Evidence of seemingly immovable obstruction isn’t hard to find. Oil and gas companies have resumed investment in exploration on the assumption that internal-combustion vehicles and gas-fired electricity generation will be around for some time to come. Everywhere the expansion of solar and wind power is being obstructed by NIMBY objections to new transmission lines, complex permitting procedures, and grids designed to distribute power generated by coal and gas. Higher interest rates have added to the obstacles facing solar and wind projects.

Against this seemingly immovable resistance is ranged the irresistible force of massive reductions in the cost of solar photovoltaics, or PV, and, to a lesser extent, wind. The result has been a huge expansion in production capacity, estimated at 650 gigawatts a year in China alone. Geopolitical concerns have meanwhile driven the United States and other countries to reduce reliance on China through “friendshoring,” the expansion of production capacity outside China.

The International Energy Agency estimates that global solar PV manufacturing capacity will reach almost 1000 gigawatts in 2024. This exceeds current projections of demand so much that the IEA warns “the industry is rushing headlong into a supply glut.”

That warning implies that stocks of unsold inventory will build up, as is already occurring. As the growth of stocks becomes unsustainable, prices will fall to a point where demand and supply are brought back into balance. Where will that equilibrium be found?

It is easier to look at the supply side first. Solar module prices have fallen to historically low levels of US$0.14 per watt, a decline of nearly 40 per cent since the beginning of 2023. These are stunningly low prices. In the absence of soft costs, and assuming 7 per cent interest, and 2000 hours of operation per year, the cost of electricity from such a module would be a mere 0.5 cents per kilowatt hour. Even at these prices, though, solar PV producers are rushing to invest in new production capacity.

The decline has been accelerated by a fall in the price of polysilicon, the raw material for a solar cell, as well as reductions in the amount required for a cell with given capacity. Solar cells now require only two to three grams of polysilicon per watt of capacity. With polysilicon prices now below US$10 per kilogram, that’s no more than 3 cents per watt.

The next big input to the production of solar cells is electricity itself. Solar PV manufacturing has tended to be located in coal-intensive provinces of China, notably Xinjiang and Jiangsu. But as the glut of solar modules develops, manufacturers will find it more economical to “eat their own dogfood,” using surplus modules to supply the electricity to produce new ones at ever lower costs.

Improvements in the efficiency of solar cells along with increases in the surface area of modules translate into reductions in installation costs. With solar cells now very cheap, manufacturers have an incentive to focus on design changes that produce lighter and more flexible modules, further reducing costs.

In other words, even a severe glut seems unlikely to result in sustained reductions in output. Rather, manufacturers will accept lower profit margins and seek ways to cut costs even further.

The demand for energy is growing and nearly all of this demand can be met by electricity in one way or another. As solar generation capacity increases, the benefits of using solar PV to meet the growing demand will become more and more evident. Battery storage is expanding rapidly too, threatening the role of gas-fired electricity as a source of “dispatchable” electricity — electricity that can be turned on or off at short notice.

What happens when such an unstoppable flood of generation capacity runs into the seemingly immovable barriers of entrenched interests and political resistance? The outcome will undoubtedly be messy, but one way or another the flood will find its way around, over or perhaps under the barriers.

The problem of transmission lines provides one example. New solar generation is now commonly sited near where coal-fired power plants have been shut down, thereby taking advantage of already-installed transmission lines. But once solar costs fall enough, it becomes economically sensible to buy and demolish coal plants in order to use their transmission capacity for solar. That’s increasingly true even when the plants are nowhere near the end of their operational life.

Rooftop solar provides another way of avoiding constraints on transmission capacity. It’s politically popular, so regulators have shied away from onerous permit requirements in most jurisdictions. Thanks to the incentives provided by the Small-scale Renewable Energy Scheme, as well as its sunny climate, Australia has been a world leader in rooftop solar. That will only accelerate as the cost of solar modules drops. In fact, the cost reduction associated with that decline is so great that, even in the absence of government incentives, rooftop solar will soon be an attractive option in any sunny climate.

Another possible path is the production of “green hydrogen” using electrolysis to split water into its components, hydrogen and oxygen. The low price of electricity implied by a severe glut of solar PV would make electrolysis competitive with coal-based technologies. Replacing these polluting technologies with electrolysis to meet existing demand for hydrogen would use about 2300 terawatt hours, or nearly twice the global total solar PV generation for 2022.

The shift to hydrogen would be constrained by the massively increased need for electrolysers, which are currently produced on a much smaller scale than would be needed. Nevertheless, production of even a modest share of current hydrogen demand would absorb any glut in solar PV production. And the prospect is that demand will increase sharply, most notably in steel production.

One way or another, the force of massively increased solar production capacity and ever lower costs will breach the “immovable barriers.” But compared with an efficient and orderly transition, the process will be slower than is needed, and the costs will be much greater. •

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This year, though, the series would have to be pitched as a documentary. COP28 opened on Wednesday in the improbable location of Dubai, where futuristic glass towers and a palm-shaped luxury resort raised from the sea cater for the world’s gas-guzzling classes. Dubai is the principal city of the United Arab Emirates, the world’s eighth-biggest oil producer. The head of the UAE’s state-owned oil giant ADNOC, Sultan Al Jaber, is the person its government has appointed to be president of the UN climate conference. And last week the BBC published leaked briefing notes for Al Jaber’s meetings with twenty-seven countries over the past year revealing that, as well as discussing the COP negotiations, he was pursuing energy investment deals for ADNOC and another UAE investment company he heads, Masdar.

For the climate NGOs this was merely confirmation that the UAE should not have been made host of the COP in the first place, and that Al Jaber was a completely inappropriate person to preside over it. “A brazen conflict of interest,” said Amnesty International, calling for him to resign.

But there was never any chance of that, and most of the country delegates in Dubai have reacted to the revelations with a world-weary shrug. “So the UAE is pursuing its oil interests?” said one. “And your point is…?”

The UAE’s energy interests overseas are large. The Financial Times estimates that it has invested almost US$200 billion in energy projects in the United States, Africa, Asia and Europe in the last year alone. Around half of this is in oil and gas, including for a major expansion of new drilling. This blatantly ignores the International Energy Agency’s warning that meeting the agreed goal of limiting global warming to 1.5°C above pre-industrial times effectively means no more fossil fuel exploration. The UAE’s plans alone will blow the global “carbon budget” out of the water.

The UAE argues that the finger of blame is being pointed in the wrong direction: it is merely responding to demand. On all realistic projections, countries will still be using oil and gas till well into the mid-century, and the UAE’s is the cheapest and among the least polluting.

And look at the other half of the UAE’s energy deals, adds Al Jaber: huge new solar, wind and geothermal investments helping provide power and air conditioning to developing and emerging economies from Azerbaijan to Zambia, China to Turkey. For many poorer countries, the UAE’s investments are critical — and far larger than anything they receive from Western governments or private sector companies. You don’t hear many developing country delegates criticising the UAE here.

Yet the revelations about Al Jaber’s Janus-like activities in the run-up to COP28 can’t be wholly dismissed. The UN rules are clear: the COP president must be neutral and impartial, and must not act to further their own interests. In Dubai over the next two weeks probably the single most contentious issue on the agenda will be the future of fossil fuels.

A distinctive feature of this year’s COP will be the “global stocktake.” This is one of the key processes set out in the landmark Paris climate agreement of 2015. Every five years, the agreement says, countries must take stock of their progress, or otherwise, over the last five, and set out global ambitions for the future. In this way the stocktake should inform the Nationally Determined Contributions, or NDCs, countries must make two years later, in which they must each set out new and stronger emissions reduction targets. The next round of NDCs is due in 2025.

Over the past year the global stocktake negotiations have been fraught. Climate scientists have made it very clear that collectively the world is not remotely on track to hold the global temperature rise to 1.5°C. In its annual report on the emissions gap, the UN Environment Programme observes that the difference between the emissions trajectory the world needs to be on for 1.5°C and the one it actually is on has widened rather than narrowed.

Last year it looked as if countries’ plans would take the world to around 2.6°C of warming; today it is probably 2.9°C. At that level much of the world’s agricultural output and water supplies will be at serious risk of failing, the incidence of extreme weather events regularly catastrophic, and large numbers of species would be wiped out. Countries’ current plans for emissions in 2030, UNEP says, need to be cut by another 42 per cent to be on a 1.5°C-compatible pathway.

The stocktake negotiators have focused on the future rather than dwelling on past and present failures. Everyone agrees there should be more investment in renewable energy: COP28 is likely to set a new goal of tripling global renewables capacity by 2030. That will not be easy: solar and wind power are being installed around the world at record rates, but market forecasts currently expect capacity only to double by then.

The COP will also agree on a doubling in the rate of energy efficiency improvements. Energy efficiency has long been the cheapest way of cutting emissions — the International Energy Agency describes it as the “first fuel” — but has always been something of the Cinderella of energy policy, requiring regulatory tightening in many different sectors. Doubling the rate of global improvement will require accelerated innovation in heat pumps, vehicles, consumer goods and industrial processes.

COP28 may well also reach an agreement on methane. Methane is one of the most potent greenhouse gases, more powerful as a cause of warming than carbon dioxide. It is produced by livestock, by waste disposal and as a by-product of fossil fuel production. Here the UAE is playing up its status as an oil giant. Only a country like his, says Al Jaber, can bring the global oil and gas sector to the COP table. Expect a historic announcement of a new tough methane target for 2030, and the major oil and gas companies — traditional opponents of climate policy, and enemies of the climate movement — pledging their support.

As ever, though, it won’t be the things that everyone can agree on, however important, that will dominate negotiations. The major battle this year will be over what the COP says about the future of the fossil fuel industry itself.

The small island states and other nations most vulnerable to climate impacts are insisting on the science. The goal of 1.5°C means reducing carbon emissions to net zero by sometime before 2050. That means ending fossil fuel use more or less entirely. (“Net” zero allows some residual emissions, but only if they are captured and stored, either by increased vegetation or geologically.) So COP28 should agree that fossil fuels must be phased out.

The European Union, with its strong pro-climate-action lobby, is sympathetic. But for China, India, the United States and Saudi Arabia it is a step much too far. They want the text to say merely that fossil fuels should be “phased down,” not out. They also want this to cover only “unabated” fossil fuels: if coal, oil and gas plants are fitted with carbon capture and storage technology to capture the emissions and bury them underground, then they should be exempt from the phase-down.

With the two groups of countries so far apart, agreeing on the text will be very difficult. So the question being asked is: will the UAE be a neutral and impartial chair of the negotiations on this crucial issue? Many observers think it is hard to believe so. Al Jaber is only COP president for a year; he will be chief executive of ADNOC for much longer. The interests of the UAE are not exactly a secret. So expect another bruising conclusion to the conference, we are told, with NGOs crying foul, and the negotiations running acrimoniously into extra time, as they so often do (last year by nearly two whole days).

But there’s another possibility. Al Jaber is a deal-maker. That’s what he does in the day job, and what he’s been doing at those meetings over the last year. He wants to show that this is what you get with a serious player from a serious oil state. So he’ll find some clever new wording to bridge the gap between “phasing out” and “phasing down,” acknowledging that the use of fossil fuels will no doubt come to an end, eventually, but in the meantime they are needed to help the world’s poor escape their poverty. And then he’ll bring the gavel down on a successful COP before, not after, the scheduled end.

In fact, he’s shown what he can do already. The first day of a COP normally manages to do no more than agree on the agenda — and that often takes hours of wrangling in itself. But the first day of COP28 on Wednesday ended with an unprecedented agreement on one of the most significant issues of the entire two weeks.

Developing countries have been arguing for years for a fund to compensate them for the “loss and damage” climate change is now inflicting on their economies. Last year they won the fund — but it had no money in it, and everyone expected the negotiations about how it was to be organised to last several more years. Yesterday, though, the UAE pulled a remarkable rabbit out of the conference hat. Not just an agreement on the arrangements for the fund, but US$440 million of financial pledges to it — including US$100 million from the UAE itself.

Curmudgeons noted that these sums are not nearly enough — the economic costs of loss and damage already run into the billions, and with the UAE’s oil revenues having soared last year to almost US$100 billion a group of former world leaders led by Gordon Brown urged it only this week to provide US$3 billion for climate change. In comparison, US$100 million is small beer.

But Al Jaber didn’t look too worried at the press conference closing the day. He had pulled off a stunning coup, developed and developing nations alike expressed themselves delighted, and the UAE was in its rightful place. •

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After this year’s startling rises in global temperatures and climate-related disasters, we may need to move the goalposts. Scientists at the European Union’s Copernicus Centre estimate that Earth’s average surface temperature was already 1.23°C higher by August 2023 than in pre-industrial times. At that rate, the temperature anomaly will top 1.5°C by 2035.

By chance, 2035 is also the next milestone year for which all countries must put forward new targets under the Paris agreement. And last week the International Energy Agency, the OECD’s energy counterpart, warned that current policy settings mean the world is on course for temperatures to be 2.4°C warmer by 2100 than in days of old.

The IEA is funded by Western governments, including Australia. It advocates a rapid “clean energy transition” to net zero emissions — but it knows that success ultimately depends on support from key developing countries, especially China and India. So its pitch is diplomatic; where activists see climate disaster ahead, the IEA sees a glass half full. Before the 2015 conference in Paris, the agency notes, its equivalent modelling found global warming would lift average temperatures in 2100 by 3.5 degrees.

The IEA’s latest report, Net Zero Roadmap: A Global Pathway to Keep the 1.5°C Goal in Reach, updates its 2021 Roadmap ahead of the coming COP28 ministerial meeting on climate in Dubai. Essentially, it’s a blueprint for ministers and their governments: if you’re serious about reducing greenhouse gas emissions to net zero by 2050, something like this is what you should be aiming for.

Its advice is pitched at countries in general: it offers no specific recommendations to any of them. But on one key question in the Australian debate — is it right to expand coal and gas fields for exports? — the IEA’s stance puts it clearly in line with the Greens and against the two major parties.

“There is no need for investment in new oil and gas projects,” the IEA’s executive director, Turkish energy economist Fatih Birol, declared at the report’s launch in Paris. A few countries would still use oil and gas in a world of net zero emissions, or NZE, but the IEA estimates global demand for fossil fuels will peak in this decade and then fall precipitously. That makes new investments a risky proposition.

If the IEA’s roadmap to NZE is followed, which is unlikely, global oil consumption will be just 7 per cent of today’s levels by 2050, gas consumption just 5 per cent, and consumption of coal just 2 per cent. But, as the report keeps pointing out, we’re not there yet.

Laura Cozzi, the IEA’s director of sustainability, technology and outlooks, pointed out that global emissions in the energy sector hit a new record level last year despite significant falls from 2019 levels in advanced economies. Certain unnamed countries, she noted, are still building new coal-fired power stations, expanding fossil fuel projects and heavily subsidising fossil fuels. She summed up the world’s prospects of keeping global warming to 1.5°C: “Not. Good.”

And yet the IEA’s key message is that it’s still possible. “While the global pathway to net zero by 2050 has narrowed, it is still achievable,” Dr Birol concluded. “It is too soon to give up on 1.5°C.”

Why? Partly, perhaps, because if the IEA gave up on that goal then governments would be free to do so as well. But partly, too, because the transition is going very well in some respects — and if governments and business bring the same focus to where they’re lagging, they could dramatically change the global trajectory.

First, the good news. In some key areas, the world is moving fast enough to meet the milestones set out in the 2021 roadmap. In two of them, it’s on track to do better than that. All this is bending the curve of our trajectory from fossil fuels to renewables, but governments have to maintain momentum by progressively tightening that curve.

For example: the decline in future global warming under current policies from the 3.5°C the IEA estimated in 2015 is not enough, but it is a dramatic start. It reflects significant shifts in government policies, business costs, technological development and investment decisions.

Back in 2015, the report implies, the IEA was expecting the global energy sector to be emitting about 42.5 gigatonnes (Gt, or billion tonnes) of greenhouse gases by 2030. Eight years later, it now expects the same sector to be emitting 35 Gt, a drop of 7.5 Gt, or 18 per cent, in just eight years.

Okay, numerous factors are involved in that. They include reduced economic growth as a result of Covid, technological breakthroughs in many areas, and the IEA’s past underestimation of the scale of the shift to solar. That aside, though, government, business and people have changed their priorities in some areas to abandon unsustainable ways of doing things in favour of sustainable ones.

The IEA report estimates that almost half of that 7.5 Gt difference in its new and old forecasts of the energy sector’s 2030 emissions has come from breakthroughs in just one sector: solar energy. It kept expecting solar energy’s dazzling growth to fizzle out, but got that very wrong; instead, solar’s price kept falling, demand kept rising, and month by month it has been replacing coal and gas power. The report estimates that by 2030, under existing policies, solar and wind will each generate roughly 15 per cent of the world’s electricity.

In Australia, solar already has that share of the market, wind slightly less. Our problem lies in creating the storage and transmission capacity to operate a system based on intermittent power sources. Australia is the world’s number one in per capita use of solar, but its transmission network was built for another age, and it has a charming tradition of allowing its farmers to be the world’s number one NIMBYs.

The IEA’s report unfortunately sheds no light on how we should fix these problems. But it does tell us that solar energy use is growing even faster than its 2021 report hoped for, and wind almost as fast, and their combined growth has provided 5 Gt of the 7.5 Gt saving in 2030 emissions.

Another 1 Gt comes from another renewable (or potentially renewable) source: electric vehicles. Here too, like everyone else, the IEA was caught by surprise. In 2015 it expected that electric cars would make up 2.5 per cent of the global car market by 2030. Now it predicts they will make up almost 40 per cent — or more if policies and research moves to bring them on faster, especially for trucks and commercial vehicles.

Some of their growth is due to policy shifts. Governments in the European Union and the United States stared down the car manufacturers, imposing tough emissions standards that forced them to switch strategy to focus on making electric cars. India and some other developing countries rolled out financial incentives and charging stations to replace the masses of tuk-tuks (two-/three-wheelers) on their roads. And, like the boom in solar, the boom in electric cars was made possible by China’s goal of creating new global industries it can dominate (though that has its own problems).

On some issues, some governments are getting serious about trying to stop global warming. And if they’re not, business is doing it for them. The IEA reports that in the last two years business investment in low-emissions energy grew by 40 per cent to US$1.8 trillion, more than Australia’s entire annual output. That’s just as well, because from 2022 to 2030, on the IEA’s roadmap, it will need to grow to US$4.5 trillion.

“We now estimate that global manufacturing capacities for solar PV and electric vehicle batteries would be sufficient to meet projected demand in 2030 in the updated NZE Scenario, if announced projects proceed,” the report concludes. “This progress reflects cost reductions for key clean energy technologies — solar PV [photovoltaic], wind, heat pumps and batteries — which fell by close to 80 per cent… between 2010 and 2022.”

The glass is half full. Unfortunately, it is also half empty.

The IEA’s roadmap to NZE has not changed much since 2021, but its presentation has. Reading it, you’re struck by the repeated entreaties for “fair and effective international cooperation” to help developing countries other than China to “unlock clean energy investment” so their economic growth will not require emissions growth.

You’re also struck by statistics showing that different countries are on very different paths. From 2019 to 2022, the IEA estimates, energy sectors in the European Union and the United States cut their greenhouse gas emissions by 4.5 per cent. But despite its world-leading roles in developing solar, wind and electric cars, China increased its emissions by 7.5 per cent, while emissions in other developing economies rose by 4.5 per cent.

You might think that’s because Westerners pump out far more emissions than China. Not so. The IEA report doesn’t analyse the issue, but its statistics tell us that the combined emissions from energy sectors in the European Union and the United States are 7.5 Gt a year. That’s just 20 per cent of the world total.

If the advanced economies meet their upgraded targets under the Paris agreement — a big if, as British politics shows — their emissions in 2030 would be 5.5 tonnes of greenhouse gases per head, whereas China emits 7.5 tonnes per head and growing. (Australia is an outlier, its total emissions being roughly 20 tonnes of greenhouse gases per head if you exclude the big discount it claims for stopping land clearing.) “The policies currently in place are inadequate to meet [countries’] stated national commitments, let alone longer-term net zero emissions pledges,” the IEA concludes.

Europe has led the way in reducing emissions, but the cynicism with which British prime minister Rishi Sunak has now reversed course to try to win re-election suggests that public support for that role is fragile. The Biden administration has made the United States another global leader, but if the Republicans win back the White House next year, then that too will go into reverse.

Xi Jinping doesn’t have to worry about re-election, and global net zero emissions would be unthinkable without China’s leadership in developing low-cost solar power technology and componentry for wind turbines, electric cars and heat pumps. But China under Xi has also built most of the world’s new coal-fired power stations; it now has 71 per cent of all coal-fired plants in the global pipeline.

However urgent the need for action, there is nothing inevitable about the world achieving net zero emissions within a generation. The European Union and rich countries on this side of the Pacific have written their net zero pledges into law, but few developing countries have followed. And, of course, the United States can no longer make bipartisan commitments.

But as I pointed out in reporting the IEA’s 2021 roadmap, the developing countries are the ones that matter most. They will be generating most of the world’s economic growth from here to 2050, and they will decide how to power it. Not only China and India, Indonesia and Brazil, but Africa too. In general, they’ve been cautious about what they commit to, and with good reason. They claim the West has kept promising financial help to develop clean energy, but has sometimes failed to deliver.

The IEA report frequently alludes to this, emphasising the developing world’s needs for financial and technological support. It suggests that the West bring forward its net zero target date from 2050 to 2045, China advance its deadline from 2060 to 2050, and other developing countries (most of whom are relatively minor emitters) take their time. The cause needs them on board.

The IEA’s milestones are challenging. In 2022, the world generated 61 per cent of its electricity by burning coal, gas and oil. (In Australia it was 68 per cent.) The IEA wants that dependence swept away, cutting fossil fuels’ share to 29 per cent by 2030 and just 9 per cent by 2035. Australia has set itself an even more ambitious target to cut fossil fuels to just 18 per cent of electricity generation by 2030, but there’s a growing consensus that we won’t make it.

The IEA wants 70 per cent of new vehicles sold globally by 2030 to be electric, up from 13 per cent in 2022, and then 98 per cent by 2035. By 2030 it proposes that space heating and cooling systems in all new buildings use energy-efficient heat pumps (or split systems), a huge change from less than 1 per cent in 2022.

