Australian carbon emission politics explained.

Have a look at the beautiful graph below, which depicts the main trends in Australian emissions and its promised emission reduction targets.

Australia’s emissions trends, 1990 to 2020

climate graph
Note: trajectories to the 2020 target range are illustrative

The dotted orange line shows the amount of greenhouse gas that Australia’s economy produces. It depicts a steadily increasing line from 420 million tonnes in 1990 to 560 million tonnes today, projected to rise to 650 million tonnes in 2020 under a ‘business as usual scenario’. The blue line shows total emissions, which thus adds emissions from deforestation to the ‘economic emissions’.

The three straight lines at the end of the graph show Australia’s promises, and then in particular the -5% line that both parties have committed to. Its a beautifully informative graph, which I have used in lectures the last few years. It is of course meant to shock the audience into rising to the challenge, but it is also very useful as a guide to discussing the politics of greenhouse emissions:

  1. Actual economic emissions have more or less followed the ‘business as usual scenario’ in the last 20 years, despite several governments tinkering with wind-mills and ‘energy efficiency’.
  2. The only reason that Australia now only emits slightly more than in 1990 is because forestry activities are included in the headline numbers (the blue line): there happened to be a lot of deforestation in the early 1990s! It would be much more proper, of course, to exclude this source: you won’t see this source in the reports of the International Energy Agency which calculates world emissions. Hence, a mere ‘accounting trick’, probably cooked up by some clever civil servant years ago, is keeping Australia in the ballpark of its promised reduction. And of course, another accounting trick is needed to exclude bush fires from ‘deforestation’! If you really want to pretend our ‘efforts’ look good, you can just look at the blue line without seeing the orange line and crow about the years with reduced emissions (such as is done here), but if one would look at economic emissions alone, then keeping the 5% reduction target would entail reducing the economic emissions between now and 2020 by about 40% relative to the ‘business as usual scenario’.
  3. Even with the ‘forest tricks’ in place one can see that Australia is not going to reach its targets without dramatic action, which its population and industry have time and again rejected.

Look at this graph hence and suppose you are the minister who is supposed to make the promised reductions happen. What can you do? You know it’s hopeless in the political reality of Australia to reduce the economic emissions by the needed amount to get to the 5% economic emission reduction by 2020. So you adopt the forestry tricks. One of your brains in the Treasury on this topic then tells you in a September 2013 OECD report that it would need a 76 dollar a tonne carbon price to get that promised reduction. That price is about 3 times higher than the price that got Labor laughed out of town, so you reject that one too. Indeed, your adviser tells you that you would have to increase the price much more drastically, easily a 100 fold at current demand elasticity estimates, to reduce emissions by the 90% you really are supposed to achieve if the world is to stabilize CO levels. So you realise you are in pretense mode anyway, but you like to keep that promise, so what do you do? Why not nuclear, you think? Well, your adviser tells you, it simply takes too long for the nuclear plants to come on-line.

So your adviser gives you two realistic options. One is to cheat and to pretend to reduce the emissions of other countries and then count them as part of the Australian tally. That is what the whole deal with the emission trading scheme in the EU was about: we’d pay Greece (and other EU countries) for the emission permits it wasn’t using anyway because its economy has collapsed, which we would then have trumpeted as doing our bit for the planet. It was of course never likely to fly politically that we would truly send countries like Greece hundreds of millions of dollars, but that was essentially Labor’s plan. Cheered on by many commentators who clearly couldn’t be bothered to investigate properly as to what would really happen, it has to be said.

Though you, the minister, have just walked away from this scam, you can always go back to it by buying ‘Kyoto permits’ from developing countries. They come at a couple of bucks per tonne, so it’s even cheaper than the EU route. Maybe you can even get it to count as development aid, you wonder?

The other option you have is to bribe big businesses and power stations to switch towards a slightly less carbon-emission intensive form of fossil fuel. From coal to shale gas, for instance, could save around 40% of the emissions used (IEA derived calculations), which could mean a difference of perhaps as much as 50 million tonnes or so per year on electricity generation in Australia (which currently belches out around 100 million tonnes in black coal and another 50 million in brown coal). That sounds good, you might think!

