The question I’m being asked most frequently in the last day is “Can Tony Abbott aim to cut emissions if he won’t accept an ETS or a carbon tax?”
It’s one of many great ironies we face right now in Australian climate politics that the Greens are the ones arguing for economic orthodoxy – a strong and unperverted market mechanism as part of a suite of measures to reduce emissions – while the Labor Government’s now twice-rejected CPRS is a morass of economic perversions and the Liberal Party rejects the market mechanisms altogether.
The answer to the question, however, is yes, he can, but not in a way the Liberal Party would ever be expected to approve!
Remember this – a market mechanism is a means to an end. As with every problem governments try to fix, there are three generally accepted options for government action – direct regulation, market mechanism or mobilising voluntary action. Voluntary action is important, but is certainly incapable of delivering even 5% emissions cuts below 1990 levels, let along the kind of deep cuts we need.
Emissions trading, when well designed, can be guaranteed to deliver a particular outcome, because, as part of its market mechanism, it directly regulates the quantum of emissions allowed in the market. Ideally, this drives the market to find the cheapest emissions cuts available and thereby delivers the outcome at lowest cost. Of course, if as part of the scheme, you deliberately pervert the market to undermine the price signal and prop up the polluters, you make it far more expensive. The better approach is to use complementary measures to overcome the non-price barriers to actions such as energy efficiency uptake, thereby unleashing the cheapest possible emissions reductions and lowering the cost of action even further. As we know, that’s not what Labor chose to do with the CPRS. Their approach would have left the vast majority of emissions reductions in Australia untapped and used the scheme to buy in cheap (and possibly dodgy) emissions reductions from overseas.
Unfortunately, the structure of emissions trading also serves to make it difficult to deliver a better outcome than the one you envisage at first if, as with the CPRS, you lock in targets and gateways a decade into the future. A reasonable ETS must give you the flexibility to increase the target dramatically if, as expected, the science gets worse and global action gets stronger.
While properly designed emissions trading is the only mechanism under which you can absolutely guarantee a specific outcome, you can certainly achieve deep cuts with direct government intervention through investment and regulation. You just won’t necessarily know exactly what your outcome will be in advance. Oh, and you’ll have to be willing and able to pay.
The obvious place to start regulating, when you look at Australia’s emissions profile, is with the 50% of our emissions that come from stationary energy.
First step is to roll out energy efficiency programs – free retrofits from homes and there’s an array of options for commercial buildings and industrial sites. We can easily flatten energy demand growth and, with a bit of effort and investment, bring demand down from current levels. At the same time, we start replacing coal with the zero pollution alternatives. We lift the Mandatory Renewable Energy Target to 40% by 2020 and supplement that with a true feed-in tariff for all renewable energy, direct investment in new grid infrastructure and fast start-up funding (loan guarantees, for example) for the baseload renewable options such as solar thermal, ocean power and geothermal. It is no huge stretch to envisage that, with such a program we could halve Australia’s current stationary energy emissions in a decade with existing technology. Many people suggest that, with the right technologies coming on stream fast enough, we could head towards zero. Since we’re currently at about 110% of 1990 levels, this approach alone would take us well below the 5% under 1990 target that Tony Abbott has signed up to, and possibly beyond 15%.
But it doesn’t stop there. We can and should stop native forest logging and start helping and paying farmers stewardship payments to reduce emissions – changing tillage practices, increasing soil carbon, potentially creating biochar, regrowing bushland and much more. We can start the difficult process of shifting transport out of private petrol cars and into renewably powered electric vehicles (private and public). We can increase options for people to telecommute instead of flying between cities. We can reduce waste and invest in new industrial processes that generate fewer emissions.
I don’t have the expertise to hazard a guess at the quantum of emissions reductions that this could deliver, but you can be confident that every aspect of Australia’s emissions profile can be massively reduced – and some brought swiftly to zero or below – with the right regulation or investment. It is entirely possible to achieve very deep emissions cuts through direct government regulation and investment.
But here’s the rub – who’s going to pay for it?
A program like this will be tremendously expensive – many tens of billions of dollars. If the cost is placed on taxpayers, the result will be deep government debt or hugely increased taxes. And it will be deeply unfair. The only equitable approach is to make polluters pay for the cost of the transformation through either a well-deisgned emissions trading scheme with 100% auctioing of permits, or a well-designed carbon tax. That cost will, of course, be passed on to consumers, but the government will be able to use the revenue to invest in all the programs that will reduce their costs – particularly energy efficiency and renewables. That’s the approach the Greens take in the Safe Climate Bill.
