Prime Minister and Cabinet in the 1990s and was chair of the CoAG taskforce that delivered national gas industry reform.