It sounds dramatic, but the IEA argues that electric cars and heat pumps will save the customer money in the long term — just as solar and wind energy are cheaper than burning coal and gas. That’s why these four cheap, mature technologies are its priorities for action now.

The report skates over the problems that Australia and other countries are experiencing as solar and wind energy make coal-fired power uneconomic in daylight hours, yet it remains a necessity at night. Its recent report on Australia acknowledged the problem, but offered no solution except a sort of “try harder.”

But much in the report is relevant to Australia. It implicitly rejects Labor’s policy of phasing out fossil fuels at home while expanding exports for others to burn. If our goal is to stop global warming, you can’t do it by transferring emissions from power stations here to power stations in Asia. You can argue the detail of how the transition to renewables should be managed, but the IEA insists that fossil fuels must be phased out throughout the world. As Dr Birol explains, “What matters is emissions, regardless of which country produces them.”

Reducing the destructive methane emissions caused by mining fossil fuels is another of the IEA’s key priorities. Often, it says, it would be far cheaper for miners to capture the escaping gas and use it. Australia was a late signatory to the global pledge to try to reduce methane emissions by 30 per cent by 2030. They have become the fastest-growing source of Australia’s greenhouse gas emissions.

The climate debate here focuses on renewables vs fossil fuels, but the IEA’s focus is on “low-emissions sources of electricity.” That includes nuclear power and carbon capture, usage and storage. Both are outcasts in Australian debates — the Howard government even banned nuclear power stations — but remain in the IEA’s toolkit, albeit for use only in rare cases.

It’s safe to assume that the Coalition’s new campaign for nuclear power in Australia is primarily aimed at renewing the climate wars; nuclear would be an expensive way to provide backup power at nights and on gloomy days. Even the IEA, as strong an advocate as any, sees nuclear providing just 2.7 per cent of the new “low-emissions” capacity it advocates for the world.

Rather, its emphasis is on the potential savings the world could make by focusing on energy efficiency: in homes, offices, shops and factories, cars, planes, ships, everywhere. As an example, redesigning new fridges and air conditioners could cut their electricity consumption almost in half by 2035.

Nothing would score better in human welfare than a global campaign to give every household in the developing world access to clean cooking technology to replace their deadly old indoor wood fires. If this could be done by 2030, the IEA estimates, it would remove 1.5 Gt a year of greenhouse gas emissions and save 3.6 million premature deaths. And that would cost just 1 per cent of the world’s annual energy investment.

But these changes require political or business decisions. The IEA offers only nonpartisan expertise — something that governments here and elsewhere don’t value as much as they should. The agency has to keep its mouth zipped, especially on how to solve the problems it exposes. Take energy efficiency. The obvious way to increase efficiency is a carbon price: make it more expensive to waste energy, and people will find ways to cut its use. But to many on the right, a new tax is taboo. So the IEA has to tiptoe around by suggesting second-best solutions.

The Albanese government is in danger of overpromising on targets while underdelivering on policies to achieve them. Its carbon price is limited to 200-odd companies, it is walking both sides of the street on fossil fuels, and most of the reviews it has launched have yet to produce outcomes. This is what happens when you allow the political staff to take charge of policy. •

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In his provocative new book, Russia Against Modernity, Alexander Etkind argues that the Russian invasion of Ukraine is part of a single, broad historical pattern. It is the last gasp of a failing, kleptocratic petrostate for which external aggression is a natural move. Rather than the Ukraine war itself, Etkind is interested in the conditions within Russia that have culminated so calamitously.

In what is more a pamphlet than a treatise, Etkind combines brevity and playfulness with a degree of erudition that other works covering the Russia–Ukraine conflict seldom manage, melding political economy, history, demography, social theory and social psychology. That range reflects Etkind’s eclectic polymathy: a native of St Petersburg (then Leningrad), he grew up in the Soviet Union, completed two degrees in psychology at Leningrad State University before earning a PhD in Slavonic cultural history in Helsinki, and has variously taught and researched — in faculties of sociology, political science, languages, history and international relations — in St Petersburg, New York, Cambridge, Florence and Vienna.

This smorgasbord of disciplines is reflected in his previous books: an analysis of Russia’s practice of imperialism and internal colonisation; a history of psychoanalysis in Russia; memory studies of the Soviet gulag and the second world war; and Nature’s Evil: A Cultural History of Natural Resources. The latter, which foreshadows a central theme of Russia Against Modernity, argues that the drive to accumulate resources has long had a corrosive effect on societies, and on the planet.

Etkind’s big-picture approach means this is not a book to read for a detailed narrative or analysis of the events that led up to Russia’s full-scale invasion of 2022. Nor will you find much discussion of Vladimir Putin, Joe Biden, NATO, Russia–Ukraine relations or Ukrainian history, or of the course of the war itself.

Most explanations of the Ukraine war tend to give primacy to either external or internal factors. The “externalists,” for want of a better word, include those who claim the war is a natural outcome of unwise/reckless NATO expansion. Going further, some even buy the Kremlin line — despite all evidence to the contrary — that the West’s fundamental, if unstated, goal is to weaken or destroy Russia.

At the other end of the externalist spectrum are those, including many Ukrainians and East Europeans, who believe an inherent imperialism is demonstrated by Russia’s aggression towards former territories. Some attribute this to the size of the country, its innate political culture, the “Russian psyche” or, in its crudest renderings, a kind of Russian DNA.

“Internalists” emphasise the domestic drivers of the war — notably an authoritarian state’s need to legitimise itself through nationalist and revanchist propaganda. In this view, the Ukraine war and other militaristic posturing or adventures are cynically deployed to further the interests of the elite. For some, Ukraine presented a threat to the Kremlin because it offered a democratic alternative. A handful on the left claim that the war’s roots lie in the ambitions of Russian oligarchs vying to capture Ukraine’s valuable natural and other resources.

Some analysts, of course, combine or reconcile internal and external elements in explaining the war, but Etkind is rare in drawing together multiple threads and focusing on general trends. It isn’t always clear whether he wants us to take the picture he presents as Constable-like realism, an Impressionist canvas or even a satirical cartoon. In parts, the book feels like a Dali-style exploration of deeper, unconscious truths, leaving the reader feeling that Etkind is getting at something without being clear quite what.

Etkind’s main idea is that the Russian state and society is an exemplar of “paleomodernity,” following in the footsteps of the Soviet Union in championing “grand designs, unlimited social engineering, huge and bulky technology, total transformation of nature.” For Etkind, Putin’s war is not only a “special operation” against the Ukrainian people, their statehood and culture; it is also “a broader operation against the modern world of climate awareness, energy transition and digital labor.”

If paleomodernity — a conglomeration of steel, oil and gunpowder — reached its apotheosis in the twentieth century, then its twenty-first-century antithesis is “gaiamodernity,” a higher form of civilisation where small, sustainable, democratic and feminine are beautiful, and racial, sexual and intellectual diversity are cherished. Etkind seems to see this nightmarish scenario for Tucker Carlson or Sky After Dark’s pundits as both a utopia to be dreamed of and a kind of immanent social order, destined to emerge, echoing Hegel’s and Marx’s systems of thought.

Etkind’s key take is that the “oiligarchs” and bureaucrats running Russia saw this “advance of history” as an existential threat to its oil and gas exports, which make up a third of Russia’s GDP, two-thirds of its exports and half the state budget. The money was crucial to the stability of Russia’s currency, crucial for its military spending and crucial for maintaining the elite’s luxurious lifestyle. It was also the chief driver of corruption, inequality and declining social and demographic indicators. All of this fed popular disillusionment, growing authoritarianism and elite paranoia and the ideologies supporting aggression.

As an archetypal petrostate, Etkind argues, Russia is afflicted by the resource curse, whereby an economy as a whole underperforms because a single commodity is so dominant. Initially, in the 2000s, rising oil prices underpinned Putin’s success in restoring economic growth. The populace gained a welcome sense of stability after the economic and political turmoil of the “wild nineties,” leading many to accept the gradual erosion of civil liberties.

By the 2010s, however, not only were Russian incomes falling but so were a range of social and economic metrics. By 2021, life expectancy had fallen to 105th globally, per-capita health spending to 104th and education spending to 125th. Russia had the fourth-highest carbon emissions globally and among the highest rates of suicides, abortions, road deaths and industrial accidents.

Thanks largely to embezzlement, post-Soviet Russia witnessed the fastest rise in inequality ever recorded. Its income inequality was among the world’s highest and by 2021 it led all major countries in inequality of wealth: 58 per cent of national wealth belonging to the top 1 per cent, well above Brazil (49 per cent) and the United States (35 per cent). More than a fifth of Russia’s citizens, meanwhile, lived on less than US$10 a day, and the middle class had been hollowed out.

In excess of three trillion dollars had been stolen and squirrelled away abroad — more than the total financial assets legally owned by Russian households. “Economists from Harvard and Moscow alike believed that economic growth would be the source of all good in Russia, that accumulated wealth would trickle down to the poor, that the rising tide would lift all boats,” writes Etkind. “In fact, it lifted only the yachts of the rich. The boats of the poor leaked, and they drowned in the tide.”

The wealth gained from being the world’s biggest exporter of energy funded an enormous state machine, particularly a military, security and law-enforcement apparatus accounting for fully one-third of the budget. Russian military spending increased by a factor of seven between 2000 and 2020, compared with a factor of two in Germany and 2.5 in the United States. In the end, though, corruption has hobbled the Russian war effort in Ukraine and sanctions have stranded assets held abroad, including the mind-boggling superyachts of Putin, his top officials and Russia’s tycoons.

Etkind doesn’t really explain why the military–security sector became so bloated, beyond its being a very big trough for corrupt snouts. Most observers would point to Putin’s own reliance on and favouritism towards cronies from the sector — the so-called siloviki, or people of force — on top of his belief in restoring Russian greatness and the need for a strong repressive apparatus to quash dissent.

Etkind treats war as more or less a natural outcome of Russia’s political economy. The more a “parasitic state” relies on natural resources, the less it invests in human capital. The lower the human capital, the greater the state’s dependence on resource extraction. It accumulates gold, limits internal consumption, pursues domestic oppression and, sooner or later, launches a war of aggression. Yet this is only part of the picture, and doesn’t hold true for Saudi Arabia, Nigeria, Qatar or other petrostates.

Some of Etkind’s most interesting, albeit speculative, chapters deal with the interplay between Russia’s political economy, its demographic decline and issues like gender inequality and homophobia. The latter have become a common theme of state-sponsored propaganda: TV pundits talk about fighting a degenerate West where genders proliferate; patriarchs and priests equate the war on Ukraine with fighting those Satanic “gay parades.”

Partly because of very high divorce rates, children are raised by only one parent, usually the mother, in one in three Russian families. Etkind pushes the envelope when he posits the growth of “fatherlessness” as a cause of authoritarian tendencies, as some postwar German theorists did in the case of Nazi Germany. High rates of domestic violence — which was actually decriminalised in 2017 in a nod to patriarchal opinion — have been another symptom of social dysfunction.

Etkind also highlights “granny power” as another bulwark against modernity: the heightened role of babushki (grandmothers) in many three-generation households, he says, imbues children with backward-looking and authoritarian ideas and attitudes. The three-generation household, with overburdened mothers and absent fathers, is a product of the inadequate incomes, housing, childcare and pensions generated by the parasitic petrostate, as well as men’s much lower life expectancy (sixty-five years, compared with women’s seventy-seven).

Etkind points to other elements of Russia’s demographic catastrophe — world-leading abortion rates, high rates of emigration among the young and educated — as signs of lack of trust and faith in a future governed by a corrupt and authoritarian state. “The birth rate,” he writes, “was the ultimate manifestation of public opinion.” A lot of these demographic problems were also present in the Soviet years, serving as a kind of canary in the mine presaging the Soviet Union’s decline.

Perhaps more telling, and more of a blow to male egos among the Russian elite, is Etkind’s suggestion that the homophobia prevalent in officially sponsored propaganda stems from the practice of bullying (dedovshchina, or the grandfather rule), often involving rape, in the military. And these super-wealthy grandfathers in the Kremlin, who Etkind notes are a generation older than Zelensky’s leadership circle in Ukraine, are natural allies of the impoverished grandmothers of the Russian suburbs, sharing the inherent conservatism of the three-generation family.

Etkind coins the term “stopmodernism” to describe Russia’s “special operation” against gaiamodernity. The war in Ukraine is just one weapon in its arsenal, alongside climate denial, election interference and others. Decarbonisation represents a huge challenge to Russia’s interests, and although Putin’s regime has played along at times with moves towards curbing emissions, it has also played a spoiler role. The biggest “gaiamodern” threat to the wealth of Russia’s elite have been the moves towards zero emissions by the European Union, its chief market for gas and oil, including the Transborder Carbon Tax announced in 2021.

Etkind also suggests that the 2009 Climategate hacks of emails, which purported to show climate change to be a conspiracy among scientists, was of a piece with Russia’s more recent hacking and online-disinformation efforts (including via Prigozhin’s infamous troll factories) to support right-wing politicians in the United States and Europe.

Etkind’s brushwork becomes a bit Dali-like in drawing lines between the petrostate’s political economy and motivations for the war, yet he makes some plausible points. He argues that rampant inequality led the elite to create fables to explain its privileged position and place blame elsewhere. He says that the kind of mystical nationalism encountered more and more frequently among the elite, including Putin, is a reworking of the idea of a chosen people to explain the fateful chance that endows some countries with an abundance of natural wealth.

The idea that Russia has a special, even divine, historical role is far from new — it featured in tsarist and Soviet times — but Etkind would no doubt argue that current conditions have given it greater appeal and currency.

For Etkind, conspiracy theories are a key part of the myth-making. He seems convinced they are a psychopathology and not just the cynical outpourings of a well-funded propaganda machine. Whatever its cause, the propaganda and media machine have become increasingly anti-American, Eurosceptic and homophobic, with “stopmodernism” encrypted into news channels, reality shows, sporting events and beauty contests. The very same people you might meet on a weekend in a posh Mediterranean hotel spend their working hours cursing “gay Europe” in Moscow TV studios.

Etkind paints Putin’s speech justifying the February 2022 invasion not just as an apotheosis of myth-making and conspiracy peddling, but also as a deadly rationale for genocide. For Putin, he writes,

Russians and Ukrainians are essentially the same, but some Ukrainians are Nazis and therefore different. The Americans had turned [Russia’s] Ukrainian friends into Nazis, the opposite of the Russians, who defeated Nazism and disliked the Americans… Putin was effectively declaring war against the US and its allies, not against Ukraine. Ukraine was not even a proxy: it did not exist, it was a terra nullius.

Ultimately, however, despite all these systemic factors, Etkind comes close to surrendering to a different kind of analysis by putting the onus on the personal: namely, Putin got bored and started a war. “A wiser tyrant would have deferred his inevitable end for another few years, even a decade. Impatient and bored, Putin was the unexpected nemesis of Putinism.”

A richer canvas might also have coloured in links between the authoritarian and corrupt Putinist system and his hubristic miscalculations about Ukrainian strength and resolve, Western unity and Russian military strength. This broader account might also help explain why a petrostate that in 2021 sent three-quarters of its gas exports and two-thirds of its oil exports to the European Union decided to risk all with the invasion.

Russia Against Modernity ends with a picture of the future: Russia will inevitably lose the war and begin a process of defederation. Its constituent national minorities, indigenous peoples and diverse regions will at last — after a long but hopefully not bloody transition period — gain real autonomy and democracy and move towards a gaiamodern world, leaving behind the petrostate that has exploited them. One can’t help feeling that this is more utopian dream than sober analysis, however much we might hope elements of it come true.

Sceptics may ask whether Russia is really so different from some or many developed capitalist societies in terms of the evils and dysfunctions Etkind outlines. I suspect he would say that they/we all cling to elements of paleomodernity to differing degrees, exemplified in different political and social forces competing with the gaiamodern. He would add that, as a petrostate, Russia is a more extreme and different kind of polity in terms of its interest in thwarting gaiamodernity.

Russia Against Modernity is a useful corrective for some on the left (and far right) who are instinctively suspicious of American actions and see merit in claims that Ukraine is a “proxy war” by NATO against Russia. Systemic factors in Russia are more than enough to explain the war, without having to disentangle the history of NATO enlargement or the contribution of Western blundering in Iraq, Libya and Afghanistan. As I have argued elsewhere, while we can debate the wisdom or morality of these actions, none represented a serious threat to Russia. And Etkind is right to see Ukraine’s treatment of Russian speakers and other internal issues as more of a “fetish” among the Russian elite, as he puts it, rather than a serious factor.

Etkind’s work is also valuable because he is a Russian with an intimate understanding of the country and broad international experience who brings to bear serious intellectual firepower. In one section, “The Unbearable Lightness of Western Pundits,” he beautifully skewers so-called experts like Niall Ferguson and Adam Tooze who pointed to Ukrainian weaknesses and the inevitability of Russian victory just before the 2022 invasion. Another target is international relations guru John Mearsheimer, who more or less justified the invasion by saying that, if Ukraine joined NATO, Russia would suffer “existentially.” Russia now has both Sweden and Finland rushing to join NATO, while Ukraine, of course, had no near-term prospect of membership.

One thing common to these generalist historians, economists and foreign policy wonks is a lack of real expertise in Russian or Ukrainian history and politics. That’s why it is vital to listen to independent Russian (and Ukrainian!) voices on the war, as well as real Western specialists. Only a few of the latter make excuses for Putin’s regime and many would see merit in the broad thrust of Etkind’s argument.

Likewise, the Russian democratic opposition almost unanimously sees the war as generated by systemic internal problems. They would agree with Aleksei Navalny, whom Etkind lauds as the champion of exposing corruption, in blaming the war on Russia’s “endless cycle of imperial authoritarianism.” •

Russia Against Modernity
By Alexander Etkind | Polity Press | $30.95 | 176 pages

The post Russia’s war with the future appeared first on Inside Story.

A closer look reveals grounds for optimism in relation to coal, the most polluting of all carbon-based fuels. With the important exception of China, construction of coal-fired power stations has virtually ceased. Coal-fired power is already in decline in most developed countries, notably including the United States. The brief bounce in Europe following the closing of Russian gas pipelines has already ended.

According to the International Energy Agency, solar PV and wind are meeting nearly all of the growth in global electricity demand. Solar cell production is expected to increase, as is the installation of wind power following Europe’s removal of a variety of planning restrictions.

If new solar PV and wind supply more electricity at zero marginal cost than is needed to meet increased demand, they will inevitably displace coal and gas generation. Existing plants must either run at lower capacity or else be scrapped. Since China is pushing ahead fast on solar PV, it is likely that many of the coal plants being constructed at the moment will become stranded assets.

All this suggests that global carbon dioxide emissions from electricity generation will peak soon. But electricity accounts for only around a third of all carbon dioxide emissions. Transport’s energy transition is much less advanced, and that’s particularly the case with cars. The vast majority of cars on the road rely on internal combustion engines.

Demand for road travel and for motor vehicles certainly dropped sharply during the lockdown phase of the pandemic. As with most other things, though, demand bounced back as restrictions were lifted.

But this bounce obscured the fact that sales of internal-combustion vehicles had peaked even before the pandemic. A study by Bloomberg found that sales of petrol- and diesel-fuelled cars (including sales of traditional hybrids like the Toyota Prius) peaked at eighty-six million units in 2017, a year in which only one million battery-electric and plug-in hybrid vehicles were sold.

In 2022, by contrast, sales of internal-combustion vehicles fell to sixty-nine million but plug-in hybrids and battery electrics rose about ten million. With the cost of batteries falling steadily and more models coming on to the market, these trends are unlikely to reverse. Importantly, and unlike coal-fired power, China has been a leader in the transition to electric vehicles, which have already captured more than a quarter of the market there.

Declining sales of internal-combustion vehicles don’t translate immediately into a smaller number on the road. This will only happen when the number of new cars falls below the number being scrapped. Most of the cars being retired now were built ten to twenty years ago, when sales were still rising. It’s for this reason that Bloomberg estimates the number of internal-combustion vehicles on the road to remain roughly constant for the next few years before starting to decline in earnest from 2026 onwards.

Defenders of the internal-combustion engine point to a variety of obstacles to a rapid transition. The most notable are the higher initial cost of electric vehicles and the limited availability of charging stations. Neither of these objections stand up to scrutiny.

The lifetime cost of an electric vehicle, taking account of lower maintenance and running costs, is already below that of comparable internal-combustion vehicles. And, with battery prices falling, the initial cost differential is also declining.

As for charging, the technology is far less complex than the process of fuelling an internal-combustion vehicle. Electric vehicles don’t require the elaborate chain from oil wells to refineries to specially constructed service stations.

The simplest solution, for most users, will be to charge overnight at home or during the day at a parking lot or parking garage. Plug-in hybrids can be charged overnight with an ordinary trickle charger. A normal home EV charging station, sufficient to charge a fully electric vehicle overnight, will cost between $1000 and $3000.

Rapid charging at service stations is also technologically simple, even if somewhat more expensive. The availability of such stations will readily increase in line with the growth in the electric vehicle fleet.

Against this background, US president Joe Biden’s new target — electric vehicles making up 50 per cent of sales by 2030 — seems eminently feasible. A question for the longer term is how we can get post-2030 internal-combustion vehicles off the road in time to achieve net zero emissions by 2050. Given that a large proportion of vehicles run for twenty years or more, this won’t happen automatically.

One possibility is a version of the “cash for clunkers” scheme introduced in the United States and briefly proposed by the Gillard government in Australia. The US scheme involved subsidising people who traded in old gas-guzzlers and bought more fuel-efficient alternatives. The inadequately funded scheme — undermined by a complex and arbitrary set of rules about which cars could be traded in, which replacements were eligible and how the money was disbursed — was wound up fairly quickly.

A similar scheme to get internal-combustion vehicles off the road need not face the same difficulties. Once the sale of new petrol- and diesel-driven vehicles ended, complex trade-in requirements would be unnecessary; instead, a simple cash payment would be made for old vehicles. The scheme could be self-financing, with increased registration charges or petrol taxes also raising the cost of continuing to operate an internal-combustion vehicle.

As with the energy transition in general, the technological problems of a shift to electric vehicles have mostly been solved. The remaining questions are those of policy design and political will.

Unfortunately, that’s exactly what still seems to be lacking in Australia. The Labor government’s electric vehicle strategy, announced this week, included a series of small-scale initiatives but no target dates or specific goals. It committed the government to developing a fuel-efficiency target that would presumably increase demand for electric vehicles, but gave no specifics, despite already having a plan on its books prepared by the Climate Change Authority under the Turnbull government.

