Tag Archives: Australia

Global damage from Australia’s coal exports up to 1000 times greater than its climate aid by 2020

In her speech at the climate negotiations in Paris this week, Australia’s Foreign Minister, Julie Bishop, tried in vain to make the case that “coal will remain critical to promoting prosperity, growing economies and alleviating hunger for years.”

Australia has been mouthing ambitious-sounding platitudes, while consistently failing to deliver policies that would actually deliver an ambitious agreement. In fact, Australia was ranked third last out of 58 countries on its climate policies.

Australia failed to support a group of countries pushing for end to fossil fuel subsidies – making a mockery of its claims even to fiscal responsibility, let alone environmental responsibility.

And Australia found itself outside the ‘High Ambition Coalition’ of more than 100 countries pushing for limiting warming to 1.5°C, which includes the EU, US, New Zealand, Canada, Africa and the Pacific island states. At the time of writing it had tried to join, but had not yet been welcomed into the group, with the convenors apparently preferring a narrower gap between rhetoric and actual policy measures.

What is behind Australia’s appalling record on climate change? When Australia is the driest inhabited continent, with ecosystems and population centres highly vulnerable to droughts, floods and bushfires, to say nothing of the threat to the Great Barrier Reef – why is Australia so blind?

One word: Coal.

The Australian Government’s Department of Industry expects (pp. 44 & 56) Australia to export 400 million tonnes (Mt) of coal this financial year. When that coal is burnt, it will release around 955 Mt CO2-equivalent.* To put that figure in perspective, Germany’s CO2 emissions in 2012 were just 817 Mt.

In July this year the US Government revised its estimates for the net present value of global damage caused by CO2 emissions. These estimates are based on very conservative Integrated Assessment Models, which, for many reasons, significantly under-estimate the costs of damage. Even so, the results are sobering – precisely because they are estimated by such conservative models, with the full backing of multiple agencies of the US Government. In short, these estimates are the least alarmist measures we have of the damage being inflicted on the world by greenhouse gas emissions.

By these US Government estimates, each metric tonne of coal burnt leads to between US$30 and US$292 damage to the world (in 2015 dollars; A$41-403). The low estimate is obtained using high discount rates (effectively valuing the future less), and the higher estimate takes somewhat better (but still inadequate) account of the likelihood of abrupt climatic changes and catastrophic damage.

Compare these estimates for global damage with the actual price of coal:

Source: OCE, (2015) “Resources and Energy Quarterly“,  Canberra, Office of the Chief Economist, Department of Industry & Science, Australian Government, September Quarter,  125 pp.

It is clear from these charts that the cost of the damage caused by burning more than a tonne of coal is now likely to be greater than the price of the coal itself.

Using the US Government damage figures, Australia’s coal exports this financial year will cause between US$12 billion and US$117 billion (A$16-161 billion) worth of damage globally.

The cost of this damage is completely ignored in the price of coal.

It may be argued that this reasoning does not take into account the potential economic benefits from the energy produced from the coal. That is true. I am also not making a distinction between thermal coal used for generating electricity (about 51% of Australia’s exports by volume) and metallurgical coal used for steelmaking (about 49%), for which alternatives are available.

The fact remains that the damages caused by the emissions from coal combustion are ignored in its price. Economists call this an externality. Coal companies externalise or dump the cost on people and the environment because they can. They pretend that coal is a cheap source of fuel and so is good for the poor. Coal isn’t cheap though – and it is a lie for politicians and the mining industry to continue to claim that it is. It only looks cheap because of the hidden subsidy it gets because its price ignores the damage its emissions cause (and we are not here, even considering the damage and health effects from the particulates and mercury caused by coal transport and combustion).

The prices of coal and other fossil fuels should be much higher to internalise the costs of the damage they cause – otherwise markets will continue to give misleading signals. The fact that free-market think tanks generally do not champion the internalisation of externalised costs shows that fundamentally they are industry shills and front groups rather than sources of informed and constructive economic policy advice.

But I digress. What is interesting is that the total revenue (pp. 44 & 56) expected from Australia’s coal exports this year is only US$27.4 billion (A$37.9 billion). That’s not profit – that’s just revenue. Since the coal industry is in dire straits globally, we can be sure that actual profits are a small fraction of revenues. That means that the unpriced damage caused by our coal exports is far greater than the profits made from those exports.

In short, Australia’s coal exports are causing massive environmental, social and economic damage which is not factored into their prices, for a profit that is far less than the costs of the damage. 

And it gets worse. Australia wants to export even more coal – including a proposal to massively expand production from the Galilee Basin in Queensland, overseen by a company whose Chief Executive in Australia failed to disclose that he oversaw an appalling environmental disaster in Zambia.

