Block’s Indicator of Sustainable Growth

by Ray Block

After years of global warming scepticism by the previous Liberal government, the new Australian Labor government signed the Kyoto Protocol shortly after election in November 2007. After putting out a green paper for community consultation in June, the government will issue a white paper this December setting out the cap and trade scheme to be introduced in 2010.

Professor Ross Garnaut, the government’s adviser on climate change policy has now issued three reports. The latest Targets and Trajectories released in September sets out an agenda for implementation. There are a number of alternative scenarios:

• If there is broad agreement to an international emissions trading scheme at the United Nations Climate Change Conference (COP 15) at Copenhagen (November 30-December  11 2009), then Australia should be reducing its net emissions by 10 per cent from 2000 levels by 2020. This would be equivalent to a 30 per cent reduction in per capita terms.

• It is almost certain that no broad agreement between developed and developing countries will be reached as early as 2009. However, if United States and the few  other developed countries not already in the Kyoto club sign up to 2020 targets, that would be an appropriate start of an international trading scheme.

• If Copenhagen gets nowhere in resolution, so that it is business as usual, then Australia should limit itself to a 5 per cent reduction in net emissions from the 2000 level by 2020. This would mean a reduction in emissions of 25 per cent per capita.

• Irrespective of the level of cutting emissions by 10 or 5 per cent, Australia should start its emissions trading scheme in 2010 by selling permits at $20, rising each year by 4 per cent a year, plus percentage increases in the consumer price index. However, if an international trading scheme started in 2013, after the expiry of Kyoto in 2012, Garnaut sees the permit price floating as Australian emissions trade internationally.

• Garnaut says that the fragile Australian environment, citing as an example the survival of the Great Barrier Reef, the world’s largest coral reef,  would need to ensure that CO2 and other greenhouse gas emissions in the atmosphere be limited to no more than 450 parts per million (ppm). This was also the preferred position of the IPCC Climate Change consensus in 2007.

• However, as a coal driven economy in terms of power generation, and as the world’s largest coal exporter, with the largest level of emissions per capita in the world, the high emissions-intensive exports puts Australia at a big disadvantage to all other developed countries. On this basis, Australia would have to start its carbon reduction scheme, with a second best option of tolerating an atmospheric concentration of C02 and other GHG at 550 ppm, dangerous as this might prove in the future.

Professor Garnaut, a former Australian Ambassador to China and leading economist with great experience of Asia realises the government’s limited options only too keenly. His policy proposal for Australia to reach a 10 per cent cut in emissions by 2020, if an international agreement can be reached, is seen by scientific critics as being far too soft and weak.

David Karoly, professor of Meteorology at Melbourne University, and one of the authors of the IPCC consensus report on Climate Change in 2007 says in effect that if Garnaut gets a green tick with the government over the emissions trading scheme, it would demonstrate that the new government is all talk and little action. It might be “politically and economically palatable or acceptable, but it is the wrong prescription.”

On the other hand, the Business Council of Australia (BCA), the big business lobby, armed with a detailed study of how Australian exports would be vulnerable to severe Asian competition, because of the carbon reduction scheme is vehement that leading Australian exporters cannot afford even a 10 per cent reduction in emissions by 2020 over 2000 levels. They want compensation from government, if they are to continue operating in Australia, and not just jump ship and move their operations to Asia or elsewhere.

The key to Australia lowering its carbon levels is a successful implementation of the carbon capture and storage (CCS) program on a large scale, but this is not likely until after 2020. There would also be the need for investment in new electricity generating plant capable of low emissions. This plant is available but at extremely high cost.

There are other options for greater investment in renewable energy, particularly in offshore wind stations, taking a cue from the success of Germany and Spain, and there remains a big future for geothermal power stations. Solar power is another option, and although solar photovoltaics received a big boost years ago from Professor Martin Green’s innovations at the University of NSW, it has not been utilised on a very wide scale in Australia.

Ironically, the biggest beneficiary of Green’s work has been in China, which now boasts world leadership in solar PV installations. Hopefully, Worley Parsons’s decision to commit to the development of a $1 billion 250 MW solar thermal plant in the Australian outback, possibly in the Pilbara will start a new wave of leadership in renewable energy.

It is hard not to feel some sympathy for Australia, this rich medium sized economy, tied so heavily to a carbon economy, which for many years had its head in the sand, and has suddenly woken up to the potential dangers ahead. Whatever emissions trading scheme is implemented in 2010, it will eventually have to be replaced by more bold schemes later on, which would dramatically change the country’s direction to more meaningful cuts in carbon emissions.

Australia needs the input of the maverick, but brilliant climatologist Dr James Hansen, director of NASA’s Goddard Institute for Space Studies. Hansen is at least one or two steps ahead of the slow moving IPCC scientific consensus. George Bush tried to muzzle Hansen, but you can’t keep the maverick down. In open letters to German Chancellor Angela Merkel and to British Prime Minister Gordon Brown, Hansen is particularly concerned about coal’s increasing place in world electricity generation.

Hansen says that while oil slightly exceeds coal as a source of CO2 emissions today, because of the long lifetime of CO2, about one fifth is still in the air after 1000 years. “Because of this long CO2 lifetime, we cannot solve the climate problem by slowing down emissions by 20 per cent, or 50 per cent, or even 80 per cent. It does not matter much whether the CO2 is emitted this year, next year, or several years from now. Instead of a percent reduction in the rate of emissions, we must identify a portion of the fossil fuels that will be left in the ground, or captured upon emission and put back into the ground.”

Hansen goes to say that currently emissions in the atmosphere are at 385 ppm CO2, but trending substantially higher. Unless they can be kept to a maximum CO2 close to 400 ppm, thus retaining the possibility to get CO2 back to below 350 ppm in a reasonable time, emissions are in a dangerous zone.

If Australia is going to have a strong future, it will with its international partners have to solve very quickly the carbon capture and storage potential on a large demonstrable scale, and go quickly into a major investment program in renewable capabilities. There is not much time to waste.