Politically speaking, the second route looks more likely even though at first glance the first might seem better: the ‘Kyoto permit’ route is cheaper, whilst switching fossil energy sources takes a couple of years and often would happen naturally anyway. However, being able to spend lots of public money on particular domestic industries clearly has its political advantages! So from a political point of view, the second one looks like the winner, even though on its own it looks unlikely to hit the promised target either. Hence, one should either expect that promise to disappear off the table in the coming years or for some lucky developing country to be able to sell some permits after all!

Neither option, of course, will do diddly-squat about the greenhouse gas emissions issue. Buying up the left-over permits of others is just a form of pretense: the world as a whole has increased its emissions by 100% in the last 30 years, and again increased its emissions last year according to the International Energy Agency! Buying ‘off-sets’ from countries whose emissions are sky-rocketing, under the pretense that they would otherwise rise even more, is a smoke-and-mirrors trick from start to finish! Maybe they could pay us for not back-burning and hence ‘prevent’ some of our emissions!

The problem with the shale gas/oil option is that one is effectively exchanging coal burning in Australia now with coal burning elsewhere on the planet (we’ll keep digging it up!), as well as coal burning in the future once the shale oil/gas is burnt up. So it is really just another smoke-and-mirror trick: you are still waiting for a competitive ‘low emission’ technology to come round to truly challenge fossil fuels as the source of our bulk energy. And even then, energy uses that really only work on combustion, such as air travel, will most likely ensure the planet will still burn through its fossil fuel reserves.

Of course, compared to the 90-95% reduction that Australia ‘should’ achieve if we are truly to ‘do our bit’ to stabilise CO2 levels, it really is quite immaterial who we bribe to pretend to reduce their emissions or which fossil fuel we are burning up first. But such truly significant reductions are not politically feasible, neither here or elsewhere. After all, who amongst you is prepared to stop all long-distance travel and move to a non-airconditioned hovel to reduce the temperature in 50 years time by 1 degree? Certainly not the hypocritical frequent-flying bureaucrats and economists who advocate you change your way of life!

So this gives you the proper focus to understand the politics of climate change in Australia: you have those who want you to waste tax money overseas and you have those who want you to hand it out locally to friends, neither of which will have a noticeable long-run effect on the climate. Or you can stop the expensive, ineffective, and corrupting pretense.

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10 Responses to Australian carbon emission politics explained.

  1. murph the surf. says:

    I think we all owe B Carr a big debt for converting all NSW state forestry to national parks or reserves some years ago.
    Of course the timber cutters , truck drivers and mill workers weren’t so happy but many have moved on to enjoy the rewards of the mining industry upturn.
    At sustainable farming lectures I attended many years ago the presenters always understood this elegant accounting trick with regard to our forestry. If only Queensland would stop land clearing we could probably claim vast credits for not allowing it to go ahead.Could even reach our goal?
    Other than that I agree with the idea of this thread and it’s preceding partner.The reality of the distance between intention and completion has never been sharper.
    Embracing the EU permits market was really capitulation – if it works I’ll be so pleased but the history of EU wide action is so disfigured by corruption and incompetence I doubt it can.

  2. Paul re bush fires- most of what burns is twigs, leaves, and middling sized fallen branches, not whole trees. This sort of stuff regrows quickly- it is amazing how quickly fuel (carbon) loads in fire forests can return to dangerous levels after a fire. And a lot of our geographically biggest bush-fires are in the seasonal savannas of the top end and regrowth there is quick.

    • Paul Frijters says:

      Hi John.

      sure, I was just making the point that if one is going to count (de)forestation then one should really count all forms of (de)forestation. Selective picking the ones that make you look good is cheeky, don’t you think?

      The pine forests that got burned around Canberra in 2003 were never re-planted. I wonder if they are in these numbers and count as deforestation?

      • The new aboratorium on mt Stromlo has replanted a lot of, very varying kinds of trees, over the past few years, while it will take a while to really grow it is already worth a visit.

        As to the accounting, agree. Its simply that some extreme green left types would also like to confuse, and ban things like fire wood on fossil carbon grounds.
        Personally I think that acquiring (at true market value) the clapped out brown coal generators and replacing them with lower emitters, is an attractive option .