By 2020 Australian expects to be exporting 433 Mt of coal each year, which would lead to emissions of 1033 Mt and damages of between US$14 billion and US$144 billion (A$19 – 199 billion). Here are the government’s projections:

Source: OCE, (2015) “Resources and Energy Quarterly“,  Canberra, Office of the Chief Economist, Department of Industry & Science, Australian Government, September Quarter,  125 pp.

This brings us to Australia’s promises to help developing countries to adapt to climate change. The rich countries have together promised US$100 billion for developing countries. Where this is all going to come from remains unclear. With much fanfare, Australia has pledged A$1 billion (US$725 million) over five years. This is not new money, but will be redirected from the existing aid budget, which the Coalition government has cut since coming to office.

Assuming the A$1 billion is spread evenly over the five years, we have A$200 million per year promised to help some of the poorest countries in the world to cope with the damage Australia is helping to cause.

That means that this year the costs of the damage from Australia’s coal exports are between 82 and 805 times what we have promised to help developing countries with. By 2020, if export expansion continues, the damage will be 97 to 993 times more. In other words: By 2020, Australia’s coal exports will be causing damage equivalent to between about 100 and 1000 times more than the amount Australia has promised to help address that damage.

It is not hard to understand why developing countries despair at Australia’s short-sighted and self-destructive duplicity.

Notes:

* With an energy content factor of about 27 GJ/tCoal, and an emissions factor (including oxidation factor) for CO2 of about 88.2 kgCO2-e/GJ, this gives 2.38 tonnes of CO2-e (CO2-equivalent) from every tonne of coal burnt. The effects of methane and nitrous oxide released from coal combustion bump it up to 2.39 tCO2-e.

** This article updates some of the information originally published in The Conversation in 2013. Read the earlier article.

Time to stand up: reflections on the federal budget

This article was originally published  here by the Ethos Centre for Christianity and Society.  

By now you may have read some of the analysis of the federal Coalition government’s recent budget (e.g. here, here and here), or its Commission of Audit (e.g. here, here, here or here), which was released prior to the budget in an attempt to frame our economic challenges as a ‘budget emergency’. Australia has had tough budgets before, but five factors make the 2014-15 budget a low-point in Australia’s modern history and should continue to spur Christian leaders into outspoken and courageous resistance.

First, for a government which pursued former Prime Minister Julia Gillard relentlessly on the issue of integrity for supposedly lying on the issue of a price on carbon (ignoring the fact that she came to preside over a minority government), Prime Minister Tony Abbott’s and Treasurer Joe Hockey’s wholesale trashing of so many pre-election promises is breathtakingly cynical, surprising even a jaded electorate (see here, here, here and here). Like many Australians, I have grave concerns about the ongoing corrosion of our society’s ability to develop, debate and implement sensible policy in a context where public trust is treated with contempt.

Second, as an economist I despair at the near impossibility of having a sensible public debate on economic policy in this country. Both sides of politics are to blame, but the Coalition has used its pro-business reputation as being ‘better economic managers’ to drag the ALP so far to the right as to be almost unrecognisable. The previous Labor government managed to paint itself into a corner totally unnecessarily by buying the line that an early return to surplus was the key indicator of sound economic management. Economic reality forced it into an entirely predictable and humiliating back down.

The ‘trickle down’ theory of neoliberal economics, to which both sides seem to be wedded, is intellectually bankrupt. It is based on a naive atomistic, individualistic, view of the ‘self-made man’ who does not derive his fortune in any way from public goods such as a skilled workforce funded by public education, transport infrastructure funded by public investment, an energy grid built by public utilities, a healthy population due to public health measures, or a tax-payer funded legal framework that enables markets to function. Some might praise the Coalition for at least being consistent. They don’t seem to even be pretending to have a vision for an equitable and ecologically sustainable society. The ALP meanwhile, imagines that it can aspire to such a vision mimicking the economic ideology of their opponents.

The failure to understand the legitimate role that public investment and government debt plays in running an economy illustrates the influence that neoliberal political ideology has had on policy at the expense of sound economics. Neoliberalism is obsessed with small government as a matter of principle without understanding the important role that public investment and good governance plays in sustainable prosperity. Governments can borrow at lower interest rates than private companies because they are understood by financial markets to be lower risk. Australia’s infrastructure was largely financed by public borrowing and public expenditure even before Federation: between 1860 and 1900, the share of government expenditure in domestic capital formation was around 40 per cent. Government debt was around 40 per cent of GDP for most of the period between 1910 and 1939 before spiking to 120 per cent during World War II and declining to today’s relatively low levels by the 1970s (see di Marco et al. here). Until the relatively recent fad for privatisations and public-private partnerships, most of our modern infrastructure was also built through public investment. A certain level of public debt also enables bond markets to function, providing a low-risk means for citizens to invest in the public good.