On this, as on many other aspects of climate policy, Australia remains an international laggard. Neither of our major political parties seems much interested in changing that.

Fortunately, the rest of the world is acting. Internal-combustion vehicles are being abandoned by most major carmakers. If government action doesn’t drive the shift to electrics, technological obsolescence will do the job sooner or later. •

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But there are some bright spots. In particular, there’s a good chance that 2023 will be the year coal use finally begins a sustained decline, and therefore the year carbon dioxide emissions from electricity generation start to fall. And the transition, once it begins in earnest, will accelerate rapidly.

This is by no means a sure thing. The International Energy Agency predicts that the current equilibrium, in which nearly all new electricity demand will be met by solar PV and wind, will be sustained for several years to come. That would leave coal and gas use almost unchanged. But the IEA has a long track record of underestimating solar and wind, and there are plenty of reasons to think that this has happened again

Total electricity demand is currently a bit over 25,000 terawatt hours a year, growing at an annual rate of around 3 per cent. So, to meet the growing demand, we need to generate an additional 750 terawatt hours from solar and wind. (Other carbon-free sources, such as hydro and nuclear, have been essentially static.)

Assuming solar PV generates at full power for 2000 hours per year, each gigawatt of solar capacity generates an annual two terawatt hours of electricity. Meeting additional demand with solar alone therefore requires adding 375 gigawatts of solar PV per year, with any shortfall made up by wind.

The good news is that is already happening. BloombergNEF estimates 315 gigawatts of solar will be installed in 2023, up from 268 gigawatts in 2022. Additions of wind power have been around one hundred gigawatts a year recently, which amounts to between 250 and 300 terawatt hours per year.

Assuming the 2022 installations are already connected to global grids, we should see a reduction in carbon-based electricity generation this year, followed by steadily larger reductions. That will be true even if electricity begins to substitute for oil and gas in transport, heating, cooking and so on.

Underlying this shift is the steadily decreasing cost of wind and, even more, solar power. This trend was interrupted by the supply shocks of the pandemic and Putin’s war, which led to a big increase in the price of polysilicon as well as coal and gas. But while coal and gas prices remain high, polysilicon, though still volatile, has dropped back to more normal levels.

More importantly, new investment in solar PV is raising production capacity even further. Polysilicon output is heading for 500 gigawatts by the end of this year — which will translate fairly quickly into production and installation of solar cells — and as much as 700 gigawatts by 2025. Installations on that scale would imply a rapid shutdown of existing coal-fired and gas-fired generation.

Is this feasible? In terms of simple economics, the answer is clearly yes. Solar PV and wind have been cheaper than new coal and gas for some time. In many places they are already cheaper than existing coal and gas. And, as the example of South Australia shows, the problems of intermittent supply can be resolved with a combination of battery storage, interconnection and a modest amount of gas-fired power, in a system which now relies on wind and solar for as much as 80 per cent of its power.

The task is even simpler where pumped hydropower is available for storage, or where existing nuclear power plants can supply any remaining demand for twenty-four-hour power. (New nuclear is hopelessly uneconomic.)

And technological progress continues apace. Commercially available solar cells now routinely exceed 20 per cent efficiency; new multi-junction technologies are approaching 50 per cent.

Concerns that shortages of “critical minerals” like lithium and cobalt will constrain the process appear misplaced. Some sources of these minerals — lithium brines and cobalt mines in Africa, for instance — are indeed problematic, as is China’s dominant position as a supplier of refined ores and batteries. But there are always alternative sources.

Australia has huge resources of lithium, derived from ordinary hard-rock mining. We are now developing a refining capacity, and could easily manufacture batteries for domestic use and export. Similarly, the price of cobalt has plunged recently, partly because of competition from lithium and partly because new supplies are available as a by-product of Indonesian nickel plants.

As the urgency of ending our reliance on coal, gas and oil has become more evident, supportive policies have reduced costs. The result is that solar panels are expected to become cheaper in 2023 and beyond. In Europe, the need to respond to the cut-off of Russian gas and oil has led to the removal of some of the NIMBY obstacles to wind farms and transmission lines that have delayed the transition.

The big exception to all of this is China, where coal-fired power has resurged. Up to one hundred new coal plants have been granted permits in the last year. This doesn’t make economic or geopolitical sense for China. It does, however, make plenty of sense for regional governments desperate to keep up a flow of large projects, both to maintain employment in coal-related industries and for the corruption opportunities such projects inevitably generate. It seems likely that most of these plants, if they are completed at all, will lose money and either close early or force the early closure of competing coal-fired plants.

In our current energy system, electricity is only part of the story, accounting for around a third of energy-related emissions. But electrification, based on carbon-free sources, is the only realistic path to decarbonising transport and producing the hydrogen needed to replace coal and methane gas in industrial uses. If this is to be achieved in reasonable time, even 700 gigawatts of new solar every year won’t be enough. Production will have to shift to terawatt scale.

There’s still no sign of the urgency needed here, certainly not in Australia. But in electricity at least, progress has been faster than seemed possible ten or even five years ago. •

The post Have we reached electricity’s carbon-free tipping point? appeared first on Inside Story.

The vessel’s fifteen-strong crew had completed the trans-Atlantic round trip in six months, of which I had spent five months aboard. Throughout its virus-disrupted odyssey via the Canaries, the Caribbean, Mexico and the Azores, the Avontuur had made her way almost entirely under sail.

A week after we arrived in Hamburg the International Maritime Organization released its fourth report on the climate impact of ships. This long, highly technical document looks at how emissions from international shipping are likely to evolve over the next few decades. Despite actions already taken to reduce greenhouse emissions, the report concludes, rather frighteningly, that emissions in 2050 will be between 90 and 130 per cent of what they were in 2008. That’s a 10 per cent drop at best, a 30 per cent increase at worst.

The IMO, the United Nations agency that regulates shipping, was a late starter in the carbon-reduction stakes. Only in 2018 did it set its first-ever target to reduce the billion tonnes of emissions produced annually by shipping. That’s two decades after the Kyoto Protocol mandated the IMO to regulate the industry. Much like large ships, the industry takes a long time — far too long — to manoeuvre.

Well before the IMO accepted that ships, too, would have to ditch fossil fuels and find other means of propulsion, several people thought they’d already found the solution: sails. Surely, they thought, if colonialism, the slave trade and empires could be built with sailing ships, the technology could serve global trade today.

Captain Paul Wahlen, a previous owner of the Avontuur, kept wind-propelled cargo transport alive during the last decades of the twentieth century, well after nearly everyone — including Melbourne-born sailor Alan Villiers — had given up on it. In the late 1990s, businesswoman Di Gilpin developed a modern ship that would incorporate the century of technological progress since the heyday of sail. In 2004, sailor Brad Ives took on the challenge of providing a reliable (although not necessarily punctual) shipping route between Hawai’i, Kiribati and the Marshall Islands.

The quest continued. In 2007, the Dutch shipping company Fairtransport’s Tres Hombres, a 1943 brigantine, began carting up to fifty tonnes of cargo across the Atlantic and the North Sea in its hold. Since 2015, the Avontuur has operated as a sailing cargo ship again — this time under the ownership of Cornelius Bockermann, who runs the German shipping company Timbercoast.

Can sailing vessels like the Avontuur, the Tres Hombres and the Kwai really decarbonise the shipping industry? The short answer is no.

These wind-propelled cargo vessels are so small that the potential emissions savings for the planet are negligible. If the entire shipping industry is to make up the difference between its projected emissions (90–130 per cent of 2008 levels) and its current target (50 per cent of 2008 levels) by 2050, far more than a handful of small sailing cargo ships will be needed. Never mind that a 50 per cent reduction won’t keep global warming below 1.5 degrees Celsius, which the IPCC thinks vital for human life on earth.

But does that mean the work of the “sail cargo movement” is futile? I think not.

Sailing vessels like the Avontuur may not be capable of carrying eleven billion tonnes of cargo a year emission-free. But they do have an important role: they highlight the need to rethink how we ship things and how much of those things we need to consume.

Timbercoast, the German shipping company that runs the Avontuur, aims to accomplish “mission zero” — to entirely eliminate the pollution it causes — in five steps: raise awareness about the environmental destruction caused by the shipping industry; model a clean shipping future with Avontuur; sell premium Avontuur products to support the project; establish a demand for products shipped by sail; and build a modern sail cargo fleet.

Their message echoes what Patagonia, an outdoor clothing retailer, has long advocated: buy less, because excessive consumption harms the environment. This isn’t entirely selfless, of course: Patagonia and “sail cargo” companies like Timbercoast want to increase their own sales by providing an ethical alternative that appeals to consumers who buy in to their anti-consumerist pleas.

On the Pacific coast of Costa Rica, meanwhile, Sail Cargo Inc. is building the Ceiba, a new wooden ship. This vessel is designed specifically to operate as a wind-propelled cargo ship. The company “envisions a future where the demands of a global supply chain are dictated by conscious and responsible consumerism, employing a web of carbon-neutral delivery services.”

The French company Grain de Sail operates one ship by that name between Brittany, New York and the Dominican Republic. They carry French wine to New York, humanitarian goods to the Caribbean, and cacao mass back to France. A second ship with a far greater cargo capacity is now under construction.

To date, the most ambitious wind-propelled cargo project based on a traditional design is EcoClipper. The company is raising funds to build the first EcoClipper 500, a steel replica of the Dutch clipper ship Noach, originally built in 1857. The true ambition of EcoClipper lies in the scale at which the company aims to operate. It plans a fleet of clippers on Atlantic, Pacific and global routes, following the trade winds of yesteryear.

These “sail cargo” initiatives do more than proposing an alternative propulsion technology. They engage in hands-on climate activism. By expressing their ethics in a practical manner, these companies aim to show that downsizing and slowing down is not only an abstract ideal advocated for by “degrowth” environmentalists but also a practical possibility.

I joined the Avontuur in 2020 to find out what exactly that world could look like. My plan was to spend three weeks aboard, crossing the Atlantic Ocean from Tenerife to Guadeloupe. Afterwards, I would visit the Astillero Verde, the “green shipyard” where the Ceiba is under construction, in Costa Rica. But that was in 2020, so none of my travels worked out as planned.

These small-scale traditionally rigged sailing ships are not the only ones turning to wind propulsion. More ambitious still, but of a very different ilk, are the modern sailing ships currently under construction or design. The Canopée will transport parts for the Ariane 6 launcher from France to French Guyana. The Oceanbird will transport cars for Wallenius. Neoline will operate between France and North America, while Veer and Windcoop vie to operate the first wind-propelled containerships.

Di Gilpin is now working on Smart Green Shipping, a new venture that combines hardware (sails that shipowners install on existing vessels) and software (to help crews find the best routes to harness wind). The Kwai, meanwhile, is now owned and operated by the Marshallese government, which is committed to reducing domestic shipping emissions by 40 per cent between 2010 and 2030.

Even so, emissions keep increasing year after year. The Avontuur‘s mission remains as important as ever: the shipping industry urgently needs to stop using fossil fuels. In July 2023, three years after I arrived in Hamburg, the IMO is expected to decide on a “revised strategy.” We can only hope this will bring their plans in line with a 1.5-degree future; if we can’t swiftly decarbonise shipping, we can’t solve the climate crisis.

Now I’m about to travel to the Marshall Islands for more fieldwork. This Pacific nation has the third-largest shipping sector in the world, but also pushes for the highest levels of ambition at the IMO. It’s at risk of losing many of its islands to rising seas, but it can’t afford more expensive shipping. That’s why the islanders are pushing for an energy transition that isn’t only environmentally ambitious, but is also equitable. So far, that’s proving easier said than done.

Later this year, I’m joining the Tecla to sail the Northwest Passage from Dutch Harbor in Alaska to Ilulissat in Greenland. We will be exploring a faultline in climate action: melting Arctic ice means the region is fast becoming a shipping shortcut between Asia and the Atlantic, saving on fuel, cargo vessels’ black carbon emissions speed up the ice melt and their underwater noise disturbs marine life. The region is already warming at a faster pace than almost anywhere on the planet.

Meanwhile, the Avontuur keeps sailing laps around the Atlantic. While it can’t compete on scale or speed, maybe it and the other “sail cargo” companies have a point. Slowing down and trading less might just be what the planet needs. •

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Collaery, a former ACT attorney-general, was charged with having breached secrecy laws when he revealed that the Australian Secret Intelligence Service had bugged Timor-Leste government offices in 2004. At the time, Australia was negotiating a maritime boundary straddling a rich natural gas field in the Timor Sea. Also charged was one of Collaery’s clients, a former ASIS officer known as Witness K.

When the case eventually went to trial, Justice David Mossop accepted the Coalition government’s argument that much of the evidence needed to be kept from the public, and some of it even from Collaery himself, to protect national security. But a three-person bench of the ACT Court of Appeal, including the territory’s chief justice, overturned Mossop’s ruling.

Before the court could publish its reasons, Dreyfus’s predecessor, Michaelia Cash, directed the government’s most senior legal officers to seek to have the ruling overturned by the High Court, with a stay on the decision in the meantime. Otherwise, Cash’s lawyers argued, information “likely to prejudice national security” would be made public. Open justice was of “undoubted importance,” they said, but national security considerations had to be given “the greatest weight.”

That argument was received sceptically by chief justice Susan Kiefel and her High Court colleagues. Justice James Edelman asked solicitor-general Stephen Donaghue if the ACT chief justice’s error was merely that she “did not make the order that you sought.” Offered a choice between having the application thrown out or having the stay left in place, Donaghue opted for the latter.

Dreyfus’s termination of the prosecution left the status of the ACT Court of Appeal’s ruling unresolved. Surprisingly, he then asked the court to reconsider its decision to allow the contentious evidence to be made public. The ACT’s new chief justice, Lucy McCallum, heard the application in September, and her decision is now awaited.

The Human Rights Law Centre’s Kieran Pender, who has followed the Collaery case, says it is “very unusual” for the government to try to “relitigate” the Court of Appeal judgement. “Given the question of redactions has already been determined once by the Court of Appeal, and the government has withdrawn the High Court appeal, to attempt a second go at the Court of Appeal is remarkable.”

Instead, says Pender, “the attorney-general should get on with dropping the outstanding prosecutions of whistleblowers David McBride and Richard Boyle and reforming Australia’s lacklustre whistleblowing laws. Whistleblowers should be protected, not prosecuted in secret trials.”

Collaery believes the Albanese government is “encased” by the same circle of security advisers, in and out of the public service, who orchestrated the moves against Witness K and himself. But he can see why Dreyfus might have accepted advice against publication from ASIS director-general Paul Symon, a retired army general and former head of defence intelligence.

“When you’ve got an ex-warrior, albeit with no actual experience in the trade — when you’ve got a man of that eminence and decency, which he has, advising you that publishing the Collaery case would prejudice national security, you accept that advice,” Collaery tells me. “But it’s tripe. It was khaki dressage.”

Beyond the court actions themselves, many influential figures are incensed that responsibility for the murky chain of events stretching back to 2004 could remain unresolved.

Among them is the president of the International Commission of Jurists in Australia, John Dowd, a retired NSW Supreme Court judge and former state Liberal leader. In a letter to prime minister Anthony Albanese on 17 October he called for a royal commission looking at whether ASIS’s bugging operation broke Australian law, whether the secret service was deployed for private commercial gain, whether the national security claims for secrecy are valid, and whether Collaery and Witness K should be compensated.

Not surprisingly, Collaery also wants a royal commission. It should encompass not only the ASIS operation and its propriety, he argues, but also issues of “utter, utter treachery” he says he isn’t at liberty to discuss. Before he was charged, Collaery had security clearance to handle a range of sensitive legal issues involving intelligence agencies and personnel — the very reason why Witness K was originally referred to him for advice in relation to his misgivings about having led the Dili operation.

Collaery particularly wants a fairer outcome for Witness K, who was given a three-month suspended sentence in June last year for conspiring to reveal classified information. He contrasts the treatment he and K received with the kid-glove handling of senior ASIO and other Canberra officials who were exposed as having been compromised by the KGB when the Soviet intelligence agency’s chief archivist, Vasili Mitrokhin, handed over a vast trove of secret records following his defection to Britain via Estonia in 1992.

“We never compromised any national security,” says Collaery, “but those who did and were exposed after Vasili Mitrokhin took the stuff to Estonia were just left alone. Not even dishonourably discharged. And allowed to keep their medals and decorations and all the rest.”

Moreover, Collaery adds, “K was never a whistleblower, despite the media constantly calling him that. If anything he was leading the charge as a mutineer. And for good reason, and he wasn’t alone. The reason why they brought it down on us was to stop L, M, N, O, P, Q [from going public]. So the story’s not told.”

On the face of it, a royal commission should appeal to the new government. It could sheet home the duplicitous Timor-Leste dealings to Coalition leaders at the time of the bugging, notably prime minister John Howard and foreign minister Alexander Downer, and perhaps also other members of the cabinet’s national security committee (which would have included treasurer Peter Costello, attorney-general Philip Ruddock, defence minister Robert Hill and immigration minister Amanda Vanstone).

Yet the idea appears not to have seized Albanese — if the ICJ letter ever got to him. As his department’s acting first assistant secretary for national security, Philip Kimpton, wrote to Dowd, “We are not aware of an intention by government to pursue such a course of action at this time.”

A Labor figure knowledgeable about foreign policy issues explained why the government might be wary about looking into the 2004 spying incident. “Did it continue?” the figure asks, clearly mindful that similar intelligence-gathering activity might well have been going on under the Rudd–Gillard government.

Canberra’s fixation on securing the big undersea gas deposit now known as Greater Sunrise goes back to its first discovery in the late 1960s. Diplomacy, legal argument and espionage were harnessed to negotiate maritime boundaries with Indonesia, Portugal, Indonesia again, and Timor-Leste with the aim of bringing as much of the gas field as possible into Australia’s economic zone. This push by successive Coalition and Labor governments extended over decades.

The Witness K revelations started emerging under Labor, which continued to uphold the boundary negotiated by Downer (with help from the ASIS operation) between 2004 and 2006. It was not until 2018 that Timor-Leste, having had Downer’s 2006 border agreement nullified because it wasn’t negotiated in good faith, convinced an arbitration court at The Hague to endorse a new agreement that moved the border to the middle of the Timor Sea and gave Timor-Leste 80 to 90 per cent of the revenue from Greater Sunrise.

If a royal commission isn’t on the horizon, Albanese and Dreyfus may have opened another avenue for inquiry by creating the new National Anti-Corruption Commission. Susan Connelly, the Josephite sister who fought hard for a median-line boundary and strongly backed Collaery and Witness K, is one who has signalled a reference to the NACC.

This would put targets on the backs of Downer, who later accepted a consultancy from the leader of the Greater Sunrise consortium, Woodside Petroleum, and the late Ashton Calvert, who as secretary of Foreign Affairs supervised ASIS at the time of the bugging and on retirement became a director of Woodside. But the NACC legislation has an escape clause that allows the attorney-general to declare an investigation to be against the national interest.

Foreign minister Penny Wong seems to hope that focusing on practicalities will shift attention away from this rancorous past. In October she appointed former Victorian Labor premier Steve Bracks to broker agreement on developing Greater Sunrise. Bracks’s extensive post-political advocacy for Timor-Leste includes work on the maritime boundary.

Getting the gas field into production has become a matter of urgency for the government in Dili, which has been dipping into its Petroleum Fund — its sovereign wealth fund derived from oil and gas revenues — at an unsustainable rate. The last revenue from existing oil fields will flow into the fund at the end of this year.

If the current rate of withdrawal is maintained, the fund will run down to zero over the next decade. By 2034, according to the country’s finance ministry, Timor-Leste faces “a fiscal cliff” that will necessitate a “radical cut in all spending.” Using similar language, the World Bank has referred to an “inescapable macro-fiscal cliff in the next decade.”

“Timor-Leste is a petro state without much petrol,” says the respected Dili-based think tank La’o Hamutuk in a recent report. The government’s policies “continue to be based on blind faith that, because oil money has carried the country thus far, it will continue to do so indefinitely.”

Politicians in Dili follow former prime minister Xanana Gusmão in pushing for Greater Sunrise to be connected by pipeline to Gusmão’s Tasi Mane scheme. Forecast to cost US$15–20 billion, this complex on the island’s south coast would include an oil refinery, LNG plant, offshore gas and onshore oil pipelines, and a supply base for offshore petroleum projects, along with transport infrastructure and new towns.

Woodside Petroleum and many oil industry experts say the proposed pipeline is too risky. It will need to traverse the 3000-metre-deep, steep-sided, unstable Timor Trench between the gas field and the coast. Other analysts say its revenue and employment benefits have been wildly exaggerated by Tasi Mane’s proponents. Dollar for dollar, investing in coffee production could create six times as many jobs and six times as much GDP growth per dollar as investing in Tasi Mane, says one recent study.

The alternatives to the Greater Sunrise pipeline would be a floating LNG plant, or a connection to existing pipelines in the Timor Sea to transport the gas to Darwin for processing. Timor-Leste would still get most of the revenue but would need to stump up far less capital and would avoid the risk of pipeline failure. Australia might be seen to be getting an undue share of the benefits, though, despite its perfidy.

In September newly elected president José Ramos-Horta tried to pressure Canberra into overruling Woodside’s objections by threatening to bring in China to take over the project. Although China’s banks are reported to have already turned the project down as unfeasible, a Chinese state oil firm is said to maintain a permanent desk inside the office of Timor-Leste’s tiny state oil firm, TimorGAP. Xi Jinping, the Chinese leader, has not always put economics ahead of political-strategic factors.

TimorGAP, meanwhile, has released selected passages from a report by British oil industry consultants ERCE claiming that the running costs of the Tasi Mane and Darwin processing options are much the same. TimorGAP is still refusing to release the full 130-page ERCE report, says La’o Hamutuk, despite Ramos-Horta saying, on his Canberra visit, that this would be helpful.

Adelaide consultancy EnergyQuest says it would be far more productive for all parties to be talking instead about plate tectonics. The Indo-Australian plate is moving north at seven centimetres a year, meaning it would move 1.5 metres over the life of the project. “Building a pipeline [to Timor-Leste] subjected to the full force of one of the most rapid tectonic plate movements in the world is an idea that should never have got off the ground,” says EnergyQuest.

