Saturday, November 03, 2007

Saturday Forum: There is a climate change debate in the election and it isn't silly.

Much of what is passing for debate about climate change in the election is just too silly for words. The Coalition will rebate households up to $10,000 to install solar panels; Labor will lend them $10,000. The Coalition will fund schools to install solar hot water systems; Labor will fund them to install solar electricity generators, and so on.

Even this week’s big debate about Australia’s approach at the post-Kyoto negotiations is no debate at all. Labor now says it will sign up to it only if it includes “commitments” by developing countries to cut their emissions. The Coalition says it’ll only sign if it gives developing countries “obligations”.

Can you spot the difference? Many words have been wasted at press conferences this past week trying to do so. In truth whichever side wins the election will enter December’s post-Kyoto negotiating session in Bali trying to get the most they can from developing countries, perhaps even threatening not to sign, and then eventually sign because the developing countries have given them something.

That’s how negotiations work, except for the last Kyoto negotiations in which Australia’s behaviour was so bizarre (negotiating hard, signing, and then not ratifying) that even the present Environment Minister thinks it was wrong, as it seems did his Coalition predecessor at the time.

But some of the climate change debate isn’t silly...

Both sides have committed to a system of emissions trading designed to roughly halve Australia’s output of greenhouse gasses by 2050. (Labor says it will cut it by 60 per cent; after the election the Coalition is expected to announce a target of 50 per cent.)

Where they differ is on whether that emissions trading system would need help.

On Monday Labor promised an additional mandatory renewable energy target requiring electricity producers to source 20 per cent of their power from clean sources by 2020.

It is a big ask. At the moment less than 10 per cent of our electricity comes from renewable sources, mainly from hydroelectricity which can’t easily be scaled up.

The Coalition has no meaningful renewable energy requirement. Its policy released just before the election referred to a target of 15 per cent by 2020. But that target included some non-renewable sources of energy and was intended to replace rather than add to “the patchwork of existing and proposed state and territory schemes”. Those schemes are on track to give us 15 per cent by 2010 anyway.

The Coalition’s distaste of mandatory requirements has impressive support. After five months of investigation the Prime Minister’s Emissions Trading Taskforce found this year that mandatory renewables targets were a “high-cost” means of cutting greenhouse gas emissions (as incidentally were cash rebates for installing solar panels of the type promised by the Coalition in the lead up to the election).

As well the cost of mandatory renewables targets was “hidden in the electricity market, where consumers are forced to cross-subsidise renewable energy generators”.

In the view of the taskforce emissions were best reduced by having only one target – the one spelt out in the emissions trading regime. The market should decide whether it would be met by more renewable power, by nuclear power, by geosequestration or by cutting demand. As the taskforce put it: “favouring particular technologies over others – picking winners – will increase the costs we impose on ourselves”.

But another report, even more impressive, found otherwise.

Britain’s landmark Stern report released this time last year found that an emissions target by itself wasn’t enough. In its words: “in some sectors, particularly electricity generation - where new technologies can struggle to gain a foothold - policies to support the market for early-stage technologies will be critical.”

Although trained as an economist and a believer in market mechanisms, Sir Nicholas Stern formed the view that the climate change crisis was so serious that a whole range of mechanisms – both market and non-market – were needed to fight it.

The world’s leading authority on climate change appears to have come down on Labor’s side (and also on the side of the Greens, who are proposing an even tighter renewables target of 15 per cent by 2015).

But that’s just looking through today’s prism. A startling oddity about the present climate change debate is that ten years ago the positions were reversed.

In 1997 after just one year in office John Howard announced plans to go where his Labor predecessors had not. Australia was to lead the world in introducing a legislated Mandatory Renewable Energy Target, MRET. It would require electricity retailers to take an extra 2 per cent of their power from renewable sources by the year 2010, increasing the renewables share of electricity sold from 6 per cent to 8 per cent.

To call MRET successful would be a massive understatement. Within two years of its adoption in 2001 almost 200 renewable power stations had been accredited (mostly wind farms) and it became clear the target would be achieved embarrassingly early.

According to the leaked notes of a senior executive of Rio Tinto obtained by the ABC, John Howard’s Industry Minister Ian Macfarlane told an gathering of fossil fuel executives in 2004 that MRET had “worked too well”, that “investment in renewables was running ahead of the original planning”, and that the “very vocal” renewables industry had taken the agenda from them.

In 2003 an independent inquiry chaired by a former Coalition Senator Grant Tambling found that “by 2007 sufficient capacity is expected to have been installed to meet the target. As a consequence, investment is expected to fall away rapidly.”