Governments should be borrowing to invest in areas where the economic return will be positive – particularly in cases such as networked infrastructure where there is a natural monopoly (meaning for example, we don’t need more than one high-speed rail route between Melbourne and Sydney, or more than one national broadband network). The Chaser team confronted Tony Abbott in 2010 with the absurdity of him saying that governments should act like households and companies in managing their debt when in fact households and companies tend to be far more indebted than the government. Australia has one of the lowest levels of public debt of any country in the OECD (see here, here and here). I was surprised to find myself agreeing with Clive Palmer recently when he said, “To say we’ve got a debt crisis means that the world’s got a debt crisis much worse than ours.”

Most economists also agree that we do not have a debt crisis (see here). We do have budgetary challenges, but these are mostly on the revenue side. It is widely believed that Australia is a highly taxed country. In fact we are the fourth lowest taxed country out of the 34 countries in the OECD (yes, really). Our revenue challenges have been exacerbated by years of tax cuts in the previous decade while we rode the mining boom and rivers of gold flowed into government coffers. That was always going to slow down once the boom ended. Now we have a significant revenue problem that the federal government is seeking to palm off to the states, slashing health and education expenditure and cynically leaving the states to square the circle by raising taxes or slashing spending themselves.

Third, the government is seeking a return to surplus on the backs of the poor, the sick and the marginalised. This fact alone should galvanise Christians everywhere. Cuts of $7.5 billion to foreign aid over the four years of the forward estimates account for 20 per cent of the savings despite aid being only 1.3 per cent of the total budget (see here and here). Closer to home, the Australian Council of Social Service warned that the billions of dollars in cuts risked destroying Australia’s social safety net. Denying people under 30 income support for six months at a time and cutting benefits to poor families, is surely a recipe for increased depression and other mental health problems, family violence, alcohol abuse, suicide and crime. The $7 fee for visiting a doctor will also hit the poor – particularly those with children who suffer repeated illness and the elderly on pensions. This is likely to lead to delays in detecting serious illnesses and far more expensive treatments as a result. Raising the age of eligibility for the pension to 70 may be tolerable for sedentary office workers – but what about those doing backbreaking manual labour? Further cuts even after the budget was handed down, such as cuts to the Refugee Council of Australia have been described as “petty and vindictive”. The very real social and economic costs of all these cuts to the most vulnerable are ignored.

Fourth, the abolition of the mining tax and particularly the price on carbon pollution is a triumph of ideology and climate change denial over both economics and science. For a government that would rather cut benefits to the poor than to raise revenue from mining companies, and with no science minister, these moves were not a surprise – indeed they were election promises. If the Abbott government truly understood the threat that climate change poses to Australia but thought that the price on carbon was too high and should be lowered to serve weaker targets, that may have reflected a view that could command some respect, if not agreement. Instead the government wants not only to abolish the price on carbon, but the entire institutional infrastructure that the previous government had painstakingly established (see here and here). The Climate Commission was swiftly dispatched (and ironically, privatised, through citizen support and rebirthed as the Climate Council), and the Australian Renewable Energy Agency and the Clean Energy Finance Corporation are under threat.  A well-constructed, self-financing market-based mechanism that had begun to lower Australia’s greenhouse gas emissions significantly, is to be replaced by a ‘Direct Action’ scheme which no experts believe will work effectively and which will cost tax-payers $2.55 billion to pay big polluters to reduce their emissions if they want to (see here). This dramatic reversal has horrified foreign ambassadors, with Switzerland’s Sven-Olof Petersson saying, “I’m amazed that a Liberal government does not choose a market mechanism to regulate emissions …I think that is really shocking.” Even China is concerned, with the ABC reporting that “The Vice President of China’s most advanced carbon emissions exchange says Australia could scuttle the creation of a global carbon trading system.”

Why the intransigence? Back in 2007 in his book High and Dry, Guy Pearse, the former advisor to the Liberal Environment Minister Robert Hill, turned whistle-blower and documented how a powerful group of fossil fuel companies had essentially dictated Australia’s climate change policies. Little seems to have changed, with the Prime Minister recently declaring in his speech to the Minerals Industry Parliamentary dinner:

 “Our prosperity rides on the ore and gas and coal carriers steaming the seas to our north, just as surely today as once it rode on the sheep’s back. …It’s particularly important that we do not demonise the coal industry and if there was one fundamental problem, above all else, with the carbon tax was that it said to our people, it said to the wider world, that a commodity which in many years is our biggest single export, somehow should be left in the ground and not sold. Well really and truly, I can think of few things more damaging to our future.”