But the country’s successful independence struggle left a complex legacy. “In 1999, Timor-Leste ousted the Indonesian occupiers in defiance of ‘experts’ around the world who told them it would never happen,” wrote La’o Hamutuk’s Charles Scheiner in the recent report. “In 2018 they transcended ‘expert’ advice again, coercing Australia to agree to a fair maritime boundary.”

As a result, says Scheiner, “some Timorese leaders, especially veterans of the independence struggle, now believe they can accomplish anything, regardless of physical or economic realities.” That means Steve Bracks has his work cut out if he is seeking to pierce what some call a “mystical” belief in the pipeline — especially if, as seems likely, pipeline-proponent Xanana Gusmão returns as prime minister after next May’s election.

But Bracks may emerge as an envoy to Canberra rather than to Dili, persuading the Australian government to detach Woodside Petroleum from its lead position in the Greater Sunrise consortium, perhaps through a buyout, and let Timor-Leste take the running and the risks. Woodside has already written the value of its 33 per cent stake down to nothing and has plenty of other projects to keep busy with. Continuing to run Woodside’s case makes Australia look selfish and colonialist, say critics.

Bracks’s ability to persuade would be strengthened if Canberra showed any contrition over the spying and lack of good-faith negotiations — by holding a royal commission or other review, by apologising, and by rejoining the jurisdiction of the International Court of Justice on maritime boundaries, from which Downer withdrew Australia in 2002.

The current limbo is far from satisfactory, says Bernard Collaery. “All it does is leave Australia’s great moral issue in ambiguity.” •

The post Timor gaps appeared first on Inside Story.

After ten days of talks between officials end in deadlock, pairs of ministers (one from a developed country, the other from a developing one) are charged with seeking out compromises on the major issues. After two more days, still largely deadlocked, the ministers hand over to the host country’s COP president — this year, Egypt’s foreign minister Sameh Shoukry — to try to produce a compromise text. The president initially develops what are essentially shopping lists of options that define the differences between different countries’ positions but do little to resolve them.

By now it is Friday morning, and the conference is due to end at 6pm. The negotiations fall silent as the president takes further “soundings.” The exhibition halls and food stations are dismantled; anyone who isn’t a country delegate, UN staffer, journalist or NGO analyst leaves for home, their COP done. Six o’clock comes and goes. A new text is shown to the heads of delegation at 3am on Saturday morning, but there are no printed versions and phones are confiscated so they can’t take photos. The president again retreats to his cell, inviting individual ministers in for more hours of bilateral contemplation.

Finally, at 1pm on Saturday, a new compromise text is published. The major negotiating groups go into separate meetings to discuss how much they dislike it. The compromise is “unbalanced,” each of them says, leaning too far towards the other side. The groups take a long time to work through the various documents, not least because many countries are members of more than one group. (China, for example, is part of the “G77 and China,” which includes all the countries deemed “developing” when the UN Framework Convention on Climate Change was signed in 1992, but also part of a much more tightly knit and hardline “Like-Minded Group” with India, Saudi Arabia and Malaysia.)

Teams of NGO analysts pore over the documents, examining what has shifted and what has not, and issue briefings to grateful journalists on-site and geeky campaigners back home. As the concluding plenary is postponed multiple times amid further consultations, and the meeting climbs up the league table of “longest-ever COPs,” bets are taken on when it will end.

By Saturday evening most COPs have at last finished, with a compromise agreement no one likes but everyone is too exhausted to oppose. The process is masochistic because it’s the delegates themselves prolonging their own irritable sleeplessness. It’s sado- because the only other people left are sad individuals who still care. Your correspondent included.

COP27 seemed determined to inflict even more pain than normal. By Saturday midnight, leaks revealed that Saudi Arabia had introduced new text not just watering down but reversing the opposition to fossil fuels. Britain’s head of delegation, Alok Sharma (president of last year’s COP26 in Glasgow), was spitting, while the venerable US deputy head Sue Biniaz — John Kerry by this time confined to his hotel with Covid — was seen talking at length on two phones. Presumably one was to Kerry; was the other the White House?

It’s now 2am and journalists and NGO staffers are sprawled out on chairs asleep. The Egyptian presidency announces there will be a plenary between 3am and 6am. It actually starts at 4am. When it does, it seems that final texts have at last been agreed. Shoukry takes no chances. Post-last-minute amendments have been made at this stage in the past (in fact, last year). He names the key document. “Seeing no objections,” he says, not looking up to the hall in case he sees any, “it is so decided,” and bangs his gavel down. Further pauses ensue, more documents are approved, but at around 6am on Sunday morning the texts have been concluded.

Not that it’s actually finished at this point. A further three hours of speeches come from the floor, as countries and negotiating groups explain their grudging welcome for some aspects of the text and their deep disappointment at others. It’s not till past 9am, fourteen days after the conference opened and nearly forty hours after it was due to close, that we can say that another COP is over.

Was it worth it? In the end, just two significant decisions caused all the conflict. The first was “loss and damage,” UNFCC-speak for the economic and human costs faced by developing countries as a result of the greenhouse gas emissions of developed ones over the past two centuries.

Loss and damage was recognised as a concept in the Paris climate agreement, but with a huge caveat: the developed countries secured an explicit exemption from legal liability for the multibillion-dollar impact of a warming world.

For the same reason the developed countries have held out against any kind of financing mechanism for loss and damage, which would require both more aid money and the tacit acceptance of moral responsibility. For the last six years, as developing countries’ demands for a loss and damage “finance facility” surged ever more strongly, the developed countries held them off with a variety of designed-to-be-useless discussion forums.

But this year the dam broke. After John Kerry had spent the first ten days insisting that the United States could not and would not support a financing facility or a fund, with the European Union equally adamant, each produced a new draft on the final Friday accepting just that. It was surprisingly poor diplomacy on their part: if they actually were prepared to concede this (and most observers thought they would have to), they would have gained much more credit by doing so early in the conference.

Crucially, this would also have given them a much better chance of winning their primary condition of support, namely that China could no longer hide behind its historical “developing country” status and would have to contribute to the funding pool as well. By leaving it so late to concede the creation of a loss and damage fund, the United States and the European Union wasted the opportunity to put public pressure on China, and the final wording included merely a vague reference to “other sources” of financing beyond the developed nations.

Nor was any actual money promised for the fund. Before that happens, further consultation on what precisely the fund can be used for, which countries will be eligible, and how it will be governed will proceed for at least a year. Nevertheless, this was a historic moment for climate-vulnerable countries, whose delegates were exhausted but jubilant at the end.

Ultimately, though, the more contentious final issue was fossil fuels. Last year, for the first time, the COP addressed not just greenhouse gas emissions in the abstract, but also their direct causes in the combustion of fossil fuels. A scientifically self-evident but nevertheless unprecedented bit of text was agreed noting that holding warming to the 1.5°C temperature limit would require the “phasing down” of coal use. (China and India baulked at the last at the aim of “phasing out.”)

In Sharm el-Sheikh the vulnerable countries’ and NGOs’ goal was an agreement that such phasing down should apply to all fossil fuels (that is, also oil and gas) and not just coal. Their cause was surprisingly taken up by India, keen to deflect attention from its still-abundant coal use.

But Saudi Arabia and next year’s COP hosts, the United Arab Emirates, were not having that. No doubt with a little gentle pressure on their import-dependent neighbour Egypt, they instead redefined “clean energy” to include “low-emission” fuels as well as renewables. By “low emission” they mean gas, a much lower-emitting fuel than oil, but not in the slightest a near-zero one in the manner of hydro, wind, solar, tidal, geothermal or nuclear. To the anger of many, the Gulf states’ language made it into the final agreed text.

The significance of these textual niceties is often overplayed. Nothing in general COP decision text is legally binding, and no petro-state will change its behaviour as a result of it. Last year’s bitter endgame argument over whether coal should be “phased out” or merely “phased down” was a case in point: without a date for phasing out, the two phrases in practice mean the same.

Yet the Sharm el-Sheikh language approving “low-emission fuels” as part of emissions reduction plans is a serious blow to the climate action cause. It will be used to justify the expansion of gas production and consumption everywhere this is government policy, giving the apparent seal of approval of the UN climate regime. The climate-vulnerable countries and NGOs were aghast; it was this issue that took the talks into the small hours on Sunday morning.

It won’t only be the Gulf states, however, who are pleased. One of the most insistent arguments running through COP27 pitched a range of African countries against the European Union and NGOs over the financing of gas. Africa has a lot of unexploited gas resources, and the countries under whose territory they lie are understandably keen to exploit them. Yet it is also true that keeping within the 1.5°C goal will require, as the International Energy Agency has pointed out, the cessation of all new oil and gas (as well as coal) production anywhere in the world.

The European Union and NGOs insist that Africa could supply all its energy needs through solar, wind, geothermal and other renewable resources. But that’s not the issue. The value of gas is in the foreign exchange it earns — a major source of the hard currency dollars to which few African countries have much access. They are simply not going to pass the opportunity up — and particularly not at the behest of a hypocritical Europe that built its own wealth on fossil fuels and is currently scouring the world for new gas contracts to make up for lost Russian supply.

In fact, the issue of African gas heralds the emergence of a new era in climate policymaking. It’s a focus on the so-called “just transition”: the principle that decarbonisation strategies must be aimed not just at cutting emissions but also at providing alternative sources of jobs and livelihoods in the process.

As countries get serious about tackling climate change, moving from generalised target-setting to specific economic policymaking, this imperative is coming to the fore. African countries desperate to reduce poverty and develop into middle-income economies won’t allow decarbonisation to stop them. And nations already dependent on homegrown fossil fuels will only be willing to reduce their dependence if they can see a viable alternative source, not just of domestic energy, but also of employment and foreign exchange earnings.

The argument over fossil fuels in the final text was symbolic, but in this context it was not nearly the most important development at COP27. That came in two separate announcements that were not part of the formal conference but merely part of its fringe; and indeed one of which was not made in Egypt at all.

During the first week of COP27 the government of South Africa announced a new US$8.5 billion “Just Energy Transition Partnership,” or JET-P, with the United States, the European Union, France, Germany and Britain. It aims to transform South Africa’s energy and industrial landscape by reducing its dependence on coal, increasing its renewable supply, upgrading its electricity grid, and developing its car manufacturing sector to become a domestic and global supplier of electric vehicles.

For a country that employs 92,000 coalminers, and whose giant, sclerotic state-owned energy company, Eskom, is unable to prevent regular blackouts across the country, this is a hugely ambitious program. The loans and loan guarantees from the donor countries will barely begin to cover the scale of the investment needed, but it is hoped they will leverage in orders of magnitude more from the private sector.

Even more importantly, the political challenges will be enormous. In a country already experiencing social unrest as a result of the rising cost of living and persistently high levels of unemployment, laying off coalminers could be a recipe for trouble. The coalmining union is one of the bastions of political support for the country’s ruling African National Congress. During the year-long consultation process the government undertook to prepare the partnership plan, it was clear that many sections of the public remain to be convinced that reducing coal consumption is in the country’s interest, or will make their own lives better.

The same challenge also faces the government of Indonesia, which, a week after South Africa, announced its own Just Energy Transition Partnership with the United States, Japan and others. This time the package of loans and guarantees was worth US$20 billion. The announcement was made not in Sharm el-Sheikh but in Bali, where Indonesia was hosting the annual G20 summit. But it had the same COP27 resonance: another huge coal-producing nation choosing ultimately to leave the coal in the ground and pledge its long-term future to renewable and geothermal energy. The partnership plan envisages Indonesia embarking on an industrial strategy designed to exploit the country’s world-leading nickel and tin mining to create battery factories and other high-technology plant.

If the world is to succeed in cutting greenhouse emissions at the same time as enabling developing countries to grow and to modernise, these JET-Ps, or something like them, are surely the form it will take. Vietnam is currently in talks with the Western powers to do the next deal, and India is making interested noises as well. It has not escaped anyone’s notice that such partnerships are potentially a means by which the West can offer developing countries financial assistance — and political influence — to rival those of China’s huge Belt and Road Initiative.

More widely, the principle of the “just transition” is likely to be the basis for much climate policy over the coming years. It already informs Joe Biden’s Inflation Reduction Act, whose trillion-dollar subsidies for green energy and industrial production are conditional on components being sourced from US manufacturers (or those within the North American Free Trade Association, namely Canada and Mexico), a fact which has led the European Union to threaten to take the United States to the World Trade Organization for breaching trade rules.

This is essentially a form of green protectionism — but it is also surely the inevitable political consequence of serious decarbonisation. Moves away from fossil fuels and energy-intensive industry will only be supported by the workers and communities affected if alternative jobs and livelihoods are on offer. Imposing domestic supply chains may not be economically efficient according to neoclassical free-trade theory, but in the eyes of any politician it makes perfect political sense.

Although these issues were animatedly discussed in COP27 fringe meetings — there was an entire pavilion devoted to Just Transition policy, sponsored by the International Labour Organization — very few measures or proposals entered the decision text. But they almost certainly will in due course.

COP27 has demonstrated the notable shift that has occurred since the 2015 Paris agreement. Before then, COPs came first, setting out principles and mandating national action, which countries subsequently followed. Today the order has been reversed. Countries are designing and implementing policies for mitigation, adaptation, and loss and damage. If a few years later they get mentioned in COP texts as important examples to follow, that is just a bonus.

This is indeed how it should be. The Paris climate agreement sets out the principles and legally binding rules of climate action, with more detailed regulation negotiated at subsequent COPs. But now the international rules are in place, the focus of debate must inevitably shift to the national political arena, where policy is made and politics rule. Given how tortuous they have become, that COPs have less and less for their negotiators to do is a boon to them as well as to the watching world. •

The post Agreement by ordeal appeared first on Inside Story.

A book is a chance to pull fragments like these together and discern a larger story. This one, by Wall Street Journal automotive and technology reporter Tim Higgins, is mainly about Tesla, not Musk’s space and solar energy companies, SpaceX and SolarCity. But Tesla took over SolarCity five years ago (the controversial transaction is described in detail here), and the connections across Musk’s commercial and personal activities mean anyone writing about him needs to deal with them all. “He’s charging after a personal calling,” wrote Ashlee Vance in his 2016 biography, “one that’s intertwined with his soul and injected into the deepest parts of his mind.” Vance dubbed it “the unified field theory of Elon Musk.”

As Higgins was wrapping up the text of Power Play early in 2021, the Economist published a debate between a Tesla bull and a Tesla bear. Sales of the Model 3 were surging and a sixth straight profitable quarter was announced, the first time Tesla had been profitable in each quarter of a calendar year. Its share price had increased eightfold in twelve months.

The Tesla bull declared the share price “will travel in only one direction — up.” It was “a mistake to judge the company by the standards of the firms it will leave in its tracks.” Tesla was not a carmaker, it was a technology firm that would disrupt personal transport, energy, robotics, healthcare and more. Its leader was a visionary with a “genius for turning the future into dollars.”

The bear was just as confident. Tesla’s share price would travel in reverse. It had done an extraordinary job “building a brand swiftly and making electric cars trendy.” Now though, competition was increasing, Tesla was losing market share and missing production targets. The hype about self-driving cars had worn off as their problems became clearer. Musk himself was spread too thinly. “The strains from Tesla’s expansion could again bring out his demons.”

So far, the Tesla bull is winning. In December, Time magazine declared Elon Musk its 2021 Person of the Year. Tesla Common Stock closed the first day of trading on the NASDAQ in 2022 at around $1200, a 64 per cent increase over the year, after the company reported vehicle deliveries in 2021 of 936,000, up from 510,000 in 2020. (Along with other tech stocks, they have fallen a long way since, closing at $930 on 24 January.) At the time of writing, according to Forbes Real Time Billionaires, Musk was comfortably the world’s richest person, his net worth nearly twice that of the fourth-richest person, Bill Gates.

“Elon has all these ideas and I can’t move fast enough,” confided Tesla co-founder and CEO Martin Eberhard in late 2006 as he battled to produce the company’s first cars. By August, the company had a new CEO and Eberhard had moved to a new position as president of technology. Before the end of the year he was gone altogether, although he retained a shareholding.

Incidents like this happen many, many times through Higgins’s flowing account of the rise of the pioneering electric vehicle company. This one, common in the life of high-tech startups, is especially decisive. It’s the moment when “a founder’s skills are exceeded,” writes Higgins. “[Eberhard] knew it, and so did Musk.”

Eberhard and Musk, the largest shareholder and chair of the company, discussed bringing in a chief financial officer and a new CEO. News of the search leaked, embarrassing Eberhard. The start date for production of Tesla’s first cars kept being deferred and their likely cost rising. The company needed money. Musk spoke to Eberhard. A few days later the board approved his “resignation” as CEO and new job title. Later, it got very messy. Eberhard sued Musk, they settled, they sang each other’s praises. In the meantime, the company got an interim CEO, then a new CEO. Eventually Musk took over as CEO himself, a position he has held ever since.

The technology, the cars, the funding dramas, the manufacturing and marketing, the deals, the losses and the profits; these provide the raw data for Higgins’s tale. The current that ripples through it all, though, are the stories like these, about Musk’s handling of people. Higgins’s title captures it perfectly. To do things as big as the ones Musk wants to accomplish you need a lot of people and they need to do remarkable work for you, their very best, long day after exhausting day.

“Elon” — his surname has become superfluous — seems simultaneously magnetic and repellent. The magnet seeks, finds and attracts the best and brightest people to do the work he needs them to do. These are not just brilliant young Stanford engineers who have already self-selected for tech jobs at the most interesting and promising Silicon Valley companies. They are experienced auto industry executives and production line workers, people who know how cars are made and how big motor vehicle companies work but are frustrated by their inefficiencies and conservatism. They are marketing people who understand advertising but are prepared to work for a company that doesn’t want to pay for it. They are retailers who understand the behaviour of consumers and might have been surprised by Tesla’s passionate early ones. These were people who wore delays, price rises, defects and breakdowns almost as badges of honour, personal investments in a more sustainable future.

The repellent Musk uses these people up and casts them aside when they are no longer useful, repeatedly behaving in ways that would drop the jaws of human resources (“People and Culture”) professionals. If they have worked at Tesla for at least five years, they will probably have their stock options. A highlight from Vance’s biography: when Musk’s long-serving executive assistant, who worked across all his interests and “gave up her life for Musk for more than a decade,” proposed she should be paid at the same level as other senior executives, Musk suggested she take a two-week vacation. He would do her job himself and decide whether she was still required. She wasn’t, and was given twelve months’ severance pay. “Twelve years is a good run for any job. She’ll do a great job for someone,” Musk told Vance.

Is this just Silicon Valley? America? Capitalism? Or Musk himself?

Higgins stays clear of the amateur psychology, deferring to the detail in Ashlee Vance’s biography. It describes Musk’s tough childhood in a violent place, apartheid South Africa, vicious bullying at school, and prodigious capacity for absorbing, understanding and recalling detail. When their parents separated, Elon and younger brother and sister Kimbal and Tosca lived with their mother; after two years, Elon decided to live with his father Errol, an “ultra-present and very intense” man, according to Kimbal. “There were fun moments,” Elon told Vance. “He is an odd duck… He’s good at making life miserable.”

Vance struggled to get anyone on the record criticising Errol and Erroll himself responded to his request for an interview with an impeccable email praising all his children. “Elon was a very independent and focused child at home with me.” Perhaps when your son is the world’s richest man and is making a fair fist of leading the global auto industry away from fossil fuels you don’t think you have much to apologise for.

Musk the magnet has drawn exceptionally smart, hard-working people to his enterprises to be part of a vision he pitches as gigantic and good. Tesla/SolarCity is saving humanity and the earth by shifting vehicles to electric power and electricity generation to solar. SpaceX is insurance in case it doesn’t work, the chance for human beings to survive somewhere else, most likely on a second planet, Mars. The first part, the power play, is widely supported. The second, making humans a multiplanetary species, is much more contentious. Whatever your view, it adds up to a serious industrial, political and cultural project and Musk pursues it with greater tenacity and purpose than many governments whose job it is to think this big.

Successful companies often claim a central mission, holding clear and steady across the years, a North Star that the whole enterprise steers towards — think “customer-centric” at Amazon, “organising the world’s information and making it universally accessible and useful” at Google. The mission disciplines decisions about how and where to grow. But it always iterates with new opportunities, expanding, contracting, clarifying. When Google outgrew its founding mission, it gave birth to a parent company, Alphabet, with a larger one, to make “the world around you” universally accessible and useful. Netflix completely transformed itself from a physical distributor of other people’s movies and TV shows to a digital distributor of its own.

The Tesla Motors that Elon Musk largely funded in 2003 (investing $6.35 million of the $6.5 million startup round) was building an electric sports car, a “Roadster.” It captivated early buyers with the same things sports cars have always oozed, acceleration and good looks. For some, electric power was just a novel way to improve performance on a familiar parameter. Less than two decades later, having acquired SolarCity, Tesla has dropped “Motors” from its name and says its mission, from the start, was “to accelerate the world’s transition to sustainable energy.” The product line-up now includes three batteries designed for home, commercial and utility-scale installations and a rooftop solar energy system, as well as the cars.

The electric vehicle part of the plan was laid out in “The Secret Tesla Motors Master Plan,” Musk’s “laughably simple” three-step business plan: build an expensive sports car to attract attention (the Roadster); then build a luxury sedan to compete against German luxury vehicles (which became the Model S, released in 2012); then build a car for the people (the Model 3, on sale since 2017). Along the way, it added two SUVs, the Model X and the compact Model Y.

Simple in conception, Higgins explains how extraordinarily difficult it was in practice to design, build and sell these different electric vehicles, how much else Tesla has changed about the auto business, and how electric vehicles became part of a larger energy transformation project. Several observations stand out.

First, while Tesla is sometimes perceived as a lone rebel in the automotive landscape, it has crafted some crucial partnerships that enabled it to get products to market more quickly, or at greater scale and lower cost, than would have been possible if it had tried to do everything itself. This was not easy when the company was another Silicon Valley startup with big plans; Musk’s gift was to convince powerful incumbents it was not just another Silicon Valley startup.

The Roadster was a partnership with Lotus and used the Elise chassis (the marriage was far from perfect). The early batteries were produced by Sanyo and then Panasonic, the latter joining Tesla in a partnership to create a huge battery manufacturing facility in Nevada known as the Gigafactory. Daimler Benz bought parts from Tesla and invested in the company. Tesla bought (and extensively remodelled) its automotive factory in Fremont California from Toyota, which used it from 1984–2009 in a partnership with General Motors, after GM had occupied the site from 1962.