        • Paul Frijters says:

          The situation the big emitters are in is classic rent-seeking territory: political favors are worth a lot to them and are politically relatively inexpensive for the politician who will just spin it as ‘doing something’. In those circumstance, don’t expect the outcome to be good for the community. I hope the current dithering on a policy is spun out for as long as possible!

        • They were bought on high leveraged basis (and most of these power-plants were getting pretty old, even then)and the only security on the loans was the plants themselves. The problem is that the lenders were people like the Commonwealth banks customers .

  3. conrad says:

    I don’t think you need to assume that people will have to do something painful, since it’s not clear to me that coal will go on forever — pain may come to Australia. If you get massive findings of gas, for example (or indeed people just work out cheaper ways to get it, since, from my ignorant perspective, there appears to be large amounts of it all over the place), then I imagine this will displace coal. Given this gas won’t necessarily come from Australia, Australia’s coal exports will get clobbered.

    I also can’t help but notice solar panels all over the place when I fly into some cities (e.g., Adelaide). If China keeps dumping cheap panels on Australia, I imagine large numbers of people we will get them simply because they’re cheaper than paying electricity bills. If you could not pay electricity bills again, for, say, $1500, who wouldn’t get them? They’d be everywhere. You can imagine combining this with electric cars — free fuel for your home and free fuel for your car.

    • Paul Frijters says:

      Hi conrad,

      the normal economic story on this is one of cheapest-fuels first, with gradual price changes in the fuel whose supply is coming to an end giving incentives to bring the next cheapest one on-line. At the moment, fossil fuel is still the cheapest thing going round for most of our energy uses (bar a bit of hydro, of which there is simply not enough potential). World demand is so large and growing that we’re going through lots of fossil fuels quite quickly, simply consuming the old sources (crude oil, coal) alongside the newer ones (shale). Whilst the US is making more use of shale, China has started to dig up huge amounts of coal.

      Dont worry about our coal exports. Australia only produces about 5% of world coal. Japan and Germany might well need more coal now that they are weening off nuclear.

      As to the non-fossil alternatives, solar is already competitive in niche retail markets (isolated spots hard to reach) and as a subsidised source (which is why you see it in our cities). If solar becomes yet cheaper still, one might see industrial uses coming in view for it. It would have to be dirt-cheap to out-compete coal or gas from an electricity generating point of view though, simply because of the problem of intermittent sunshine and the associated need for expensive batteries and back-up generators. Having said this, the cost reductions have been amazing on solar technology the last 10 years, so there is certainly grounds for hope on that one!

      • conrad says:

        I think people worry too much about intermittent supply as they seem to want to get to zero emissions tomorrow, whereas I’m happy to see use curb gradually over time. I don’t see planes being replaced where fast-trains are not viable for decades, for example, although it’s hard to think of something harder to replace (and it’s almost impossible to predict future technology — I doubt too many people would have predicted what it’s like today even in 1970, for example).

        Alternatively, things like electric cars seem inevitable to me. You can already get electric motorbikes, and they’re entirely fine, and the power solution seems pretty obvious too even without awesome battery technology, which will presumably come later. You just have two batteries which you switch over each day. Lots of cycling toys (Garmins, really bright lights etc.) more or less already work like this, where people seem happy to plug and unplug stuff to download their data each day, so I can’t imagine people would find it too big an imposition to change batteries. This means cheap solar would eliminate hydrocarbon based cars, which is a big deal. You could just have a panel on your roof plug directly into the charger, which means there would be essentially no installation charges, unlike for houses. In this case, if you are going to buy a car for 30K, I don’t see why a 3K charger would hurt, especially because it would save fuel costs, which are non-negligible for many people. In case you were slack, you could presumably buy a more expensive one which saves the energy in another battery and then just pipes it over, which would save you changing batteries each day.

        As I noted in the last post, I don’t think China will go down the coal path as much as many people do (mainly those that haven’t been there for any period of time), and the reason is obvious — the place is already polluted so badly it is causing political problems as well as reducing plant yields etc., which is serious for them. They’re also very good at building other stuff quickly, and it’s easy to see them doing that instead — I bet nuclear with a recycling plant or two for the fuel combined with cheap alternative sources wherever they can use them.

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