Australia has enormous coal reserves and the government is working hand in glove with those who want to dig it up and export as much as possible. But once you start to take the economics of this seriously, and start to consider the wellbeing of our children and grandchildren, the case for expanding our coal exports falls to pieces (see here). Using very conservative climate models linked to even more conservative economic models, the US Government came out last year with some eye-popping figures for the so-called ‘social costs of carbon’. These models do not of course, take into account recent developments such as the fact that the collapse of the West Antarctic Ice sheet now seems unstoppable no matter what we do (see here).

What do the estimates of the social costs of carbon tell us? According to the Bureau of Resources and Energy Economics (here, pp. 48 &70) Australia’s black coal exports in FY2013-14 will be around 372 million tonnes (Mt). Combustion will release around 889 Mt CO2-equivalent. For comparison, Germany’s CO2 emissions in 2011 were just 807 Mt. Based on those conservative US Government estimates, our current coal exports are causing between A$12 billion and A$110 billion of damage globally each year (in 2014 dollars). By 2018-19 the Bureau expects our coal exports to rise to 438 Mt, producing around 1045 Mt CO2-equivalent, which will cause between A$15 and A$153 billion in damage (in 2014 dollars) for expected revenues of only $49 billion. The actual profits of course would be much less. None of this damage is included in the coal export price. This is a textbook example of what economists call an externality – a social and environmental cost imposed on others by the actions of private companies. It is bad economic policy pandering to the short-term interests of powerful lobby groups.

Lastly, making higher education far less affordable by deregulating student fees is a catastrophically stupid policy. It will increase poverty levels for students, increase class-based social stratification, decrease overall skill levels in the workforce, and make public debates of complex policy issues even more difficult over time as fewer people can afford a broad education that is not narrowly tailored to a particular job. Graduates will emerge with large debts which will harm their well-being and pressure them to seek high paying jobs at the expense of more community-minded jobs such as teaching, nursing, child care, social work and public service (see here).

What are we to make of all this as Christians? I am probably not alone in feeling bewildered at what is happening to our country. So many people have been working so hard to uphold the values Jesus taught – the care for the sick and the marginalised, justice for the poor, respect and welcome for the foreigner, humility and generosity for the rich. And yet – here we are. It is inspiring to see a few church leaders and other Christians standing up, even to the point of being arrested in protest. Bravofriends! But some of the most strongly ‘Christian’ electorates voted for these cruel and regressive policies. Many of those in federal politics and their supporters who are designing and implementing these policies also call themselves Christians. Many churches continue to preach a narcissistic prosperity theology that has nothing to do with the gospel of Jesus. This surely points to a colossal failure of leadership among the Christian churches over many years – a desire to ‘play nice’, seduced by the promise of influence, and an unwillingness to consistently stand up for those Jesus placed at the centre of his concern: the poor, the marginalised, the sick, the outcast and children. Did Jesus hate rich people? Of course not. But he saw clearly that excessive wealth, selfishness and insularity were spiritual traps from which only humility, hospitality and service could free us.

If one good can come of our current malaise, perhaps it will be the re-ignition of a Christian sacred activism grounded in Jesus’ teachings, fuelled by deep prayer and with the courage to speak truth to power no matter what the cost.

Expanding coal exports is bad news for Australia and the world

This article was originally published at The Conversation. Read the original article.

In the coming months our new federal government will be promoting a massive expansion in Australia’s coal exports. In all likelihood they’ll hail it as “good For Australia”. It isn’t.

Most of us are familiar with the damage coal mining, export and burning does to the environment. We know it affects health, contributes to climate change, risks groundwater supplies and threatens the Great Barrier Reef.

For many, that damage is offset by what they see as social and economic benefits, here and abroad. But in almost all cases, those benefits are exaggerated or non-existent.

How much carbon dioxide are we exporting?

The Australian Bureau of Resources and Energy Economics expects (p. 106) that Australia’s black coal exports in the financial year 2013-14 will be 350 million tonnes (Mt).

With an energy content factor of about 27 GJ/tCoal, and an emissions factor (including oxidation factor) for CO2 of about 88.2 kgCO2-e/GJ, this gives 2.38 tonnes of CO2-e (CO2-equivalent) from every tonne of coal burnt.

The effects of methane and nitrous oxide released from coal combustion bump it up to 2.39 tCO2-e. That implies that the combustion of our coal exports will release around 836 Mt CO2-e. To put that figure in perspective, Germany’s CO2emissions in 2011 were just 807 Mt.

Greenpeace estimates the mega-mines planned for Queensland’s Galilee Basin alone would produce some 705 million tonnes of CO2 each year. That’s enough to chew through around 6% of the CO2 the entire world can release to keep warming to 2C above pre-industrial temperatures.

Burning coal causes billions of dollars in damage

Our coal exports are causing massive environmental, social and economic damage. These costs are not factored into coal’s export price.