That said, Tesla’s preparedness to build parts and products itself, to bring in-house activities that have been increasingly dispersed across global manufacturing chains, is remarkable. The book is full of examples where the company imagined it could rely on experienced suppliers to design and manufacture parts it needed but was frustrated by their quality and/or cost and eventually chose to build rather than buy. The Gigafactory is the best example: this partnership to massively scale up battery production was designed to give Tesla more control of its own destiny as it pursued ambitious targets for vehicle and solar production.

Third, Tesla’s success in producing things, especially motor cars, has mattered in the United States. In the internet age, American capitalism triumphed in Silicon Valley but collapsed in Detroit. As Tesla was battling to sell its first vehicles and finance its future during the global financial crisis, America’s car companies were going to the wall. (Tesla came close itself.) Many of the great tech successes of recent decades — Google/Alphabet, Facebook, Netflix — sell experiences, not tangible products. Apple sells devices but they are largely produced overseas, a stellar example of the globally dispersed production model. America did not make things anymore, many complained. Tesla does, and the very things that once supplied America with corporate and cultural iconography — Henry Ford, the Chrysler Building, General Motors. Now, there are Stars and Stripes decals on SpaceX’s rockets.

Fourth, Power Play shows how the Musk-led Tesla has changed more about cars than the way they are powered, often against immense opposition. Electric power itself changed more than the carbon footprint of vehicles: a watermelon-sized electric motor, fewer moving parts and a battery pack located under the passenger compartment opened up more space for occupants and luggage. Tesla also changed the way motor cars were sold — direct to customers rather than through franchised dealer networks. (Australian ex-Ford boss Jack Nasser, consulted as part of venture capitalist Kleiner Perkins’s early due diligence on Tesla, warned about direct selling, regarding his own attempt to fight the franchise dealers as one of his “biggest mistakes.”) Tesla changed the way cars are advertised (theirs are not). Along with many others, it hopes to change the way they are all driven (they won’t be).

Companies come and go around the Bay Area: Silicon Valley does not have a problem with failure. “Since organisational death, in and of itself, is not perceived as a finite expression of failure, entrepreneurs are able to entertain what would normally be considered ‘outlandish’ risks,” write Homa Bahrami and Stuart Evans in a chapter on high technology entrepreneurship in Understanding Silicon Valley. Elon Musk takes outlandish risks but he does have a problem with failure. “My mentality is that of a samurai,” he told a venture capitalist (quoted by Vance). “I would rather commit seppuku than fail.”

Musk came to Tesla already a successful tech entrepreneur, having sold the company he founded with his brother Kimbal, Zip2, to Compaq in 1999. He then received around $250 million (before taxes) from his share of PayPal when eBay bought it in 2002. Musk had been CEO at both enterprises, carrying heavy bruises from PayPal, where he was replaced by Peter Thiel in a clandestine manoeuvre undertaken while Musk was on his way to honeymoon at the Sydney Olympics. Ashlee Vance found much acknowledgement of Musk’s contribution at PayPal, where he hired a lot of the top talent, as he had done at Zip2, created a number of the company’s most successful business ideas and served as CEO during a period of rapid expansion from sixty to several hundred employees.

“I’ve just never seen anything like his ability to take pain…,” Tesla and SpaceX investor and Musk friend, Antonio Gracias, told Vance. “Most people who are under that sort of pressure fray. Their decisions go bad. Elon gets hyperrational… The harder it gets, the better he gets.” Musk says he would like to die on Mars. “Just not on impact. Ideally I’d like to go for a visit, come back for a while, and then go there when I’m like seventy or something and then just stay there.”

Business historians and management theorists are trained to look at many factors to explain the growth and evolution of enterprises, to be wary of the biographer’s temptation to personalise it all, to give too much credit to leaders, especially leaders as media-thrilling as Elon Musk. It isn’t hard to forecast a fall ahead for the Tesla and SpaceX leader, or even imagine the likely reasons. The Tesla bears and their shortselling shadows do it every day. But right now, Elon Musk has cast a spell across global business and investment. By the time you read this, it may have broken. If not, watch it closely, for it is an extraordinary thing.

One last thing: Tim Higgins says he gave Elon Musk “numerous opportunities” to respond to the material presented in the book. Musk made no specific comments, but said “Most, but not all, of what you read in this book is nonsense.” •

The post Electric ambition appeared first on Inside Story.

Countries had to dismount from plenty of high horses in the last few days of the conference. As negotiators sought a final agreement, many nations’ red lines were crossed in the interests of compromise. But the conference ended in high drama when India stubbornly refused to get off its particular steed.

The issue was coal. Every other country had accepted a line in the final agreement calling for “the phasing-out of unabated coal” (that is, coal used without carbon capture and storage technology). But India — supported by China — would not. Even after the conference had to be adjourned because of its refusal, and after delegates were called back two hours later assuming a deal had been done, India objected again, proposing a further amendment to the now-completed text. “Phasing-out,” India said, should be replaced by “phasing-down.” The British chair of the conference, Alok Sharma, choked back tears as he apologised for the failure of the process, to much sympathy from delegates.

India’s and China’s late obstructionism highlighted both the power and limitations of these UN climate conferences. On the one hand, the largest and fifth-largest economies in the world cared enough about the precise wording of the agreement to face down the anger of 194 other nations. Other countries didn’t like many things in the text either, but had accepted them in the spirit of compromise required to reach agreement. On the other, it will make practically no difference to anything that happens in the real world beyond the conference hall. Though Greenpeace and other climate campaigners hailed the first-ever mention of getting rid of fossil fuels in a COP decision, the words are entirely symbolic. Without a date by when it must be done, neither “phasing-out” nor “phasing-down” have much practical meaning.

Part of the reason we know that it was only symbolic was that Australia had accepted “phasing-out” even though the government in Canberra has no plans to end coal use or exports at all. Poland and South Korea, two other coal-dependent nations, have agreed to a phase-out, but not till 2049. In practice, all five countries will have to end their use of coal well before that date if the Paris goal of limiting global heating to no more than 1.5°C above pre-industrial times is to be achieved.

The 1.5°C limit was in fact not the principal Paris goal, which was “well below 2°C.” But the small island states in the Pacific, Caribbean and elsewhere most existentially threatened by climate change — some of the lowest-lying will not survive rising sea levels at all — have succeeded in making 1.5°C the new benchmark of tolerable warming.

Remarkably, the conference didn’t just accept the new goal. It also acknowledged that countries’ current plans to reduce emissions would not go anywhere near meeting it, and agreed to come back next year with stronger plans aimed at doing so.

On this criterion alone COP26 should probably be regarded as a relative success. Given the pre-conference hype about Glasgow being “the last chance to save the planet,” many in the public might have been forgiven for expecting countries to announce new and stronger commitments during the conference. But that was never going to happen. They came to the meeting with emissions reduction targets decided — in many cases with great difficulty — in their domestic political systems. This is why the Paris agreement calls them “nationally determined contributions,” or NDCs. Countries had neither the desire nor the mandate to raise their ambition levels during this fortnight, and the possibility of doing so was not even on the agenda.

So the most this conference could ever do was to acknowledge that the global reduction in emissions was nowhere near enough to put the world on a path to limiting heating to 1.5°C; and to resolve to reconvene as soon as practically possible with stronger commitments. Which is precisely what it did.

The numbers presented were stark. If implemented, current national pledges up to 2030 would lead to average global heating of 2.4°C. At those temperatures the oceans would be stripped of all coral reefs, many land species would become extinct, major regions would lose their water supplies, and productive agriculture would become untenable in many countries. Revisiting and strengthening NDCs is crucial if such a projected temperature rise is to be averted.

The other big issue of COP26 was finance: specifically, money provided by the rich nations to the poorer ones to help them tackle climate change. For a long time the most vulnerable countries have been angry that most of the money provided so far has been for “mitigation” (emissions reduction in those countries) and has taken the form of loans. Their emissions are too small to matter much, but they are already suffering severe effects as the climate changes. So they wanted more money directed towards adaptation, and as grants rather than loans.

They won some of this. Developed countries agreed to “at least double” their finance for adaptation (which could take it to 40–50 per cent of total financial flows) and the World Bank has been told to increase its overall funding to vulnerable countries.

But developed countries resisted the demand that they make up for their failure to hit the goal of US$100 billion in financing by 2020 — first promised over a decade ago — by providing more in 2024 and 2025. Instead the text sticks to US$100 billion a year. A new process will be established to define how much wealthy countries should pay after 2025.

It was the issue of “loss and damage,” however, that provoked the most anger — and the greatest resistance. This is the idea that rich countries should compensate poor ones for the economic and human costs caused by the former’s emissions. The idea of compensation for loss and damage represents a vital principle for the global South, one that lies at the heart of the idea of “climate justice.” Climate change is the result of the two-centuries-old economic development process that has made rich countries rich. But its most damaging effects are being experienced by the countries that contributed least to causing it — and it is making them poorer.

In climate negotiations the developed world has always fiercely resisted the idea of compensation. They fear it is a slippery slope. Accept liability for causing climate harm and before long they will find themselves in the international court, required to pay out trillions of dollars to every developing nation.

This clash of interests was never going to end harmoniously at COP26. The least developed nations and small island states demanded a new financing facility for loss and damage — with no sums or liabilities mentioned. But the United States, the European Union and other developed nations were determined not to concede. The final text called merely for a “dialogue” to discuss “arrangements.” The island nations vowed to return next year with the same demand.

So, two weeks of intense wrangling, with a leaders’ summit thrown in, ended in a nine-page main document primarily notable for asking countries to do it again next year at COP27 (to be held in the somewhat warmer location of Sharm El-Sheik, Egypt). It’s easy to see why the whole process attracted so much hostile comment. Did the Glasgow jamboree actually achieve more by way of reducing emissions than it caused, in bringing 25,000 people together from across the world to merely talk about climate change? Haven’t greenhouse gas emissions risen continuously throughout the thirty years in which these annual UN climate chinwags have taken place?

Cynicism is understandable. But the right question to ask is not whether emissions have fallen since the UN Framework Convention on Climate Change was first signed in 1992. It is what would have happened if there had been no international treaties, and no talks.

We have an answer to this. Before COP15 in Copenhagen in 2009, the Intergovernmental Panel on Climate Change, or IPCC, projected that if emissions continued on their “business as usual” path, the average global surface temperature would likely rise 4–6°C above pre-industrial levels by the end of the century. Prior to COP21 in Paris in 2015, the projected temperature rise had been reduced to around 3–5°C. In 2018, it was around 3°C. If the “nationally determined contributions” presented in Glasgow are implemented, the projected likely temperature rise is 2.4°C.

So it is not true (as Greta Thunberg is wont to say) that nothing is being done. Almost all countries have either reduced their absolute emissions (in the developed world) or slowed their rise (in the emerging economies). Not by enough, as the IPCC makes clear. But this is not a record of complete inaction.

Has this anything to do with climate negotiations? Yes. The reason we have an international climate treaty and big global “moments” like COP26 is that they internationalise what would otherwise be national policy responses to a global problem.

Climate change can only be tackled if all countries reduce their emissions. The largest single emitter, China, contributes 31 per cent of the global total; the United States 14 per cent, India 7 per cent, Russia 5 per cent. No other country’s share is above 3 per cent. Global emissions can only be reduced if every country plays its part, but if it were left to every country to act on its own, most would surely not. It would be too easy for each to say, “Our emissions are too small to make a difference; how do we know anyone else is acting?”

But it is also a problem of political circumstances. There are few countries in which climate change is a major political issue, with powerful interests favouring action. Left to themselves, most governments would no doubt do something, some time; but it is highly unlikely that this would be coordinated with every other country’s domestic political timetable.

By forcing all countries to act simultaneously, not just when it is domestically propitious to do so, the UN climate process has created much larger collective action. And in doing so it has built global scale for emissions-reducing technologies. It is no coincidence that the cost of solar power has fallen around 90 per cent since Copenhagen in 2009, and wind power up to 70 per cent. That has happened because all larger countries have introduced renewable energy policies in response to UN climate agreements (even the apparently “failed” one in Copenhagen), and the resulting scale and innovation have slashed costs. The same effect has led to the rapid and continuing fall in the price of electric vehicles and batteries since Paris in 2015.

And, of course, the declining cost of decarbonisation means that more of it can be done. It is a virtuous circle. International agreements lead to near-universal national action, which creates global markets for green technologies, which reduces costs and incentivises innovation, which allows stronger targets to be adopted next time round.

Given the requirement in the Glasgow agreement that every major country produce new 2030 commitments by COP27 next year, attention will now turn back to domestic politics. It won’t be easy for any country, barring a few with very weak plans (such as Australia), to find ways of cutting their emissions further than they have already decided. New policies and new public investment funding will be required, whether in renewable energy, regenerative agriculture, industrial emissions, or research and development into green technologies.

Can it be done? Technically and economically, yes. But politically, for many countries, it will be mighty hard. The Glasgow agreement acknowledges the need to support a “just transition” — the creation of alternative jobs and incomes for the workers and communities of high-carbon industries — but it will still be difficult to overcome the power of incumbent interests. The fossil fuel sector will defend itself vigorously for some time yet.

And yet, taking the longer view, Glasgow did feel like a turning point. Never at a COP has there been such a recognition of the injustice faced by poorer countries as a result of a problem caused by rich ones. Never have leaders been confronted so directly with the evidence of their failure. Never have they admitted that failure, and agreed to have another go. China and India’s pyrrhic victory in the dying minutes of the conference may have given heart to all those still wedded to coal. But for the rest of the world it looked like the beginning of the end for the age of fossil fuels. •

The post Glasgow kiss appeared first on Inside Story.

The case for pessimism was made eloquently — if perhaps unintentionally — by Sir David Attenborough in a powerful address to the Leaders’ Summit that opened the conference on Monday. Tracing the precipitous rise in the concentration of carbon in the atmosphere over the past hundred years, the ninety-five-year-old naturalist reached a simple conclusion: “We are already in trouble.”

The prime minister of Barbados, Mia Mottley, was even more brutal in her speech in response. The developed world had failed to meet its promises to cut emissions and provide financial assistance to the poorest countries. The cost, she said, would be measured in lives, and in livelihoods. “It is immoral, and it is unjust.”

Both Attenborough and Mottley insisted humanity can still turn things around. But listening to the rhetoric of the 119 leaders whose speeches filled the next two days — all of them stressing how much their countries were doing, despite most of the facts showing otherwise — it was hard for the rational brain not to feel overwhelmed by pessimism.

The facts are pretty simple. To have a reasonable chance of limiting global heating to the UN goal of 1.5°C above pre-industrial times, global emissions need to be cut by 45 per cent by 2030. On current trends they will rise by 16 per cent.

And yet COP26 is strangely a place of extraordinary optimism. This is mainly a function of its structure. Most of the 25,000 attendees aren’t country negotiators here for the UN climate talks, who probably number around 2500. The rest are people who work professionally on climate change, for businesses, charities and activist groups, universities, city and regional governments, and myriad others. They are here not to negotiate but to sell their wares, meet their international colleagues and network tirelessly.

For a COP is never just — or even mainly — a UN negotiating meeting. It is the world’s annual global climate expo and conference. And almost everyone who comes has a positive story to tell about how they are tackling climate change in some way. For some reason the climate sceptics and the opponents of climate action don’t seem to regard themselves as welcome, and they don’t show up.

So walk among the country and business “pavilions” in the middle of the conference centre — a slightly grandiose name for a series of pop-up stalls and exhibits — and the good news is relentless. Every country is doing so much to tackle the problem, from renewable energy to flood defences, sustainable transport to overseas aid. Every business is committed to “net zero,” engaging its eager workforce in meeting the goal. Every technology company has a world-leading solution, from green hydrogen to drought-resistant crops.

And every hour of the day all the side rooms are full, hosting hundreds of fringe meetings on every possible aspect of climate change. And here too the mood is powerfully feel-good. Of course most of them start with speakers recounting how dire the climate situation is. But they quickly move on to what can be done to tackle it; indeed what their organisation is already doing, in partnership with local communities and local businesses, supported by benevolent financiers and researched by concerned academics. The poorest people in the world may be suffering from severe climate impacts, but a lot of people claim to be helping them.

Observing all this it is easy to be cynical. But it’s also hard not to be affected. It can only be a good thing that a global climate industry of this scale and variety exists. There will surely be no solutions without it. And it has contributed to the remarkably upbeat mood of the official COP proceedings in the first few days.

The negotiations themselves have barely started. An agenda was agreed on the first day — you might think that this would be routine, but plenty of seasoned negotiators saw it as something of a triumph — and the committees and working groups on key issues have held their opening sessions. But most of the attention has been taken up by a series of side agreements carefully choreographed by the British hosts. And the extent and ambition of these have taken many by surprise.

The first was on deforestation. A new pact was announced between more than a hundred governments, representing over 85 per cent of the world’s forests and including Brazil, Indonesia and the Democratic Republic of Congo, pledging to halt and then reverse deforestation and land degradation by 2030. Donor countries would give US$12 billion for forest protection and restoration; many of the countries, companies and financial institutions most involved in trading forest products, including timber, pulp and palm oil, would eliminate deforested areas from their supply chains.

After forests, methane. US president Joe Biden announced that ninety countries had agreed together to cut methane emissions by 30 per cent by the end of the decade. Methane, produced from agriculture, oil and gas, and landfill sites, is a much more potent greenhouse gas than carbon dioxide: if fully implemented, the pledge could limit global heating by about 0.2°C by 2050.

Green technologies were next in the spotlight. Forty countries, including the United States, China, India, the European Union, Britain and Australia, signed up to a “Breakthrough Agenda” to coordinate the global introduction of clean technologies, starting with zero-carbon electricity, electric vehicles, green steel, hydrogen and sustainable farming. The governments said they would align standards and coordinate investments to scale and speed up production. The aim is to bring forward the tipping point at which green technologies are more affordable and available than fossil-fuelled alternatives.

Then it was the turn of finance. Mark Carney, former governor of the Bank of England and Britain’s climate finance envoy, announced that financial institutions holding US$130 trillion of assets under management had committed to hitting net zero emissions targets by 2050. Including more than 450 banks, insurers and asset managers across forty-five countries, the Glasgow Financial Alliance for Net Zero said it could deliver as much as US$100 trillion of financing to help economies decarbonise over the next three decades.

Not everyone applauded all this. Observers noted that a very similar agreement on forests had been announced at the UN Climate Summit in 2014. Nothing much had happened since then; would this time really be any different? It was pointed out that China, one of the world’s largest sources of methane, had not joined the new agreement. Several other green technology initiatives over the last ten years, including a “Mission 2020” platform announced with great fanfare in Paris six years ago, had proved disappointing.

The finance announcements attracted the most criticism. Non-government organisations quickly pointed out that the financial institutions were not promising that all the financing would be focused on environmentally friendly companies. Many of the banks and pension funds would only be greening a small proportion of their portfolios while happily continuing to invest in fossil fuels. The “net zero” commitments of the firms whose shares they owned were in many cases pretty dubious, resting on “offsetting” mechanisms (such as buying trees in developing countries) that can’t be guaranteed to have any effect.

And yet these agreements can’t be wholly dismissed. Many involved a large number of countries that had not previously signed up to such pledges; and most came with a lot more money — both public and private — than previous attempts. A specific agreement between South Africa, the United States and several European countries to help South Africa move away from coal particularly impressed observers: it included both significant policy reform and serious financial support.

These side agreements have a slightly strange relationship to the main negotiations. Formally, they have nothing to do with them: they do not involve the universal participation of the 197 parties to the UNFCCC (the Framework Convention that governs the talks) but rather are “coalitions of the willing.” Most of them involve private sector partners that have no formal place in the UNFCCC.

Yet in another sense they are clearly part of the process of cutting global emissions and increasing climate-related finance, which are the two main goals of COP26. Indeed, they are rather more concrete manifestations of this than anything negotiated in the conference hall. So the British government is trying to find a way of bringing them into the final COP agreement. In particular it wants to show how these agreements will help close the emissions gap between the 1.5°C trajectory demanded by the science and the current total of country pledges. Initial analysis has been uncertain: it’s possible that these sector-specific emissions reductions will be the means by which the “nationally determined contributions” of the participating countries will be achieved. Or it could be that they will enable those contributions to be exceeded.

And the nationally determined contributions themselves have also received a welcome boost in the first few days. China and India were the only two major countries who came to the COP without having announced new commitments for 2030. When it did come, China’s statement added nothing to what it had already pledged. Coupled with president Xi Jinping’s non-appearance at the Leaders’ Summit, it has made many observers question China’s current stance: a country that once prided itself on being the champion of the developing world is appearing to absent itself from this crucial moment.

India, by contrast, announced a much more ambitious contribution than anticipated. Speaking in his leader’s slot, prime minister Narendra Modi declared that India would commit to net zero emissions by 2070, and half of its electricity production from renewables by 2030. The former — a later date than China (which has committed to net zero by 2060) and apparently too late to be compatible with the 1.5°C goal — seemed disappointing to some. But scientific observers noted that this was not necessarily the case: it was indeed too late if Modi meant net zero carbon dioxide, but not if he meant net zero from all greenhouse gases. And the renewables pledge was truly ambitious: with India’s proportion of renewable electricity currently under 20 per cent, a more than doubling in less than ten years is a startlingly radical goal.

And so the early feeling in Glasgow is considerably happier than many had feared. More side agreements are still to be announced, including on phasing out coal and electrifying cars. No one will admit to expecting that COP26 will be a raging success. But some are allowing themselves a small boost of optimism. •

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Mike Cannon-Brookes, co-founder of the software house Atlassian, paid a record $100 million for Fairwater in 2018, and moved in with his young family. Atlassian’s other founder, Scott Farquhar, had already bought the neighbouring house, “Elaine,” which had been owned by Sir Warwick’s cousin and John Fairfax Ltd director Sir Vincent Fairfax, for $71 million.

Where Sir Warwick went to work chauffeur-driven in finely tailored Prince of Wales check suits, in later years favouring mutton-chop sideburns, forty-one-year-old Cannon-Brookes wears jeans, sweatshirts and a peaked canvas cap, has a straggly beard and shoulder-length hair, and takes public transport to work.