So, yes, Tony Abbott could deliver emissions cuts without a price signal. But it would not be an economically or ecologically sensible approach to take.
11 Comments
I do appreciate the irony of the right-winger opposing a market based mechanism. Someone said if they are so sure its all false they should just waiting til trading comes in and short the carbon price (thats what a market is for).
AS you say, make the polluters pay, who will then make the consumers pay. OR just pay it directly out of tax dollars. I see very little difference in the outcome other than the opportunity to bankrupt polluters without good lobbying connections….
Mandatory renewable target of 40% by 2020 is a joke. Its completely impossible.
It requires erecting a 2 MW turbine every 4 hours. Day and night, every day, for over 10 years. About $25B a year every year for 10 years without including the transmission costs. SO close to 10% of the government budget. Of course once the good sites are gone and they’ll go pretty quickly, you end up needing more turbines for the same volume.
Or you could pay the La Trobe valley generators $10B to shut down. About $15B to replace the baseload generation. And there’s most of your emissions cuts done.
EnergyPedant, you do realise, don’t you, that there are other forms of renewables than wind turbines? Sure, you couldn’t meet a 40% target with wind alone, but nobody’s saying you should or would or could. How about multi-hundred MW bioenergy plants? And steadily growing output from solar thermal and wave. There’s plenty of options.
Excellent article and response Tim, there’s certainly no silver bullets of simple answers to this question, and maybe one upside of this week’s shocking turn of events will be a closer examination of the need to use all tools immediately at our disposal to respond to the climate emergency.
Another option that would achieve significant and necessary emissions reductions through regulation and investment is to rapidly phase out the much overlooked “super greenhouse gases” such as hydrochlorofluorocarbons (HCFCs) and hydrofluorocarbons (HFCs), as well as getting a whole lot more serious about recovering banks of old HCFCs, and chlorofluorocarbons (CFCs), which are by volume around 5,000 to 11,000 times more powerful contributors to climate change than CO2.
A ban on HFCs by 2015 is certainly technically and economically feasible, would only hurt the profits of fluorocarbon importers, and has great potential to deliver big improvements in energy efficiency across the refrigeration and air conditioning sector. It has already been achieved in Denmark (in systems with <10kg refrigerant charge), and would unleash technical innovation and skill development that Australia could market to the world, with enormous further contribution to emissions abatement.
Of course action on F-gases will only ever be a small slice of the solution, but it's a big enough and fast acting enough slice that deserves to be on every list of important things we can and must do now – including making a decision at Copenhagen to empower the Montreal Protocol to take on the task of phasing out HFCs internationally.
(PS – if you need a simple yet entertaining description of the F-gas problem, check out http://www.greenpeace.org/f )
Tim, I do agree there are other options. I just note that none of them are at commercial scale yet other than sugar cane waste biomass plants. Winds farms are the only thing getting built because they are the cheapest option (the market has spoken) and the success of wind is actually hurting all the other options (which is why banding of MRET to include a baseload category was suggested).
Your suggestion of start-up funding/loan guarantees for baseload renewable types is exactly the sort of measure required to help get those technologies from the sub 1MW scale into real use.
I can’t see the Libs going for a 40% MRET target though. Its basically just a tax on electricity use. If the Libs line is about keeping energy prices low for business then raising the MRET is incompatible.
Good point EnergyPedant: “very little difference in the outcome other than the opportunity to bankrupt polluters without good lobbying connections”
This whole thing is being turned into a witch-hunt against polluters, deniers, neoliberals, and any other vilification labels Rudd comes up between now and the next election. Lobbyists pushing hard for effective measures need to decide between cutting carbon and punishing those they blame for providing the cheap power and export coal that has made this country wealthy. They can have one or the other but not both.
Tom, you make some good, practical suggestions. But calling for an “equitable” approach is making the best the enemy of the good. Before a solution can be equitable it’s going to have to be implementable. Political reality is that if you try to hit the most powerful the hardest, the whole thing falls over. When are Australians going to learn this?
Very good article.
Too be honest I wasn’t aware of the details of the Greens approach to emissions reduction – apart from stronger targets – but it does make a lot of sense.
I had actually favoured regulation for reducing emissions, as I thought any market mechanism (ETS) or carbon tax would be subverted by vested interests (as it is being) and ultimately become less efficient. You have made me think again.