In May the US Government revised its estimates for the net present value of global damage caused by CO2 emissions. These models may significantly under-estimate the costs of damage, but the results are sobering.

By these conservative US Government estimates, our current coal exports are causing between A$11 billion and A$103 billion of damage globally each year (in 2013 dollars). None of this is included in the coal export price.

When we consider that total revenues from exports in FY2013-14 (p. 94) are expected to be around A$41.5 billion, and actual profits are a much smaller fraction of revenues, we can be confident that the unpriced damage caused by our coal exports is likely to be significantly greater than the profits made from those exports.

If our coal exports were to reach 1000 Mt by 2020, they would be producing around 2390 Mt of CO2 and up to A$370 billion in global damage each year.

Pricing this damage could fund the repair

It will be argued of course, that this reasoning doesn’t take into account the economic benefits from the energy produced from the coal. True. But the export price should be higher to internalise the costs of damage – otherwise markets will continue to give misleading signals.

Correcting the market failure of externalised costs could be done either in Australia with an export tax, or in the importing countries with an import tariff or domestic price on carbon.

If Australia imposed an export tax itself, as Peter Christoff suggested, then the Australian people would capture the benefits of that revenue stream. We could fund climate adaptation measures, clean energy and disaster risk reduction in Australia. We could pay our international climate finance obligations to the poorest developing countries to help them to adapt to climate change.

The coal boom damages our economy

Treasury officials and researchers such as Richard Denniss and Matt Grudnoff have shown the resources boom helped to push up our exchange rate.

This caused significant damage to tourism, tertiary education, manufacturing, agriculture and other clean export industries – a classic example of the so-called Dutch-disease. These industries employ vastly more people (Table 06) in far more widely dispersed locations than coal mining.

Leisure tourism has also been hard hit, not only by the higher exchange rate, but by higher labour costs and difficulties attracting skilled staff.

A massive expansion of coal mining would make capital and labour even more expensive for other industries – exacerbating the crowding out effects already seen in the first phase of the mining boom.

Australia Institute researcher Mark Ogge has said: “Consultants for Clive Palmer’s China First coal mine in the Galilee basin estimated, in the company’s EIS, that this effect of driving up labor costs would mean 3,000 jobs will be lost in other parts of the economy, with manufacturing being the hardest hit.”

Powerful coal interests distort our political system

Guy Pearse and Clive Hamilton blew the whistle on the influence the fossil fuel industry has on Australia’s climate change and energy policies. Powerful coal mining companies and their lobbyists distort our political economy, and the expansion of the industry will only make the problem worse.

The tourism and education sectors are together just as significant export earners for Australia, and employ far more people, than coal mining.

But there is no equivalent to the giant mining companies in those sectors to make large political donations, or to fund well-orchestrated lobbying and media campaigns promoting their interests.

Our coal undercuts clean energy in developing countries

The argument is often made that if we really cared about the poor we’d export a lot more coal – but this is purest nonsense. It ignores the devastating costs of climate change and respiratory illnesses to the poor, and makes it harder for developing countries to transition to a clean energy future.

Wind energy is already competitive with new coal-fired power stations in India and solar is expected to be competitive by 2018.

The World Bank no longer funds coal fired power stations in developing countries and analysts at Goldman Sachs are already warning that coal export terminals are a bad investment because expected global demand for thermal coal has been over-estimated.

Australia should halt its plans to expand its coal production and exports – it enriches a few at the expense of millions and will inflict immense damage both on our own country and on the rest of the world.

Self-inflicted Climate Policy Chaos

If you are of a certain age you may remember the 1990 federal election, with Andrew Peacock up against Bob Hawke. What you may not remember is that the Liberal Party took to that election, a policy of 20 per cent reductions in greenhouse gas emissions by 2001. That’s right – in 1990, the year of the Intergovernmental Panel on Climate Change’s very first assessment report. The basic physics of how greenhouse gases warm the planet is more than 100 years old, and even back in 1990 the scientific evidence that greenhouse gases emitted by human activity were contributing to climate change was robust enough for the Liberal party to take a strong emissions reduction policy to the federal election.

What happened next? As is now well documented by numerous authors such as Naomi Oreskes, Clive Hamilton, Guy Pearse, and James Hoggan and Richard Littlemore the next two decades witnessed a massive disinformation campaign, denying the link between climate change and greenhouse gas emissions. It was funded largely by fossil fuel industries and libertarian market fundamentalists who could not stomach the idea of any problem that might require government intervention. The objective wasn’t to defeat the climate scientists, but simply to create the impression that scientists were divided. It was a staggeringly effective strategy, devised not only by some of the same PR firms involved in helping tobacco companies deny the link between smoking and cancer, but even some of the same individuals. Climate and energy policies in Australia, Canada and the United States have lurched and stumbled like wounded wookies ever since.