The old Fairfax building on Broadway featured different tiers of catering, ranging from an executive dining room for senior managers, editors and directors down to two greasy-spoon canteens, one for white-collar staff and the other for the inky printers. A reserved elevator took Sir Warwick and other directors to the wood-panelled top floor. Otherwise the building was so bleakly utilitarian it was once used as a location for a movie set in Stalin-era Moscow.

Some 300 metres away, Atlassian’s new $546 million headquarters, recently approved by the NSW government as part of the remake of Central railway station, will be a forty-storey concrete, steel and timber structure running on 100 per cent renewable energy. It will feature indoor and outdoor garden terraces where executives and programmers will mingle under a corporate philosophy that declares “no bulls—t” as one of its guiding principles.

The Atlassian story, now a legend, has inspired a generation of internet startups. It began when Cannon-Brookes, a banker’s son who went to the expensive Cranbrook school, not far from where he lives now, and Farquhar, a working-class boy from Sydney’s outer suburbs who won a place at the selective James Ruse high school, met during information technology and science classes at the University of NSW.

On graduating in 2002, they formed Atlassian and began work on a new program called Jira, designed to improve collaborative software development projects and sort out program bugs. They financed the startup with $10,000 drawn on maxed-out credit cards. Jira and other products designed to enhance creative cooperation found ready markets. Two decades later, Microsoft, Oracle and the other top-ten software makers use Atlassian products, as do major global companies including Shell, Toyota, Amazon and Nokia Verizon, and universities including Harvard, Stanford, Yale and MIT.

In 2010 the partners raised US$60 million from a big US venture capital fund, and in 2015 they floated Atlassian on the Nasdaq stock exchange in New York. It now has a market capitalisation of US$108 billion, making it the 143rd-biggest corporation in the world by that measure, with 6000 employees in Australia, the United States, the Netherlands, the Philippines, Japan and India. Cannon-Brookes and Farquhar both own 22.7 per cent, making each of them worth US$24.5 billion.

The two partners haven’t just spent big on the finer things in life. They have also been lobbing boulders into the stagnant ponds of Australia’s economy and politics. Belatedly, a decade or so after the United States, tech billionaires are disrupting Australian business, and their firepower is immense.

One of the first inklings came in early 2017 when South Australia suffered a statewide blackout after tens of thousands of lightning strikes and two tornadoes cut power lines. Conservative politicians and journalists pounced, blaming the then Labor state government for relying too much on wind and solar power rather than “stable” coal or gas generators.

Cannon-Brookes picked up on a claim by Tesla’s vice-president for energy products, Lyndon Rive, that his company’s big lithium batteries could fix the state’s energy network in one hundred days. On Twitter, he asked Tesla founder Elon Musk how serious he was. “If I can make the $ happen (& politics),” he asked, “can you guarantee the 100 MW in 100 days?”

“Tesla will get the system installed and working 100 days from contract signature or it is free,” Musk tweeted back. “That serious enough for you?”

Musk was derided by then federal treasurer Scott Morrison, who around the same time brandished a lump of coal in parliament to taunt Labor and the Greens. “By all means have the world’s biggest battery, have the world’s biggest banana, have the world’s biggest prawn like we have on the roadside around the country,” said the man destined to be prime minister. “But that is not solving the problem.”

The big battery began operating in November that year, some sixty days after an agreement had been signed between Tesla, French renewable firm Neoen, and the SA government. As a backup, it can power 30,000 homes for eight hours, or 60,000 homes for four. As a source of cheap power, it’s estimated to save South Australian consumers about $40 million a year.

The battery’s capacity is currently being doubled, and state governments and power companies around Australia are following its example.

“The way capital has moved much more strongly towards renewables than the Coalition has is fascinating,” says former Australian National University professor of economics Andrew Leigh, now a federal Labor MP. “You can see the tension within the Business Council of Australia and how increasingly renewables are being seen as the sensible way to go.”

Leigh believes that Mike Cannon-Brookes stands out so much because the Australian business landscape has been so static. Aside from pharmaceutical major CSL, he says, the five largest firms on the stock market are the same as they were thirty-five years ago. “You see much more dynamism and flux in the US. The US has completely turned over its top five companies in the last thirty-five years, and the dominance of tech in the share market has been well-established for a decade.”

Business is coming round on climate, though. Leigh reports having very different conversations with business leaders from those he has with his counterparts on the other side of parliament. Coalition MPs, he says, “are caught up in talking about 2050 targets when the conversation in Glasgow is going to be about 2030. They’re still running scare campaigns about electric vehicles ending the weekend. You get a sense when you are talking to businesspeople that they’re excited about what Tesla and others are doing, they’re looking at renewables, they’re aware they have to account to the market on climate emissions. It’s just a very different conversation.”

“It’s a great thing for Australia that Cannon-Brookes and Farquhar have made an absolute fortune,” says Ralph Evans, a former head of the federal government’s Austrade. “There have been venture capital successes before, but much smaller. This is a very big one and it shows it can be done. It will encourage many others.”

Evans cites other examples of emerging firms, notably the Sydney-based graphic design platform Canva, started by Melanie Perkins, Cliff Obrecht and Cameron Adams in Perth eight years ago, which now has 1500 staff and 750,000 customers worldwide, and is valued at US$40 billion.

For Evans, the Atlassian partners reflect the spirit of the San Francisco Bay area. “It’s full of people like Cannon-Brookes and Farquhar,” he says. “They are not going to put up with what they’re told to think by Murdoch or Donald Trump or anybody else like that.”

As well as taking a high-profile position on climate, the company weighs into debates on immigration, arguing for more open transfers of expertise, and IT security, questioning the push by intelligence agencies to compel communications and social media companies to give them “backdoor” access to encrypted data.

But green technology is the subject that has brought Cannon-Brookes out into advocacy — and action. Over the past week, as Morrison dragged his Coalition partners into reluctant agreement on a net zero target for 2050 while sticking with the Abbott government’s target of 28 per cent reduction by 2030, Cannon-Brookes has been spurring action outside the federal government.

He and his wife Annie pledged to invest $1 billion in green technology projects and donate a further $500 million to organisations working on the climate crisis, and promised that Atlassian itself would be a net zero operation by 2040. He says the 2050 target cited by Morrison as a historic moment was already a “done deal” for most of the advanced economies, with ambitious 2030 targets now far more important.

His latest commitments come on top of some $1 billion that Cannon-Brookes has put into green energy ventures. One is a company called Sun Cable, with offices in Singapore, Darwin and Sydney, started by partners David Griffin, Mac Thompson and Fraser Thompson. It was seed-funded by Cannon-Brookes’s private investment firm, Grok Ventures, alongside iron ore magnate Andrew Forrest’s Squadron Energy and others.

On 20 October, as the Nationals caucus was still chewing the grass stalks on net zero, Sun Cable announced that a raft of important global firms, including engineering giants Bechtel, Hatch and SMEC, were joining its $30 billion project to take solar power from northern Australia to Singapore.

The project involves some 125 square kilometres of solar arrays in the Simpson Desert, connected to Darwin by an 800 kilometre cable, and then undersea to Singapore by a 4200 kilometre high-voltage direct current cable. The project is designed to supply 15 per cent of the island republic’s electricity and cut emissions by enough for it to reach its 2030 abatement target. Construction is planned to start in 2023, with completion in 2028, when it is expected to generate about $2 billion a year in earnings for Australia.

It’s a big test of the cable transmission technology. The most ambitious example so far is an 800 kilometre high-voltage direct current cable between Norway and Britain, with shorter ones from offshore windfarms to European centres. But a solar-cable project over a similarly ambitious distance is proposed to link solar arrays in Morocco with Britain.

Iain MacGill, a UNSW associate professor of electrical engineering who has collaborated with Sun Cable, says the project is “technically leading edge” in its combination of terminal configuration, distance, power transfer capacity, and water depth. “There are other HVDC links that collectively do most of these things (except that distance), but not all together,” he says.

“The commercial challenges and risks are likely the most important in terms of the project being implemented,” MacGill goes on. “However, the commercial opportunity is also extremely attractive given Singapore’s current reliance on gas generation, limited local renewable energy options, and plans to increase their use of renewables and reduce emissions.”

Another big renewables scheme, the solar-and-wind Asian Renewable Energy Hub proposed for northwest Australia, has switched from HVDC energy exports to green hydrogen and now green ammonia. Ralph Evans notes that Singapore is already building floating solar arrays in its own backwaters, and could find larger floating arrays in nearby Indonesian waters a cheaper proposition than the distant Australian source.

Somewhat ironically, Scott Morrison has found himself part of the marketing for Sun Cable, pushing its merits to his Singapore counterpart Lee Hsien Loong on a stopover to the G7 summit earlier  this year. Australia’s ambassador in Jakarta, Penny Williams, also worked to gain the Indonesian government’s approval for the undersea cabling, announced last month, with the project pledging $2 billion in technology transfers to Indonesian institutions.

After these latest announcements, Cannon-Brookes said Sun Cable could be just the start of renewable energy exports, and Australia should be thinking of a “500 per cent” renewables target.

“Every step forward puts the naysayers further in the rear-view mirror,” he tweeted. •

The publication of this article was supported by a grant from the Judith Neilson Institute for Journalism and Ideas.

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COP26 is not the first “last chance,” of course. Several others have been so billed over the past decade or so. But this is indeed an important meeting because it’s the moment specified under the 2015 Paris climate agreement when countries must strengthen their commitments to tackle global heating. After three years of biblical droughts, fires and floods on every inhabited continent — and melting ice sheets on the other — no leader can claim that climate can safely be left to the future.

COP26 must tackle two big issues. The first of these is the gap between the aggregate commitments countries have made to cut their greenhouse gas emissions by 2030, and the total the scientists have said is required to keep global heating to the Paris goal of 1.5°C above pre-industrial levels. To have a reasonable chance of achieving this limit will require global emissions to be around 26 gigatonnes of carbon dioxide equivalent, or GtCO2e, in 2030. Countries’ announced emissions reduction pledges will reduce global emissions to around 46–49 GtCO2e, leaving an emissions gap of 20–23 GtCO2e. Put another way, we are currently on track for an average global temperature rise not of 1.5°C but of 2.4–2.9°C, levels at which the severest climate impacts become certain.

The second issue for COP26 is the finance gap. In Paris the richest countries promised the poorest that they would mobilise US$100 billion a year by 2020 to help them tackle climate change, and more thereafter. At the last count, in 2019, they had raised around US$80 billion. Developing countries have been loud in their protests.

But there’s a problem. Although the emissions and finance gaps are the big issues COP26 must address, neither will actually be negotiated in Glasgow. They are not even on the official agenda for the talks.

How is this possible? To understand it we need to delve into the past, for what might be called the “Glasgow paradox” — that the two most important issues at COP26 will not actually be the subject of its negotiations — has its origins in the turbulent history of UN climate negotiations.

The treaty underpinning these negotiations is the UN Framework Convention on Climate Change, or UNFCCC, agreed at the first Rio Earth Summit in 1992. Just a few years after the first assessment of global warming by the Intergovernmental Panel on Climate Change, or IPCC, it set out an overall goal and some governing principles for how the international community should control emissions and adapt to a warming world. In doing so it made a very clear distinction between developed and developing countries. Countries had “common but differentiated responsibilities”: while all had a general responsibility to act, developed ones — the Western world and Eastern Europe — had the specific obligation to reduce their emissions and provide finance and technological support to developing countries. In 1992 China was still unequivocally “developing.”

These principles were then enacted in the Kyoto Protocol, agreed at COP3 in 1997. The developed countries negotiated how much each would commit to cutting its emissions by 2008–12. (Some, such as Australia, were allowed to increase them.) Developing countries took on voluntary actions only — and insisted that these depended on financial and technological assistance from the rich world.

Kyoto was a landmark agreement, backed by sanctions in international law for non-compliance. But it failed at its first hurdle. Though personally negotiated by US vice-president Al Gore, it attracted not a single vote in the US Senate. America, its legislators agreed, could not accept a treaty in which China did not have the same legal obligation to act.

The emissions reduction targets negotiated under the Kyoto Protocol were largely achieved. But the US’s absence was not acceptable to the European Union, Japan and the rest of the developed country signatories, and they sought to negotiate a new agreement at COP15 in Copenhagen in 2009. Copenhagen foundered, though, when the United States insisted that China — now a rapidly growing “emerging economy” — must take on the same legal obligations to cut its emissions (and to be transparent about reporting them) as it had. China refused, and the negotiations broke down in acrimony and recrimination.

Fast-forward to COP21 in Paris in 2015. A third attempt was being made to agree on an implementing treaty. Now China was the world’s second-largest polluter and a major economic competitor to the United States and the rest of the developed world. Brazil, South Africa, India and other emerging economies had also become major contributors to climate change, and each was now willing to take on emissions reduction commitments. But they weren’t willing to negotiate these with other countries. And they were not prepared to have them made legally binding in international law, with Kyoto-style sanctions for non-compliance.

If the emerging economies wouldn’t do this, nor would the United States, which still insisted on legal parity. So the Paris agreement found a compromise. It set out a new and comprehensive set of rules on how governments should act, including the legal requirement that they must make a “nationally determined contribution” to the global climate process. But it was up to each country to decide for itself what that contribution should be.

The Paris agreement was undoubtedly a breakthrough. For the first time, every country in the world had to tackle its emissions, and to do so in pursuit of a specific temperature goal — limiting heating to “well below” 2°C, with an aspiration to keep it to 1.5°C. The agreement even set a “net zero” goal, albeit for some time in the second half of the century.

But Paris had a huge flaw. The contributions submitted by countries alongside the agreement didn’t add up to the agreed aggregate goal. The emissions gap was born.

Paris has a mechanism designed  to patch this up. It requires the IPCC to conduct a “stocktake” of the climate science three years after the agreement, and assess progress so far. And two years after that, countries must return to the table with stronger commitments.

The IPCC duly reported in 2018, with a much starker injunction that global emissions had to be cut by 45 per cent by 2030 to hold heating to 1.5°C. COP26 is now the five-year moment (having been postponed from 2020 because of Covid) when the emissions and finance gaps must be dealt with.

But the Paris compromise still rules. It is still up to individual countries to make their emissions cuts and finance pledges on their own. It is still not the task of the UN climate talks to negotiate these, and still not even the job of countries to discuss with one another what they each should be doing. Hence their absence from the COP agenda.

And despite much stronger commitments, countries are still not doing enough. The United States, the European Union, Britain, Japan and others have all this year strengthened their emissions reduction pledges for 2030, some very dramatically. But the gap to the 1.5°C trajectory remains. Although China and India have not yet announced their contributions (the only major emitters not to have done so), they can’t get near to closing the gap on their own.

So the emissions and finance gaps are what COP26 is primarily about, but neither is on the actual agenda. Of course, the conference will discuss emissions reductions and finance in general, and no doubt bitter speeches from developing countries about the inadequate commitments of the developed world. But there will be nowhere in the talks where the gaps can be narrowed.

So what will be negotiated at COP26? The official agenda is all about the “Paris rulebook,” the task of turning the general principles of the Paris agreement into specific, detailed regulations. Much has already been done in the intervening years, but there are still some major sticking points.

The largest of these is about “carbon markets.” These are the mechanisms by which developed countries, including Australia, and companies hope to be able to buy emissions reductions (such as tree planting) done in developing countries, to save them the difficulty and cost of reducing emissions themselves. Many companies claiming to be committed to acting on climate change (notably in the oil and gas and airline sectors) are expecting to get much of their emissions cut in this way — to the great consternation of climate campaigners, who see such “offsetting” largely as an unsustainable scam. Many developing countries are not happy about carbon markets either, and the Glasgow talks are likely to be tough.

So the Paris rulebook is not insignificant. But it is hard to argue that it is what’s really important. The negotiations over the regulations are highly technical, barely needing ministers, let alone leaders. And they are certainly not what climate activists, the public or the media think COP26 is about.

So how can this mismatch of expectation and reality be overcome? As the COP convenor, the British government hopes to bridge the gap in three ways.

First, it has brought the leaders together (which does not normally happen at COPs) precisely to discuss the shortfalls in emissions cuts and finance. In an ideal world it would be extracting stronger commitments than the assembled presidents and prime ministers have so far announced.

They might — just — achieve this on the finance gap, where recent announcements by the United States and others have offered hope that the US$100 billion promise could finally be achieved, and maintained up to 2025. But it seems extremely unlikely that any major country will improve its emissions pledge. In most cases, these have been painstakingly won in each country’s domestic politics, and no leader will want to reopen the argument at home. With China’s leader absent, the idea of a new “grand bargain” between the great powers looks out of the question, too.

But Britain still hopes that it can at least get the leaders to acknowledge that they’re not doing enough, and to commit conclusively to the 1.5°C goal and to the new goal of achieving net zero emissions by 2050. This certainly looks possible.

Second, Britain hopes to get some “side agreements” in four key areas where emissions need to be brought down. These are on building and financing new coal-fired power stations; slowing deforestation; accelerating the phase-out of petrol and diesel cars; and mobilising trillions of dollars of private finance for investment in green infrastructure and technologies. In each of these areas countries and companies have both been signing up to new commitments. So Britain hopes that “real economy” announcements in these areas will show that genuine progress is being made. It will try to bring these for the first time into the formal declaration at the end of the conference.

Third, Britain will encourage the demand by vulnerable countries that parties to the agreement should come back earlier to review their pledges. Under the Paris agreement this is due in 2025: given the continuing emissions gap, there will be huge pressure to agree an earlier review date, probably 2023.

But even if they are achieved, will these moves assuage the public demand for more urgent and stronger action? It is hard to see how they could. The climate scientists and campaigners — with Greta Thunberg their clear-eyed clarion — will say that it isn’t enough. In the conference hall they will be joined by the most climate-vulnerable countries. It will be hard for the media to report anything else. •

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“There is no greater potential problem for the world than greenhouse-induced climate change — particularly for Australia and for our region,” she said at the time. Since then, the potential has turned to reality while governments have dithered and slithered to avoid serious action. And nowhere more so than in Australia.

Two and a half years ago, the Morrison government went to an election still refusing to contemplate the reality of inevitable changes in energy use. It was far too busy proposing subsidies for new coal-fired power stations, approving new coalmines and running a scare campaign against Labor for threatening the jobs of coalminers. There was no policy on transition: it was coal and gas forever.

As slippery as he was on these questions during the campaign, Bill Shorten did promise to create a Just Transition Authority — an independent body working with companies, employees, unions, local communities and state governments on economic diversification, pooled redundancy schemes, and labour adjustment packages for regions affected by the closure of coal-fired power stations. But he gave no further detail and no commitment to funding beyond establishing the authority. The Greens promised something similar but added that their Clean Energy Transition Fund would have a total of $1 billion to spend.

Two and a half years later, promises of new jobs are raining down on fossil fuel workers like confetti. Earlier this month the Business Council of Australia said that moving to net zero by 2050 will create 195,000 jobs by 2070. Then it went one or two steps further and joined the Australian Council of Trade Unions, the Australian Conservation Foundation and the World Wide Fund for Nature in promoting the prospect of 395,000 jobs by 2040 if we build export industries in clean hydrogen, batteries and other areas. Take your pick — that’s either one and a half or three times the estimated 133,000 jobs now in fossil fuels in Australia. Are there any further bids?

Workers are entitled to be sceptical. Before the last election, the BCA said Labor’s policy of a 45 per cent reduction in emissions by 2030 would “wreck” the economy. Now it is advocating the same policy and says this is the one and only true road to prosperity.

New industries will certainly create opportunities, but not automatically. The NSW government’s announcement of five renewable energy zones has attracted serious investment. The first to go ahead is in the central west of the state, where the government received bids from the private sector for twenty-seven gigawatts of electricity worth $38 billion — nine times the generating capacity planned by the government. Andrew “Twiggy” Forrest has the resources to make good his proposals for green hydrogen manufacture in Gladstone in Queensland and the Illawarra and Hunter in New South Wales, even if there is a long way to go to turn them, and the jobs that go with them, into reality.

The labour market is dynamic, with jobs constantly disappearing and being created. The monthly employment and unemployment figures hide much of this movement because they capture only the net result of the change. And the phasing out of fossil fuels will be gradual, spanning decades, albeit with bumps along the way.

The Australia Institute’s Jim Stanford points out that his estimate of 133,000 fossil fuel jobs represents only about 1 per cent of the Australian workforce, and that proportion is already declining. The largest component is the 52,000 jobs in coalmining, followed by 33,000 in that portion of electricity supplied by fossil fuels, 28,000 in oil and gas extraction, 12,000 in gas supply and 8000 in coal and petroleum refining. Half of these jobs are located in or near capital cities — in companies’ head offices, in technical and professional roles, and in manufacturing and distribution — rather than in rural Australia.

In any one year in recent times, the economy has created twice as many new jobs as exist in fossil fuel industries. But particular regions are disproportionately affected. In six communities in Queensland, four in New South Wales and one in Western Australia, around one in nine jobs are in fossil fuels. Even then, Stanford points out, a similar number of people in each of those communities work in healthcare and social services.

None of this guarantees a smooth or fair transition, of course. Few miners and employees of coal-fired generators can expect to finish their old jobs one day and turn up in renewable energy or other industries the next, let alone with comparable pay and conditions.

Luckily, we already have experience in handling these kind of disruptions. Despite the suddenness of the French owner’s decision to close Victoria’s Hazelwood coal-fired generator in 2017, a series of initiatives cushioned the blow. The Victorian government created a support package that helped workers move to other power stations in the region or obtain jobs in mine rehabilitation, and established the Latrobe Valley Authority to fund a series of development and job creation initiatives. The unemployment rate in the Latrobe Valley actually fell from 9 per cent before Hazelwood closed to 6.5 per cent three years later. This success came at a cost to government budgets: the state committed $690 million and the federal government $43 million.

Other positive examples, and on a much larger scale, come from overseas. Before it started its long-term decline, Germany’s Ruhr Valley employed almost 500,000 coalmining workers. In 2007 federal and state governments, unions, the coal company and community representatives reached agreement to end subsidies for coalmining by 2018 and gradually close the mines. No redundancies were forced, but retraining and redeployment were strongly supported. Governments built new universities and technical colleges, funded environmental restoration projects and encouraged new business clusters, technology parks and cultural precincts. Unemployment remains higher than in the rest of Germany but much lower than it might have been in the absence of the orderly phasing out of coalmining.