EnergyPedant, it’s certainly drawing a long bow to suppose we can get 40% of energy from wind, but 20-30% is almost certainly possible. Southern Australia’s wind resource beats any location in Europe, which has installed wind turbines at (per capita) about the rate you suggest – Spain installed 3500MW of wind energy in 2007 alone. Wind and solar power now supply nearly 20% of Spain’s electricity demand, and Spain only has weak interconnections with the rest of the European grid, so they provide a good free case study for what Australia can achieve.
What I suspect *would* make 40% renewable energy unachievable is if we attempt to rely on electric cars as the primary solution for transport – thus making the electricity grid do all the work of not just the stationary energy sector but also the transport sector. Electric cars are certainly efficient relative to Australian petrol cars (though not so much compared to some European models), but the best of them is still about equivalent to the least efficient form of public transport. I’m not sure people have thought through the implications of potentially doubling the electricity demand for every house in a typical suburb.
Aside from that quibble, a very good article Tim.
Strewth,
Do you have any links showing the overall effect of Spain’s large amount of wind turbines? I see on Wikipedia that they are only averaging around 20%-24% capacity factor (http://en.wikipedia.org/wiki/Wind_power_in_Spain). Given how intermittent wind can be it would still need a large amount of reliable power generation for backup, which as I understand it can destroy a lot of the CO2 reductions if that backup is single cycle gas plants or coal plants that have to be ramped up and down over short periods of time.
If wind and solar supply nearly 20% of Spain’s electricity demand, I’m trying to find out what that actually translates to in terms of GHG emissions reduction after taking into account the backup generators.
Analysis of the human condition suggests that, although we know of the right thing, we will generally do the wrong thing – perversity. Yes, we SHOULD exercise / recycle / love one another / et al but .. not now. The whole stick and carrot thing. This article could have been written – and probably was – 10 years ago, which says that we’re going around in circles. Why ? The power of the status quo – if it ain’t broke blah blah. So, if we contend that it is broke, what’s the stick bit ( regulation / penalties ) ? And the ETS was born …
And now we’re back discussing electric cars .. Australians are very easily spooked and fall back into sneering at sensibleness. What’s needed is numbers at the coal face .. and it nearly happened. I despair.
The answers to reductions are commerial and available. They can be found by looking outside of Australia. On November 13 the Spanish government approved the next 6,000MW of wind, 2,000MW to be built each year. Back in 2007 Spain installed 3,500MW in a year. That’s a turbine every 6 hours or so. The previous year Spain had installed a third of that. So EnergyPedant if Spain can do that back in 2007 when the wind industry was less mature. And with the advent of 6MW+ turbines hitting the commercial market and the advantages of scaling. Why can’t Australia install equivalent of a turbine every 4 hours? We manage to sell 2,800 motor cars every hour. So I don’t see installing a lot less turbines, which are simpler devices installed in controlled manner and controlled environment to be that difficult.
Also Baseload Solar Thermal is much more mature than you maybe aware of. Spain has just approved 2,440MW of Solar Thermal with storage (Each plant is upto 50MW) for the feed-in tariff to be built over the next 3 years. These plants have capacity factors from 50%-75% and run upto 90% of the time. Greater operating hours than NSW coal fired power generators (throttling their turbines as demand changes from 60-100%).
These plants can and are being built in 9months. Best scale is for each module to be around 250MW. So 8 plants would be the equivalent of a huge 2000MW coal plant. But this is better than baseload cause these plants are designed to be dispatchable. So they do everything a big old coal plant does, but they can shutdown or throttle back at 3AM when no one needs the power without massively sacrificing efficieny.
Matt when comparing Australia to Spain remember their population is more than double and the population density is much much much higher. Also remember that since 2007 the cost of turbines has escalated at least 50% (mostly due to the manufacturing bottle-necks in Europe/Asia). I do think having a turbine factory based in Australia would be good for our future, if we subsidize a car industry why not a turbine industry.
Also remember that the price of retail electricity is roughly 50% higher in Europe. This means the wholesale price is probably close to double. e.g $70-80 /MWh not $35-40.
Building lots more wind farms is South Australia is not much help when most of the load in energy terms is in Qld and NSW (and the wind doesn’t blow during SA heat waves). Solar thermal looks promising. But for some reason no one in Australia is prepared to invest.
Strewth, electric cars actually help the grid more than you think. Since they are basically just rechargable batteries and the power can flow in or out they actually help compensate for wind variability. On the energy front a kWh gets you up to 5km travel. Average household consumption is 7000 kWh. So it looks like doubling household energy. However in most states industrial demand outweighs residential demand so the actual increase in grid demand is not anywhere near double.