And so we come to 2013 and our refurbished Prime Minister’s surprise early switch to an emissions trading scheme blowing a $3.8 billion hole through the budget over the next four years. The CEO of coal-fired power generator InterGen complained that “only the scrapping of the carbon tax will finally remove this debilitating policy chaos”. The owners of Victoria’s filthy Hazelwood power station GDF Suez said “it creates further uncertainty for investors in our business.” And of course the ubiquitous Minerals Council asserted that it didn’t go nearly far enough and that the scheme should be abandoned.

There is a very good reason though for the policy uncertainty: vested interests have done everything in their power to prevent any policy clarity that would deliver strong emissions reductions. But while fossil fuel companies, coal-fired generators and their investors may have believed their own propaganda for 20 years, you can’t fool Mother Nature. The laws of physics don’t do dodgy back-room deals and they don’t care if you’ve managed to confuse the public debate and spook most of the politicians into pathetically weak emissions reductions targets. The game is up. The decade 2000-2009 was the hottest since records began (p. 19). Extreme weather records are tumbling all over the world – and this is just the beginning. The world’s major economic institutions and every major national academy of science are unanimous in saying that greenhouse gases from human activity are driving climate change (see here and here). As a result we are facing a catastrophe unparalleled in human history without deep and rapid emissions reductions.

Fatih Birol, the Chief Economist of the International Energy Agency, warned that about two-thirds of all proven reserves of coal, oil and gas will have to stay in the ground to prevent warming beyond two degrees above pre-industrial levels. The World Bank declared that a world of four degrees above pre-industrial temperatures “simply must not be allowed to occur.” Christine Lagarde, the head of that radical hippy drum circle, the IMF, said (also here) in January that “without concerted action, the next generation will be roasted, toasted, fried and grilled.” The International Energy Agency says (p. 9) we are currently on track for 3.6 to 5.3 degrees warming above pre-industrial levels by 2100 – temperatures the Earth has not seen for between 15 and 40 million years. There is no possibility that our societies and the ecosystems which support them could adapt to such a massive increase in temperatures.

Meanwhile Mr Abbott described carbon markets as “a so-called market, in the non-delivery of an invisible substance to no-one.” And in May the CEO of the soon-to-be-defunct Australian Coal Association, Nikki Williams, disingenuously mocked climate activists as being purely “anti-development” and quipped, “I don’t know about you, but the last time I flew to Europe it was pretty apparent that the Arctic was still there.” Nikki, the Arctic has lost around 80% of its volume since 1979 (see here, here, here and here).

Opponents of strong emissions reductions are reaping what they have sown. They ignored the warnings from climate scientists for 23 years, funded crank denial groups to prevent action and now bleat about policy uncertainty. If they had taken the science seriously and engaged constructively on how best to achieve the deep and rapid emissions reductions our children need for a safe future, we would be in a vastly better, more certain, bipartisan policy environment. Our present policy chaos is a direct consequence of too many corporate leaders’ lack of serious engagement with the implications of real climate science, the lobbying against strong emissions targets that will protect our children and the ludicrous plans to massively increase our coal exports.

Some countries’ corporate and political leaders did take the issue seriously. On Sunday 7th July, 21 per cent of Germany’s electricity came from solar and between 1 and 2pm, 60 per cent of its total electricity was coming from renewables. Things are changing in Australia too, wreaking havoc with the business plans of the old coal-fired generators. Earlier this month, wind supplied 47 per cent of South Australia’s energy during National Science Week.

A report from the Climate Change Authority to the Government recommend a tripling of the bipartisan minimum emissions reduction target from 5 to 15 per cent below 2000 levels by 2020. Climate scientists say the cuts need to be much deeper. Another recent report by The Climate Institute found that the Coalition’s current Direct Action policy would be see Australia’s emissions rise by 9% by 2020 (see also here). 

If the polls are correct, Australia will have a Coalition government next week – and Australian business will enter a protracted period of climate policy chaos. Even if Mr Abbott has the numbers to repeal the carbon price and abolish its associated institutions – business leaders who have taken the issue seriously all know deep down that it will all have to be reinvented again at some point. The delays and uncertainty will gut the clean energy sector, entrench emissions-intensive interests, and make Australia’s economy more fragile and vulnerable in an inevitably emissions-constrained world. The next IPCC scientific reports will roll out over the next year, starting later this month, and will make a mockery of the Coalition’s climate policies.

To those business leaders who complain about the uncertainty and policy chaos, and who did not step up to defend the science of climate change, the need for a price on carbon and their own children’s futures – you have only yourselves to blame.

Coalition Climate Figures Don’t Add Up

This article was originally published at The Conversation. Read the original article.