Germany’s experience stands in sharp contrast to Britain’s, where laissez-faire policies largely ruled. Former coal regions in England, Scotland and Wales are now among the most deprived, with higher unemployment, poorer health and 50 per cent more people claiming the disability living allowance than in the rest of the country.

The assurances of a long-term role for coal and gas offered to the National Party by emissions reduction minister Angus Taylor — industries he says have “a great future” — put Australia where Germany was in the 1980s, before it accepted the reality of coal’s decline and started seriously planning.

But nor are promises of new industries enough, economically or politically. The successful precedents suggest that major policy and financial commitments are required from governments. The question is whether a federal government inclined to a hands-off approach (other than during Covid emergencies) is willing to step up.

The ACTU argues that the orderly closure of coal-fired power stations must involve no forced redundancies; lengthy and enforceable notice periods, such as AGL’s five-year notice of the closure of the Liddell plant; retraining schemes; and government support for economic diversification via investment in new infrastructure, education facilities and other initiatives. The rehabilitation of power stations and associated mines can also be a significant source of employment.

Most important of all for displaced workers are good wages and working conditions, which often have not been available in renewable energy.

Lest the Morrison government baulk at implementing union recommendations, substantial common ground can be found on these issues. “To believe that the market will be the sole solution to Australia’s decarbonisation is foolhardy,” says the Blueprint Institute, a think tank established by Liberal moderates that characterises itself as generally pro-market.

Blueprint argues that adaptation authorities should be created in coalmining and power-generating areas as a means of empowering local communities. They would each receive an initial $20 million from the federal government and continuing funding through 5 per cent of coal royalties collected by the states. Based on 2019–20 figures, this would raise $259 million a year, including $175 million in Queensland.

Like the ACTU, Blueprint favours requiring companies to give lengthy notice of closures, together with detailed planning for future investment and employment. It proposes income insurance for the first six months of unemployment to give employees the economic freedom to find high-quality jobs. This would be a variation on the social insurance schemes widely used in Europe and other developed countries that guarantee employees a large proportion of their previous incomes if they lose their jobs.

Blueprint suggests topping up existing welfare benefits to 70 per cent of individuals’ former wages, capped at $35,000. As well, it proposes short-term wage subsidies to firms hiring displaced coal workers in regions seriously affected by closures, and voluntary early retirement packages for workers over sixty.

If the government isn’t prepared to make commitments on this scale, it will create an obvious opening for the opposition. Labor is holding much of its fire, with the aim of directing maximum attention to the government in the lead-up to the Glasgow COP26 gathering. So far it has promised a National Reconstruction Fund with $15 billion in capital to help fuel a private sector revival of manufacturing, including in regional areas and renewable energy. Shadow climate change minister Chris Bowen has announced a $10,000 subsidy for each of 10,000 apprenticeships for jobs in renewable energy industries and another $10 million for a new energy skills program.

Bowen is also pushing for approval of offshore wind farms, which operate on a much larger scale than those on land and can, he says, provide tens of thousands of jobs, including in areas where coal-fired generators will be phased out. He promises Labor will “have much more to do and much more to say” on climate change policy.

The 2015 Paris agreement required signatories, including Australia, not only to develop ambitious targets to decarbonise their economies but also to take into account the “imperatives of a just transition of the workforce and the creation of decent work and quality jobs.”

Some countries have taken this seriously. The European Union has established a Just Transition Mechanism that is using a combination of grants and loans to mobilise no less than an anticipated €65–75 billion (A$102–118 billion) on a range of measures, including funding jobs in new sectors and providing training and other help to investors and businesses.

From what we know, Scott Morrison will be going to Glasgow without meeting the Paris agreement’s requirements on either score. Such a move would hasten the removal of climate policy from the government’s hands. Companies and investors would continue to withdraw their support for fossil fuels and look elsewhere to invest in renewable opportunities. Major trading partners could be expected to act on their threats to tax our exports for their emissions component. And our economic transition would be much more painful and disruptive than it needs to be. •

The publication of this article was supported by a grant from the Judith Neilson Institute for Journalism and Ideas.

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Promising net zero emissions by 2050 is a marketing tool; no cost, some gain. It matters only because it sets up expectations that will be used to pressure future governments to introduce the emission-reducing policies this government refuses to provide. Without matching action, business won’t believe the promise, and won’t make new investments. In itself, pledging net zero emissions by 2050 is just words.

A more significant question has been played down in the media coverage. Will the government meet Boris Johnson’s challenge to lift its target for 2030 — a 26 to 28 per cent reduction on 2005 levels, the smallest cut being offered by a G20 developed country? This short-term target is something the Morrison government might conceivably have to deliver; and it claims its existing policies would get us there. But figures within the Coalition are resisting Johnson’s pressure, and the government lacks the leadership to counter them.

Suppose, though, that “net zero emissions by 2050” was not just words. Suppose our government and other governments actually meant to change their policies to put us on course to meet the target. What would they have to do?

That is the core question put by the International Energy Agency, or IEA, in its latest World Energy Outlook. A Paris-based bureaucracy whose job is to track the data on energy use and give information and advice to governments, the IEA released this year’s report early to get in ahead of next month’s COP26 summit in Glasgow.

The IEA’s summary of the world’s current position is that we are now moving in the right direction at last, but there is a long way to go — a long way. “The world has started to bend its emissions curve,” its chief modeller, Laura Cozzi, said at the report’s launch last week. But if net zero emissions by 2050 is our target, she added, we are nowhere near meeting it.

The world’s use of coal peaked in 2018. Oil use is likely to peak by around 2025. Economic growth no longer means growth in emissions. Most of the electricity generation being added worldwide is solar, wind, hydro or bioenergy. Wind and solar are now the cheapest fuels for future electricity generation, and set to remain so.

But the IEA’s executive director, Turkish energy economist Fatih Birol, warns: “The world’s hugely encouraging clean energy momentum is running up against the stubborn incumbency of fossil fuels in our energy systems. Governments need to resolve this at COP26 by giving a clear and unmistakeable signal that they are committed to rapidly scaling up the clean and resilient technologies of the future. The social and economic benefits of accelerating clean energy transformations are huge, and the costs of inaction are immense.”

On present government policies worldwide, says the IEA, emissions will still be growing in 2100 and global temperatures will have risen by 2.6 per cent.

Even if recent government pledges to reach net zero emissions, mostly by 2050, are delivered in full, the modelling says that the world will be 2.1°C degrees hotter in 2100 than in pre-industrial times — clearly overshooting the goal of holding the temperature rise to 1.5°C degrees.

Why? Because global warming requires concerted global action. Of the more than 200 countries in the world, just eighty have committed to lowering their emissions to net zero. Australia, Israel and Singapore are the only holdouts in the developed world, but others yet to commit include India, Indonesia and Russia — three of the six countries now generating most of the world’s economic growth — plus most of Southeast Asia, most of Africa, and virtually all the Middle East.

“Emissions don’t have a passport,” Dr Birol notes. This is why Australia’s failure to lift the low bar it has set itself for 2030 is sand in the wheels of other world leaders trying to make global action work. With Australia one of the world’s largest per capita emitters of greenhouse gases, its modest target tells the world we aren’t serious about ending net emissions by 2050; we are a coal exporter looking after our interests. And that strengthens resistance to action in other countries.

But suppose Australia and the other recalcitrants do end up on board, and soon enough to matter. Suppose the leaders in each country actually legislate policies that would end the world’s net emissions of carbon dioxide and other greenhouse gases by 2050. What would they have to do to end global warming?

The IEA modelled energy and emission outcomes on several scenarios: business as usual (continuing existing policies in each country); adding the pledges made by China, the United States and seventy-eight other countries to reach net zero emissions; and its own estimates of the cheapest and fastest path for the world to reach net zero by 2050.

Of course the IEA’s path is not the only way to get there, but any alternative way is likely to be more expensive and just as disruptive. This is modelling, so it’s not gospel, but it does suggest the orders of magnitude we are facing, and which pieces of the puzzle are the most important. These are a few key takes.

The critical battles in this war will be fought not in Australia and the West, but in today’s developing countries: above all China, but also India and its neighbours, Southeast Asia and, not least, Africa.

Developing countries are already the driving force of the global economy. The International Monetary Fund projects that they will provide 70 per cent of the world’s real economic growth in the next five years. On that reckoning, China and India alone will generate 40 per cent of global growth, while all the advanced economies combined — the United States, Europe, Japan and the others — will supply just 30 per cent.

But the choices the developing countries make will be greatly influenced by how rapidly the developed world — and advanced developing countries like China — phase out the old technology to bring in the new.

The faster the West dumps fossil fuels and invests to bring on new technology and lower its price — by developing green hydrogen and ammonia as energy sources, for instance, and making it viable to capture, utilise and store carbon emissions — the cheaper it will become for developing and developed countries to invest in them rather than coal and gas. We have an important part to play.

Coal-fired power must go, and as soon as possible.

The IEA’s findings are not strictly policy recommendations. But in effect it is saying, “If net zero emissions by 2050 is your goal, this is the best way to get there.” And in the power sector, the message is very clear: coal has to go, ASAP.

The IEA’s pathway to net zero specifies no new coal-fired power stations, anywhere in the world. Those already under way (mostly in China) should be abandoned where possible. And — in sharp contrast to the Australian government’s policy — the world should open no new coalmines or extensions thereof.

On the IEA’s path to net zero, half the world’s coal-fired generators would shut down by 2030 and the electricity generated from coal would shrink by two-thirds. The plants that remain would be newer ones that could operate flexibly as a back-up to solar and wind power — or one able to be converted to capture their CO2 emissions and utilise or bury them.

By 2050, in its scenario, coal-fired stations would supply only 1 per cent of the world’s electricity demand, and they would all be capturing their carbon dioxide emissions for industrial use or storage. Coal would survive only by becoming emissions-free.

Coal (and gas) would retain a bigger role in large industrial plants designed to capture their emissions. But the IEA projects that even in 2050, a world producing net zero emissions will use only a tenth of the coal we now produce each year. That would have quite an impact on Australia.

“Accelerating the decarbonisation of the electricity sector is the single most important way to close the 2030 gap,” it says, “and could cut emissions by around 5 gigatonnes,” or about 15 per cent of global emissions. “We estimate that up to 60 per cent of the gap [between existing policies and the path to net zero] in the electricity sector can be closed through cost‐effective expansion of wind, solar photovoltaics, hydro and nuclear power.”

The IEA’s modelling implies that coal is already in inevitable decline; the net zero target would simply accelerate that. Even on existing policies, it sees coal’s share of global electricity demand shrinking from 40 per cent in 2010 to 26 per cent by 2030, and 13 per cent by 2050.

In advanced economies, even Australia’s, coal has been shrinking in importance for years, and now faster than ever. Renewables have replaced it as the cheapest source of power, so when solar or wind are going full pelt, coal stations have to reduce their output, and be ready to increase it again when needed. They work much better when they can burn coal steadily, flat out. But that world has now gone.

New South Wales and Victoria have not built a new coal-fired power station since last century. Their remaining coal generators are like a collection of old Holden Kingswoods, being driven past their use-by date. They frequently break down and are becoming uneconomic to run in a system in which renewables are the cheapest source of power. Last year coal supplied just 54 per cent of Australia’s electricity — not the 60+ per cent claimed by many analysts — and could already have sunk below 50 per cent.

Yet as coal fades away, total power generation worldwide is set to almost treble by 2050. Most of it would come from new solar and wind plants, but with significant portions also from hydro, bioenergy and the new kids on the block, hydrogen and ammonia.

In the world of net zero emissions, the IEA projects that 88 per cent of a vastly expanded global energy demand will be met by renewables. Solar and wind would each generate roughly a third of that — each generating almost as much electricity in 2050 as the world now generates from all sources including coal, gas, hydro and nuclear.

But the IEA believes we will also need nuclear power and carbon capture to make net zero work.

Its proposal to ban coal might warm green hearts, but the IEA is convinced that the world in 2050 will also rely for its electricity on expanded nuclear power — and some gas and coal, mostly from power stations that capture their carbon and use or bury it.

The critical issue is the one Australia has been grappling with for years without success: how to generate electricity when the sun is not shining and the wind is not blowing. The IEA points out that there are many ways of doing so, but they are expensive, and some are cumbersome, so all possible options will be needed.

It would be expensive to have your power system relying solely on batteries and pumped-storage hydro to provide energy when solar and wind are having bad days. Witness the latest revelations that Snowy Hydro 2.0 and its transmission links could cost more than $10 billion, rather than the $2 billion first promised. The scale of new battery storages is growing rapidly, but they are still niche products, there to help in emergencies rather than power us night after night at low cost.

That’s why the IEA’s modelling envisages nuclear power generation roughly doubling worldwide by 2050, mostly in China and the developing world. It accepts that nuclear is now politically unacceptable in the West, but expects it to regain its place, even in Japan and Europe. In its view, nuclear is a mature, safe and relatively cheap technology that produces no emissions — and can supply the crucial backup flexibility required by a renewables-based system.

By 2050 it sees nuclear supplying 8 per cent of the world’s power needs, with emissions-free gas and coal producing just 2 per cent between them but playing a backup role to the dominant renewables. Gas would hold its ground longer than coal, because it emits only half as much carbon dioxide and gas plants can operate more flexibly than coal stations. But by 2040 most of the world’s gas-fired power stations would also have shut down.

The IEA has not abandoned hope that carbon capture and storage will become a significant contributor to meeting the net zero emissions goal. But it argues that the lack of investment by business and governments to pave the way for carbon storage — and hydrogen and ammonia as sources of fuel — is limiting the potential role they can play.

“Without innovation and learning‐by‐doing to drive down their costs over the next decade,” says the IEA, “it would be much more difficult for these technologies to ramp up after 2030 to contribute to achieving net zero energy emissions by 2050.”

There is another problem with the carbon capture option that the IEA carefully does not mention. We’ll come to that shortly.

Emissions could be significantly reduced if we focused more on raising energy efficiency.

In the old world, growth in the economy and growth in energy use went hand in hand. But in the last decade they have diverged sharply: global GDP has surged, mostly in developing countries, while growth in energy use has slowed.

Energy intensity — the dollar of GDP created per unit of energy consumed — is now growing by nearly 2 per cent a year. Double this annual growth to 4 per cent, the IEA says, and in a decade we could prevent energy use that otherwise would have raised global emissions by a third.

There are thousands of opportunities: from behavioural changes like turning down the heating and airconditioning in homes and offices (the IEA recommends 19 to 20 degrees for heaters, 24 to 25 for air conditioners) to replacing inefficient old technologies with energy-efficient new ones. Industry in particular could make big savings, the IEA argues, especially in reducing its use of materials, but the opportunities are across the board, and include videoconferencing, working from home, retrofitting buildings and increased recycling.

The big one now is electric vehicles. Two years ago the IEA’s Outlook highlighted the energy inefficiency of SUVs. On average, it said, they need 25 per cent more fuel to drive a kilometre than a car does — and with 200 million of them on global roads, they had become the second-biggest source of growth in rising global emissions. Alas, no one took any notice.

But this time the IEA has a positive story to sell: switching to electric vehicles powered by renewable energy could save billions of tonnes of future emissions. As part of the path to net zero, the IEA says, with government support EVs could overtake petrol- and diesel-fuelled cars to win 60 per cent of the global vehicle market by 2030 — up from less than 5 per cent in 2020.

The mining industry must immediately implement a crash program to sharply reduce methane emissions from mining gas and other fossil fuels.

Methane gases in the atmosphere are shorter-lived than carbon dioxide but far more potent as a cause of global warming. We’ve all seen photos of flames soaring from the smokestacks of Middle East oil and gas wells as excess gas is burnt off. In Australia, soaring methane emissions from gas fields drove much of the rise in greenhouse gas emissions from 2014 to 2019.

The IEA says these emissions could be cut by more than 80 per cent by 2030 if mining companies carried out “the elimination of all technically avoidable methane emissions.” It’s all doable, and…

Many of these reforms could in fact save money.

A prime example: stopping the leaks from oil, gas and coal mining would cost the industry US$13 billion (A$17.5 billion), the IEA says, but the market value of the gas they would save is more than that. It’s an example of the inertia caused by that “stubborn incumbency” of established practices.

People in many countries are paying more for power from dirty coal-fired stations than they would if the old plants were replaced by new solar and wind generation. Even now, the IEA estimates, solar and wind plants are easily the cheapest to operate, and the cheapest even including construction costs, arguably except for gas in the United States. By 2030 they will be the cheapest everywhere, by a mile.

To get there, though, we need to double energy investment.

The world now spends about 1 per cent of its GDP investing in new energy plants, transmission lines, pipelines and so on. The IEA says that share needs to rise to 2.2 per cent to finance the rollout of solar and wind power, EV charging stations, transmission lines and other works needed to make net zero emissions feasible. And moreover:

Most of that investment must be in developing countries.

That’s the real problem. Borrowing money is cheap in countries like Australia, but in developing countries it can cost seven times as much. Their governments and companies are financially weak —  half the electricity companies in Africa are in financial difficulty — and rich countries like Australia have not delivered the aid they promised in Paris in 2015 to help developing countries to carry out their part of the green revolution.

The IEA urges the International Monetary Fund, the World Bank and governments to get together to come up with new financial avenues to make this aspiration a reality. It points out that developing countries are going to need a lot of iron, steel, cement, chemicals and other energy-intensive products. And the chances of the world halting global warming anytime soon will depend on what choices they make, and how much energy-efficient technology they can afford to buy.

The World Energy Outlook 2021 is also full of the positive messages about the economic and social benefits of this green revolution that we now hear from its former opponents like the Business Council and the Murdoch press. (Welcome aboard, what took you so long?) But two of its most important messages are left unstated. They are crucial, so let’s end with them.

No country is more important in achieving net zero emissions than China.

The IEA is too diplomatic to say it, but China is the key to success. It now burns 56 per cent of the coal we consume. Xi Jinping has promised to stop financing new coal-fired stations in the rest of the world, but his government is still building and planning them in China. On its current policies, the IEA numbers show, China would still account for half the world’s use of coal in 2050. We will only get to net zero if the Chinese government stops building coal-fired stations in China.

My regular reminder: China is already the biggest economy in the world, and by a growing margin. The IMF projects that by 2025, its real output will be 30 per cent greater than that of the United States. Of course, China could be exaggerating its numbers, and right now — with its building giant Evergrande on the verge of collapse — the unsustainability of its economic path is more obvious than ever.

But it will still be by far the most important country we need to have onside.

The IEA’s path to net zero emissions assumes a carbon price.

You could get some of the way without a carbon price, but nowhere near zero. Regrettably, “technology, not taxes” is just another of the Coalition’s empty three-word slogans. The reason for a carbon price or tax is to drive the adoption of new technology when business as usual doesn’t provide sufficient reason for it.

I mentioned earlier the IEA’s continued faith in carbon capture, utilisation and storage. Its own numbers make it clear that CCUS has no future on current policy settings. Without a carbon price, it is simply unviable. Hydrogen and ammonia, too, need a carbon price to be viable. It is just Economics 101: if production involves “externalities” that damage third parties, governments should put an appropriate price on them. Make the polluter pay, and good solutions will be found.

It’s not hard for people to recognise that fact: Europe’s emissions trading scheme is now widely accepted. But to build the case for that, a country needs to have real leaders. Australia unfortunately has none, at least at federal level, and there is no sign of any emerging. •

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In a recent interview on the electric vehicle podcast The Driven, NSW energy minister Matt Kean was waxing lyrical about the Tesla Model 3 he bought last year — which he reckons is the best car he has ever driven — and mentioned that Perrottet, who also lives in the Hornsby LGA, is one of the few fellow ministers he can regularly see in the current Covid lockdown.

“We’ve been catching up, doing a bit of walking and whatnot, and he actually asked if he could have a drive (of the Tesla) the other day. And I’m not going to get him in trouble, but it’s fair to say that he enjoyed the very fast experience,” Kean told the podcast. “And he says to me, ‘I’d love to get one of these things.’ So I’m doing a bit of environmental or EV diplomacy with my colleagues at the moment. And hopefully they can see that [EVs] are fun vehicles, they’re cost-effective and they’re a great product.”

It remains to be seen whether Perrottet buys a Tesla, either for personal use or for work. But given that he has just become premier, and the premier’s vehicle is probably already decided for him, and he’s in the middle of a pandemic, there will be other priorities. And, to be honest, you can’t fit a family of his size in a Tesla Model 3, and even the new and bigger Model Y crossover SUV isn’t coming as a seven-seater, at least not initially.

But the fact that Kean — who features prominently in the reported cross-faction deal that is likely to propel Perrottet to the leadership this week — has got Perrottet interested in Teslas in the first place is no mean feat. Everyone will be hoping that it points to a broader awakening.

Several years ago, the signs were not so good that Perrottet understood the threat of climate change or the opportunities available from tackling it. Addressing conservative think tank the Centre for Independent Studies, he railed against investments in renewables, and climate policies in general.

“An example of gratuitous waste is the almost religious devotion of the political left to climate change,” said Perrottet, who knows a thing or two about religious devotion, having grown up as a devout Catholic — one of twelve children and now father of six — and been educated at an Opus Dei college.

But the thirty-nine-year-old will find himself leading a state that has just announced what could easily be described — with the exception of the Australian Capital Territory — as the country’s most ambitious climate policy. New South Wales, which had been slow to adopt renewables and move away from coal, has set a new, improved target of a 50 per cent emissions cut by 2030 as it seeks to replace its ageing and increasingly decrepit coal generators. And Kean has made it clear that if all the coal generators in the state need to go by 2030, then they can and they will.

Along the way, Kean managed to convince Treasurer Perrottet to commit $380 million towards creating the renewable energy zones that will be crucial to navigating that clean energy transition, which promises to be as quick and dramatic as any other state’s, or even country’s. “The Roadmap is expected to attract $32 billion of investment over the next decade and create thousands of jobs,” Perrottet enthused at the time.

Kean also managed to convince Perrottet not to follow in the footsteps of Victoria and immediately impose an EV road tax, and to instead delay it until EVs are well established in the market. The pair, along with transport minister Andrew Constance, ushered in the most generous EV support mechanisms of any state — a $490 million package that includes $3000 rebates, a stamp duty exemption, and funding for a comprehensive EV charging network. “From young adults saving for their first car in Western Sydney to retirees planning a road trip to Broken Hill, these incentives will make electric vehicles accessible and affordable for all NSW residents,” Perrottet said.