It recommended doubling the target and extending the scheme to 2020 in order to stop the renewables industry collapsing.

This week The Australian reported that that warning was backed up by the then Environment Minister Ian Campbell who wrote a secret memo to the Prime Minister in December 2005 expressing concern that investment in renewable energy would “come to a halt'” within 12 to 18 months.

“Since wind energy has been the main beneficiary of MRET this industry is likely to be the most affected, though there will also be important impacts for solar hot water heaters, energy generation from sugar by-products and other producers,” he wrote.

“Let me outline some of the possible implications for the industry in the period ahead. In the absence of any state government policy responses, it is highly likely that the wind turbine assembly operations in northern Tasmania and Portland, Victoria, will shut down.”

“Moreover, there will be important impacts on a range of project proponents, ancillary industries and communities (though this will be viewed positively in some cases).”

The Minister lost the Cabinet battle and the resulting failure of several wind farm projects was indeed viewed positively by nearby communities worried about noise.

A virtual roll call of Australian renewable energy pioneers walked out of the country.

. Dr Zhengrong Shi, a graduate of the University of NSW moved to China and now runs Suntech, one of the world's top ten manufacturers of photovoltaic cells. He claimed in a recent interview that he would have done it here, had Australia made it viable.

. The Australian company Roaring 40s moved into India and China after announcing last year that $750 million of its Australian wind investments had stalled because the MRET had not been extended.

. In March this year the Australian company Global Renewables announced a $5 billion UK deal, saying it could not get support for its technology in Australia.
. In February the Australian company Pacific Hydro announced it was investing $500 million in Brazil claiming its local projects had stalled.

And then just six weeks ago, 21 months after his minister had warned him of enormous damage should MRET be allowed to wither, the Prime Minister gave it back a small lease of life.

To be called the Clean Energy Target, the new scheme would “build on the market-based framework of the Australian Government’s world-first Mandatory Renewable Energy Target”.

In practice it would go little further than state-based schemes in NSW and Victoria were likely to by 2020 and included in the 15 per cent target would be “clean coal” and nuclear power.

The additions probably make little difference. There is no nuclear power in Australia and there is unlikely to be before 2020.

And “clean coal” is more of a marketing phrase than a practical technology.
Also known as “geosequestration”, and “carbon capture and storage” the idea is that the carbon dioxide can be removed from coal just before or after it is burnt and then buried underground, hopefully forever.

New coal-fired power stations are needed. Carbon can’t be removed at existing power stations without massive expense. Retrofitting is said to roughly double the cost of making the electricity.

And then there’s the question of storage. No-one knows whether it will leak. BP has just ditched plans to build the world’s first such plant in Scotland.

On offer here is the largely-empty Moomba underground natural gas field in South Australia. It is a long way from Australia’s coal-fired power plants but it is very big - large enough to take 20 million tonnes of carbon dioxide a year. But even that accounts for only 10 per cent of Australia’s annual power station emissions.

The celebrity scientist Karl Kruszelnicki who is standing for Senate in NSW claimed on Thursday that to get rid of C02 from power stations Australia would need to store one cubic kilometre of compressed carbon dioxide underground every day, something that was “physically impossible”.

“It is simply a furphy, it's a porky pie. Goebbels, the Nazi propagandist, said if you're going to tell a lie, tell a big one, and this is a beauty,” he told reporters.
The energy industry is concerned about liability should the carbon dioxide leak.

There is talk of a leakage target of 1 per cent a year, but even that would allow most of the carbon dioxide to eventually escape, rendering the exercise of burying it pointless.

Companies interested in geosequestration are said to want the government to take on their legal liability for leakage before they will go ahead.

Not that you are likely to hear much about the problems of “clean coal” from our mainstream politicians during the campaign. Both the Coalition and Labor say they are committed to it.

The Coalition has directed $3.4 million toward “clean coal” research. Labor has promised $500 million.

The research is certainly unlikely to be done without government support. There is little incentive for electricity suppliers to do it. They will just buy their power from alternative generators when emissions trading makes the price of coal-fired power too high.

Generation companies aren’t too interested. Before their coal-fired power stations reach the end of their economic life (a process that will be accelerated by emissions trading) they will replace them with whatever generators are economic at the time, be they powered by wind, solar, hot rocks or maybe – if it works and someone else pays for the development – “clean coal”.

And our coal companies don’t have much of an incentive either. They sell most of their product overseas, much of it for the manufacture of iron. Their product will be in demand for a long time even without “clean coal”.

It’s possible to get an idea of the way in which Australia’s energy future will unfold while looking through the fog of the so-called climate change debate in the 2007 election campaign. But it isn’t easy.