Shadow Treasurer Joe Hockey and shadow Minister for Finance, Andrew Robb, have announced A$7.5 billion in planned budget savings from scrapping key elements of the Government’s Clean Energy Future package. By abolishing the price on carbon, a Coalition government would need to plug a hole in the budget estimated in the Pre-Election Fiscal and Economic Outlook at A$9.7 billion over the three years from July 2014.

The savings are outlined in the Coalition statement, “Our Plan to get the budget under control”. Let’s break down the statements in turn and see how they stack up.

Discontinuing business compensation

Discontinuing the business compensation measures introduced to provide partial relief to selected sectors and industries for the hit from the carbon tax ($5.1 billion).

These measures include the instant asset write-off threshold, the Jobs and Competitiveness program, the Steel Transformation Plan, the Clean Technology Program, the Coal Sector Jobs Package and other measures.

Let’s look at each in turn.

Removal of the increase in the instant asset write-off threshold to $6,500 ($0.2 billion)

The instant asset write-off threshold (pp. 58-59) was already increased from A$1,000 to A$5,000 from 2012-13 with the passage of the Minerals Resource Rent Tax legislation. The further increase from A$5,000 to A$6,500 was intended to make it easier for small businesses to invest in new assets, including energy efficient equipment. It was originally costed at “foregone revenue of A$200 million over the period to 2014-15” (p. 122).

Verdict: The A$0.2 billion quoted seems about right.

Discontinuing the Jobs and Competitiveness Program ($4.0 billion)

Assistance under the Jobs and Competitiveness Program (pp. 55 & 114) is in the form of free Australian carbon permits, not cash handouts. That means this measure represents revenue foregone rather than actual savings from the budget bottom line.

Verdict: Technically, judgement here hinges on whether it is appropriate to use an accruals or cash accounting basis for this “saving”. Foregoing revenue from permits that would no longer exist cannot be said to be a budget saving in the sense of making cash available in order to reduce the underlying cash deficit. Cash accounting gives a more accurate picture here and so real savings are overstated by A$4 billion.

Discontinuing the Steel Transformation Plan ($0.1 billion)

Originally the Steel Transformation Plan (p. 133) was budgeted at A$300 million over five years with figures for FY2013-14 and 2014-15 of A$75 million each. The portfolio budget statement (p. 38) shows budget of A$136 million for FY2014-15 and FY2015-16.

Verdict: Allowing for funds already committed, this announced saving of A$0.1 billion appears to be in the right ball park.

Discontinuing the Clean Technology Program ($0.4 billion)

The Clean Technology Program (pp. 56-57) is made up of the Clean Technology Investment Program, the Clean Technology – Food and Foundries Investment Program, and the Clean Technology Innovation Program.

In its May budget, despite “reprofiling” some funding, the Government maintained that the Clean Technology Program “will still provide A$1.2 billion over seven years from 2011‑12” (p. 213). In its August Economic Statement however, the Government announced “rephasing $200 million of funding from the Clean Technology Program and returning $162 million of unallocated funding to the budget” (pp. 39 & 60).

We know that the majority of funds in the Clean Technology Programs is already committed in the forward estimates period. An update was published in 16 July and more has been committed since then.

Verdict: The various changes to the three programs make it difficult to assess the accuracy of the Coalition’s announced A$0.4 billion saving. What can be said though is that the figure appears to include “savings” from funds that have already been committed and contracted. The proposed changes would also make it more expensive for small businesses and trade-exposed firms to invest in technologies that will enable them to save on their power bills. Unless one believes that our industries will never have to face a price on carbon, these changes simply increase their future vulnerability.

Discontinuing the Coal Sector Jobs Package ($0.3 billion)

The Coal Sector Jobs package (pp. 133-135) originally allocated A$1.3 in cash assistance over six years from FY2011-12 to the most emissions-intensive coal mines.

Cuts had already been announced by the Government in its May budget (pp. 68 & 250): “The Government will reduce funding by $274.2 million over two years from 2015-16 for the Coal Sector Jobs package to reflect the projected carbon price. The program will now provide funding of $763.5 million over four years from 2013‑14.”

Further changes were announced in the Government’s August Economic Statement (p. 39): “updating the Coal Sector Jobs package allocation in 2014-15, consistent with lower expected carbon prices, saving $186 million” (Actually A$186.4 million, Table B2, p. 62).

Total budget for FY2013-14 and the following three years implied: A$763.5 – A$186.4 = A$577.1 million total.

Verdict: The multiple changes to this package make figures hard to estimate, but with funds already committed for this financial year, an estimated saving of A$0.3 billion over the next three years is about right.

Discontinuing other small Clean Energy Future business compensation measures including the Energy Efficiency Information Grants, the Clean Energy Skills package, and the Clean Technology Focus for Supply Chain programs

Implied savings as the balance remaining from the A$5.1 billion subtotal: A$100 million.

Energy Efficiency Information Grants (pp. 58 & 87) are to “help small businesses understand the implications of the Government’s clean energy plan and how they can reduce energy costs.” Cost: A$40 million program over four years.

The Clean Technology Focus for Supply Chain (p. 59) initiative is an additional A$5 million over four years for the delivery of programs to small and medium businesses in clean technology industries to “enhance the clean technology focus of industry supply chains, which will help local businesses secure contracts for major projects”.

The budget (p. 131, fn 6) for Energy Efficiency Information Grants & Clean Technology Focus for Supply Chain programs is:

Financial YearAmount

FY2013-14 A$21 million
FY2014-15 A$19 million
Total A$40 million

We also know that the great majority of funds under the grant schemes have already been committed, and so it is hard to see how some of the proposed savings could be made without breaking contracts.

The Clean Energy Skills package (p. 131, fn 6) “has been allocated $32 million over four years, which is to be fully offset from existing resourcing.” This implies zero additional funds from the budget.

Verdict: Savings here seem to be overstated by A$60 million.

Energy market compensation

Discontinuing energy market compensation measures which will no longer be needed once the carbon tax has been scrapped ($0.5 billion).

Verdict: Compensation measures are generally in the form of free carbon permits so again, this would not be a saving from the budget bottom line. Real savings are overestimated by around A$0.5 billion.

Land sector initiatives & cuts to departments

Discontinuing various land sector initiatives which Labor has already slashed, as well as bureaucracies like the Climate Change Authority ($0.4 billion).

The budget of the Climate Change Authority (p. 11) is:

Financial YearAmount

FY 2013-14 A$8.707
FY 2014-15 A$8.776
FY 2015-16 A$8.854
FY 2016-17 A$9.241
Total A$35.578 million

This implies that some A$364 million will come from “various land sector initiatives” and other “bureaucracies”. That’s not good news for the environment – though the vast majority of the remaining Biodiversity Fund money is already committed as are funds for the Carbon Farming Future program, and the Regional Natural Resource Management Planning for Climate Change Fund.

Verdict: The only verifiable figure here is less than 10% of the supposed A$0.4 billion in savings, allowing a great deal of wiggle room and a black box of major cuts to other important energy and environment initiatives, some of which are already committed and contracted.

Other measures

Abolishing other measures linked to the carbon tax that are wasteful or will no longer be required once the carbon tax is abolished ($1.5 billion).

The Australian Renewable energy Agency (ARENA) seems to be the target here, as Tristan Edis has outlined.

Verdict: A$1.5 billion is an enormous figure to state with no detail on what is being targeted. The implications for Australia’s renewable energy future would appear grave.

Conclusion

The claim to save the budget bottom line A$7.5 billion with these measures significantly overstates the practical reality, primarily because of the misclassification of A$4.5 billion under the Jobs and Competitiveness Program and energy market compensation measures. A more accurate figure for the total cash saved by this set of measures is more like $3 billion – nowhere close to the loss of A$9.7 billion in revenue from abolishing the price on carbon.

These cuts also have serious adverse implications for Australia’s preparedness to tackle climate change in the future, since they discourage investment in renewable energy and energy efficiency and imply drastic cuts to vital climate adaptation funds.

I am grateful for the assistance of Claire Maries, Climate Change Campaigner with the Australian Conservation Foundation in the preparation of this article. Any errors are my own.

The future of transport in Australia

Tonight I attended a useful seminar on the future of transport in Australia organised by the Melbourne Energy Institute and the Grattan Institute. Chaired by Professor Roy Neel, Chief of Staff to former US Vice President Al Gore and Adjunct Professor of Political Science at Vanderbilt University, speakers included:

  • Ms Fiona Calvert, Director Strategy and Resource Efficiency Policy, Policy and Communications Division at the Department of Transport, Victoria;
  • Prof Nicholas Low,Professor of Environmental Planning, Faculty of Architecture Building and Planning, University of Melbourne, and Associate Director and Founder of GAMUT  – The Australasian Centre for the Governance and Management of Urban Transport;
  • Mr Patrick Hearps, Research Fellow, Melbourne Energy Institute, University of Melbourne;
  • Mr William McDougall, Principal, Public Transport, Practice Leader, Sinclair Knight Merz.

There was a live webcast, but I’m not sure if the footage is being uploaded somewhere. I hope so.

UPDATE: The webcast has been uploaded here.

One point I’d missed was a fascinating Guardian article by John Vidal on information from Wikileaks that cables from the US embassy in Riyadh “urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.” If true, and few seem to believe that official Saudi reserve statements are accurate, the economic implications are serious.

MEI’s next seminar is on November 16 on ‘The Future of Solar Power’ – should be interesting.

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