Kean is clearly a very persuasive man. He also succeeded in persuading Nationals leader John Barilaro of the benefits of the clean energy switch and the opportunities in regional Australia that will come from being a renewable superpower. These are ideas that have proven well outside the comprehension of Barilaro’s federal colleagues.

But there are two big questions for voters and investors as Perrottet gets ready to take the reins at state parliament.

The first is over the change in cast. All the key players who put together those announcements are now out the door or redeployed. Berejiklian is gone, and Barilaro is also quitting politics. Constance, also behind the rapid electrification of Sydney’s bus fleet, is trying his luck at a federal seat, while Kean looks likely to be shifted to the state Treasury when Perrottet gets the top job.

So who replaces Kean as energy minister? And will Kean as treasurer be as engaged on climate and the clean energy transition as he is now? And will Perrottet, once anointed, turn out to be just an obliging Covid-buddy for Kean, or has he really changed his spots? Everything else about Perrottet — his views on abortion, and support for Donald Trump and letting it rip on Covid — points to his being a key player on the far right of Coalition politics.

If Perrottet were to honour those recent commitments — on climate, emissions, renewables and EVs — that would be a first from the far right in Australia. And as head of the country’s biggest state economy, with the biggest coal fleet in town, it would be a game-changer in Australian politics. It’s one thing for a moderate like Kean to shine the light on the clean energy future, but quite another for a Catholic conservative. It may come down to whether Perrottet ultimately loves Tesla because he thinks it would be a fun toy or because it points to a prosperous and blessedly fossil-free future. •

The publication of this article was supported by a grant from the Judith Neilson Institute for Journalism and Ideas.

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Until about five years ago, debates on climate policy lined up the extensive evidence of rising global temperatures and modelling showing worse to come against statistical quibbles and “sceptical” arguments that came down to the belief that “scientists are always predicting disaster but it never happens.”

In 2021, though, we no longer need to look at models to see the effects of climate change arriving faster and more destructively than most of the modellers thought possible. For Australians and many others around the world, climate change has taken the form of almost unstoppable bushfires. For those who have yet to feel climate change directly, the pandemic provides life experience of a long-predicted disaster that has turned out worse than most people imagined.

Even this direct experience has turned out not to matter much to some people. The fact that the New England area was devastated by fire in 2019 hasn’t shifted the denialist/do-nothingist position of its local MP, Barnaby Joyce, and probably won’t cost him his seat at the next election.

The same is true, in spades, of Covid. In the United States in particular, conservatives who have seen friends and relatives die around them continue to insist that the whole thing is a hoax. There’s now a whole genre of stories (reminiscent of deathbed conversion narratives) in which people dying of the disease finally urge their friends to get vaccinated or, occasionally, go to their graves still denying everything.

Despite all this resistance, we have collectively made enormous efforts to control Covid. For the most part, we have accepted handwashing, social distancing, masks, travel restrictions and periodic lockdowns even while being unsure which measures will work and which will turn out to be unnecessary. Now that vaccines have become available, the majority of the population has rushed to protect themselves and everyone else. And there is increasingly little patience for the selfish or misguided minority who refuse, even when given every opportunity to get vaccinated.

The contrast with climate change is striking. We know, from looking at successful examples, that we can greatly reduce greenhouse gas emissions at costs too small to be detectable in the aggregate economy.

By 2025, most European countries will have eliminated coal-fired electricity altogether; several have already done so. The main policy instrument used to achieve this goal has been an emissions trading scheme that requires firms burning coal, iron or gas to buy a tradeable permit. The permit price was below €10 per tonne for some years, but has now risen to €50. Since generating a megawatt-hour of electricity using coal emits roughly a tonne of carbon dioxide, the scheme effectively adds around A$80/MWh (or 8 cents/kWh) to the cost of coal-fired electricity, with a smaller effect on gas-fired electricity.

Since the emissions allowed under the EU scheme are currently around 1.5 billion tonnes, the annual value of permits used is roughly €75 billion, or around 0.5 per cent of the European Union’s GDP. This is not an economic loss; it is a transfer from polluters to society as a whole. The actual economic cost is even smaller.

The same point can be illustrated by Australian experience. The Gillard government’s short-lived carbon tax/price significantly reduced emissions. But despite Tony Abbott’s claims about a “wrecking ball” going through the economy, neither the imposition of the tax nor its removal had any measurable effect on GDP or other indicators of aggregate performance.

Ending coal is only a first step. But an extension of the same policies — a doubling of the EU carbon price, for example — would see a rapid replacement of gas-fired electricity with a combination of solar, wind, battery storage and other zero-carbon options. And even if the economic impact were quadrupled it would still be so small as to be undetectable against the background of ordinary economic fluctuations, let alone crises like the pandemic.

If the electricity supply were decarbonised, electrifying the vehicle fleet would eliminate emissions from road transport. Again, we have examples to show how easy this would be. Norway has committed to ending sales of internal combustion engines. Already, electric vehicles account for more than half of the country’s new car sales and around a fifth of the total car fleet. This outcome was achieved with a mix of fairly modest measures, such as exemptions from purchase taxes and parking fees. As the cost of electric vehicles has declined, some of the more generous measures have been scaled back.

A number of national governments have committed to ending sales of internal combustion engines, and car manufacturers have announced plans to switch to producing electric vehicles. But current policies will leave lots of petrol and diesel vehicles on the road well past 2040. Incentives on the scale of those being offered in Norway, combined with a hard deadline for removing internal combustion vehicles from the roads, if announced now, could put an end to transport-related emissions by 2035.

The main economic cost would be the scrapping of vehicles before the end of their usable life. But owners could be compensated with a version of the “cash for clunkers” scheme that ran in the United States a few years ago. This isn’t an elegant policy solution, but when we are faced with the prospect of destroying the global climate we can’t afford to worry about such things.

Other responses, including drastic limits on air travel, might seem more draconian. But we have all put up with near-total bans on international travel, and lots of constraints on domestic travel, imposed with little or no notice in response to pandemic outbreaks. Replacing business travel with Zoom has turned out to be easy. As for recreational travel, a very simple response would be to replace frequent short “getaways” with the longer holidays, taken once a year or less, that were normal in the twentieth century. This would allow trains to substitute for planes in many cases.

We have more time to act on climate than we did on Covid. But that time is running out, and we are not using it well. •

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If McCormack wasn’t anti enough, then we have to wonder what his replacement, Barnaby Joyce, has in store. When the Conversation’s Michelle Grattan asked McCormack back in June whether he would allow the government to adopt a goal of net zero by 2050, he replied, “Well, we’re not going to sell our coalminers out, no way, shape or form, as Nationals. And nor is Scott Morrison… [W]e’re not signing up to anything.”

More than a year earlier his attitude to net zero by 2050 was the same: “I think if you go down that path, what you’re going to do is send factories and industries offshore, send manufacturing jobs offshore.” Yet these very public and very emphatic protestations were not enough to ward off a challenge.

So why exactly was Barnaby Joyce elevated to the role of Australia’s blocker-in-chief? Apparently, because the National Party is now the champion of blue-collar workers in mines, in smelters, refineries and power stations, and in our oil and gas fields and liquefaction plants. As Matt Canavan, seemingly Joyce’s chief backer, went so far as to say, farmers aren’t numerous enough to be the National Party’s most important constituency.

The Nationals claim they will defend hi-vis workers against the global push from a net zero coalition made up of the United States, Canada, Japan, all of Europe, South Korea and China. Canavan told parliament that rather than adopt a net zero target we should “put Australia first.”  This means adopting “policies that will bring back manufacturing… and not be beholden to agreements that are worked out in overseas capitals that betray the interests of the average working men and women of this country… That is what, I know, Barnaby Joyce is focused on.”

But there’s just one problem. The workplaces the Nationals want to protect send almost all their production to markets controlled by governments committed to net zero emissions by 2050. Ninety per cent of our aluminium is exported overseas, and 87 per cent of our alumina. Eighty-five per cent of our black coal production is exported, as is 80 per cent of our oil and 70 per cent of our gas. And where the governments in our markets aren’t committed to net zero, they won’t necessarily escape the carbon price/tax adjustments that the European Union has committed to applying to imports, and that the United States may well adopt.

The global financial markets can see that this means carbon-intensive businesses are no longer worth the risk. The governor of the Reserve Bank of Australia, Philip Lowe, revealed in June that “a very frequent question” in the international meetings he attends is “What is Australian business doing to decarbonise?” “Many international investors are very focused on this issue…” he said, “and that’s a trend that is only going to continue.”

If you don’t believe the Reserve Bank governor then take it from the fossil fuel industries themselves. One of Australia’s major thermal coal producers, Whitehaven Coal, complained to a parliamentary inquiry that Australian banks’ lending policies “are not tethered to any local emissions-reduction framework and go significantly beyond the current or likely future energy transition arrangements outlined by the Australian government.” Sandy Mak, Lawyers Weekly’s Dealmaker of the Year, told the Australian oil and gas industry’s annual conference that when she tries to broker a merger or acquisition involving any kind of fossil fuel, “a whole bunch of clients… say they can’t do it.” These major clients are telling Mak they will “never get it signed off by the investment committee.’’

The message is equally clear in manufacturing. The chief executive of Rio Tinto, the majority owner of Australia’s alumina and aluminium facilities in Queensland and the Hunter Valley, told investors the company will dump plants whose carbon intensity is inconsistent with its 2030 emissions reduction strategy. No prizes for guessing which ones: he noted that the company’s Australian assets are on “thin ice.”

The industrial might and smarts of the regions and corporations that have adoped an industrial-technological strategy of killing off fossil fuels are truly intimidating. Have a look around you at the technology and manufacturers that define “world-leading” and then ask yourself — where are they betting their chips? Where is California, and especially Silicon Valley, putting its money? How about Korea’s Samsung and LG or Japan’s manufacturing giants? What’s the strategy of German technology and manufacturing leaders like Siemens and Volkswagen?

In fact, look at the corporate strategies of almost all major car manufacturers: Ford, General Motors, Volvo, Porsche and even Bentley are planning for all new car sales to be electric by 2030–35. Even Mercedes, a laggard, expects half of its cars will be electric by 2030. These companies will then deliver the last piece of the decarbonisation puzzle: low-cost energy storage to go with low-cost wind and solar.

Canavan says that China’s behaviour means this can all be ignored. It’s true that China’s heavy reliance on coal and growing oil and gas consumption are serious problems. But the world’s leading analyst of the global oil and coal market, Wood Mackenzie, had this to say about China’s pledge to net zero emissions:

When President Xi Jinping announced the country’s goal of carbon neutrality by 2060 last September, he wasn’t simply indicating that China would adjust its energy mix to reduce emissions, he was giving notice of the complete transformation of its economy and how it produces, transports and consumes energy. For Beijing, energy independence and decarbonisation are inseparable: by winning the clean-energy race, China can cast off the shackles of its reliance on others and dominate the resources and technologies the world needs to decarbonise. This isn’t future gazing. China is innovating, not replicating. Decisive government and private-sector efforts have put it well ahead of the game in virtually all clean-energy supply chains and technologies.

While China consumes a lot of coal, it isn’t much of an exporter of either coal or coal technology. But it absolutely dominates the global market for solar panels, and it is an increasingly important wind-turbine supplier. It is also furiously building up its manufacturing capability in batteries and electric vehicles. With a population whose health will be greatly improved through the rollout of zero-pollution technology, a move to net zero is unequivocally in China’s own interests.

So should we be betting the communities of Central and North Queensland and the Hunter on the hope that every one of these global economic powerhouses will fail?

The reality is that the National Party leader is an irrelevant minnow to the leaders of the world’s biggest economies and corporations. A person powerless to do anything but gum up the wheels of Australia’s effort to better prepare for a new energy future.

Barnaby Joyce is but a minor speed bump in the way of a monster truck poised to mow down Australia’s fossil fuel reliant regions unless we get our act together. At best, we have a ten-year lead time before that truck comes rolling through town in earnest. We need to reshape our energy system to repower mining and manufacturing, so that we are on board that truck rather than under its wheels. •

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On 22 April, Joe Biden will hold a virtual climate summit aimed at persuading world leaders to take more ambitious action to reduce greenhouse gas emissions. The US president has correctly identified climate change as an “existential threat,” and his US$2 trillion infrastructure package includes substantial investment in renewable energy and electric vehicles. His climate ambassador, John Kerry, has identified Australia as one of the holdouts, linking us to the Bolsonaro regime in Brazil. “Australia has had some differences with us, we’ve not been able to get on the same page completely,” he said during an interview in February. “That was one of the problems in Madrid, as you recall, together with Brazil.”

Brazil’s president, Jair Bolsonaro, appears to have taken the hint: his climate denialist foreign minister has been forced to resign and his government has publicised a letter from Biden offering cooperation on climate policy. Australia could easily end up in a minority of one at the summit, unwilling to move beyond the government’s patently inadequate offer of a 26 per cent reduction in emissions by 2030.

Everyone outside the lunatic fringe of the government’s backbench knows that the final outcome of this process will be a commitment to net zero emissions by 2050. We can do this voluntarily or we can wait to have it forced on us by the trade sanctions being prepared by the European Union and foreshadowed by the United States. Morrison has already inched towards this position by acknowledging that it would be desirable to reach net zero preferably by 2050.

It would make political as well as economic and environmental sense to make the commitment in time for Biden’s summit. At best, it might shift the domestic focus from the scandals besetting the government. Even if that doesn’t happen, it could hardly do any more damage than the daily run of disasters. Some backbenchers might shift to the crossbench, as Craig Kelly has already done and Andrew Laming will probably be forced to do before long. But they won’t vote to bring down the government, and Morrison has survived minority government before.

The big problem is that, having announced a 2050 net zero target, the government needs to map out a policy that might plausibly get us there. The task is made more difficult because the simplest and most economically sensible way of reducing emissions, a carbon price, remains unacceptable to the Coalition.

This month’s release of former chief scientist Alan Finkel’s Quarterly Essay, Getting to Zero: Australia’s Energy Transition, seems to provide the perfect opportunity for the government to reset the debate. Finkel focuses almost exclusively on technology, mentioning a carbon price only in the context of the high price required to make carbon capture and storage economically viable. He is diplomatic about the very limited efforts made by the current government, most notably the Emissions Reduction Fund, suggesting that it could form the basis of a transition program.

Even so, adopting Finkel’s plan would require Morrison to dump some longstanding positions. It would also upset a significant proportion of his base.

Finkel begins by dismissing as “non-starters” two technologies he has previously suggested might be part of the solution. These are “clean coal” (supercritical coal-fired power stations, with or without carbon capture and storage) and nuclear power (including small modular reactors), both of which have plenty of supporters in the Coalition parties.

Finkel’s list of solutions makes plenty of sense but would require Morrison to eat his own words on a number of issues. He summarises his proposals thus: “Step 1: Replace all the existing electricity generation with zero-emissions electricity. Step 2: Generate lots more zero-emissions electricity, so that we can use it for stationary energy [manufacturing, building, mining and so on] and transport. Step 3: Generate lots more electricity, so that we can use it to make hydrogen for those instances where electrons are not ideal. Step 4: Generate many times more electricity, to produce hydrogen for export. Step 5: Produce lots more electricity, to produce goods that embody large amounts of energy, such as zero-emissions steel and zero-emissions aluminium.” All these steps, he adds, can happen simultaneously.

Steps 1 and 2 pose the biggest problems for the government. Step 1 will require abandoning years of rhetoric about the supposed unreliability of wind and solar power, as well as making some significant policy shifts. Step 2 will force Morrison to walk back his silly pre-election jibes about the abolition of the weekend.

But Finkel’s analysis of improvements in battery storage provides Morrison with the opportunity to say that technological change has delivered this part of the government’s “technology roadmap” sooner than expected. And with the vehicle industry itself calling for emissions standards, the time will never be better for the government to embrace the shift to electric vehicles.

The export part of the proposal is also critical. Along with sections of the Labor Party, the government is clinging to the idea that Australia can be the “last man standing” in the global coal trade. But the export of renewable energy, either as electricity or in the form of hydrogen and ammonia, should appeal to the conservative side of politics.

With one exception, Morrison’s track record suggests he will duck the hard decisions, prefer spin to policy, and shift the blame for failure wherever he can. But that one exception is a big one. As the scale of the pandemic became apparent early last year, the government shifted rapidly from its plan for a small-scale, targeted response to the all-out effort of JobKeeper and JobSeeker. In the process, a decade of rhetoric about the wasteful and unnecessary nature of Kevin Rudd’s response to the global financial crisis was thrown out the window.

The climate crisis might not be as fast-moving as the pandemic, but it has caught up with us now. Let’s hope we see the Morrison of March and April 2020 one more time, and not the PR man we usually get. •

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Scott Nargar, Hyundai’s “senior manager of future mobility,” stands in the middle of the road holding a remote control. He presses a button; the steering wheel spins on its own and the car rolls backwards until it’s parallel to the kerb. From a nearby apartment window, a black cat gazes unblinkingly at this fusion of the supernatural and the mundane. And I wonder: is this what the future feels like?

Nargar opens the door and hops back into the driver’s seat. “So basically, after that, the car turns itself off, puts itself in park, locks itself and I can walk away,” he says, matter-of-factly. We drive on, and he runs me through the Nexo’s high-tech cockpit: blind spot cameras and pedestrian-seeking auto brakes; ventilated seats and a heated steering wheel.

It all sounds deluxe, but I’m mostly interested in what’s in the Nexo’s tank: pure hydrogen. Hydrogen-powered cars in Australia are rare; this is one of twenty on lease to the ACT government. The car runs on the electricity produced when hydrogen reacts with oxygen in a fuel cell. The only thing it emits is a curl of steam.

The car also filters the air as it drives. We pull onto an avenue leading to Parliament House and zip past cars belching fumes into the afternoon sky. Nargar points to a huge touchscreen display in the centre of the console showing he’s driven 208 kilometres that day. “I’ve purified 153.1 kilolitres of air — which equates to enough air for five adults to breathe for a day. And I’ve displaced nearly thirty kilos of carbon dioxide,” he says.

In May of 2020, carbon dioxide concentrations in Earth’s atmosphere reached a record 417 parts per million, which means for every one million molecules of gas in the atmosphere, 417 were carbon dioxide. These concentrations are growing steadily; in Australia, even Covid-19 lockdowns couldn’t stop the rise. Without radical cuts to greenhouse gas emissions by 2030, says the UN Intergovernmental Panel on Climate Change, a planetary disaster awaits. We must find new, cleaner fuel sources or else perish together. Renewable energy can certainly get us part of the way, but it won’t be enough.

That’s where hydrogen comes in. You’d be hard-pressed to find anyone in energy circles who disputes that, in theory, hydrogen could eliminate carbon from much of the global economy. How to do it right, and in time to avert climate catastrophe, is the conundrum now before us.

Hydrogen is the most abundant element in the universe, but you can’t see, smell or taste it. It was made in the Big Bang and went on to form stars and galaxies. On Earth, hydrogen is not conveniently available in its pure form but is bound up with other substances. Hydrogen can only be extracted without carbon emissions in one of two ways: from fossil fuels (using a technology that captures and stores carbon) or from water (in a process powered by renewable energy).

Fiona Beck, a researcher at the Australian National University’s Research School of Engineering, is interested in the latter. She and her colleagues have developed a technology that, in essence, converts water into hydrogen using nothing but sunlight. Converted to electricity, solar energy can power an electrolyser that splits water molecules into hydrogen and oxygen. But Beck’s new technology cuts out the intermediary: the solar panels have been re-engineered to create the hydrogen themselves.

“The problem at the moment is that the economics of buying an electrolyser and plugging it into renewable energy is not quite there compared to the fossil fuel methods,” Beck says. “What we’re looking at here is: how do you make it even cheaper, and actually do it all in one?”

Beck’s doctoral student Astha Sharma emerges from a lab. “She is the brains who does most of the actual work,” says Beck, motioning us both back into the lab. Inside, bundles of power cords dangle from hooks, and electrical equipment crowds every surface. On one desk sits what looks like a long black paparazzi lens. “There’s a big arc lamp in there,” says Beck. “It’s like controlled lightning. In a very small area, it’s actually a very large fraction of the temperature of the sun.”

Wearing disposable gloves, Sharma takes a tiny silicon solar cell, about one centimetre wide. Fused to that is another type of solar cell made of a material known as perovskite. She dips the cells into a clear container filled with an alkaline solution, then removes the cap from the lens. A sharp beam of light illuminates the liquid. Soon, tiny gas bubbles fizz from the cells.

“Is that hydrogen?” I ask.

“Yep,” says Beck, and laughs. “It’s actually not very dramatic.”

The project has set an efficiency record for solar-to-hydrogen cells: of the energy the cells receive from the sun, 17.6 per cent can be converted to useable energy — rivalling the most efficient rooftop solar panels, which convert about 20 per cent of sunlight into electricity. So, depending on how the technology develops, the end result may be dramatic indeed.

Alan Finkel, whose term as Australia’s chief scientist ended in December 2020, is head cheerleader for the nation’s tiny hydrogen industry. He talks up our potential to “ship sunshine to the world” — a merry description of exporting hydrogen produced with solar energy. And he proudly claims to be first on the waiting list when Hyundai starts leasing the Nexo to the public.

Finkel spearheaded the National Hydrogen Strategy, published in late 2019. It aims to make Australia a world leader in hydrogen within a decade: under the most optimistic scenario, it predicts that our hydrogen industry could be worth $26 billion to the economy in 2050.

I ask him if the economic calamity brought on by Covid-19 has damaged hydrogen’s prospects.

“I’m actually feeling more optimistic, because there’s so much happening globally,” he says. “We are seeing extraordinary monetary commitments.” He rattles off a couple made just before our conversation in the late spring of 2020:

€7 billion from France and €9 billion from Germany to expand the hydrogen industry in Europe and abroad.

Investment by Australia is far more tentative. Of two dozen or so hydrogen projects announced to date, Finkel says there are only about six “where money is actually flowing and ground has been turned.” At the time of writing, the Morrison government had committed about $370 million to support the hydrogen strategy; state governments have promised further funding, though smaller amounts.

Creating a mass market for hydrogen won’t happen overnight. “Let’s say you’re building demand for hydrogen through transport,” Finkel says. “You don’t suddenly develop hydrogen trucks and cars and develop the refuelling capability and people’s confidence in the regulations and the other stuff that makes an industry. It’s going to take years and years. So demand is the limiting factor here.”

Energy experts broadly acknowledge that zero-emissions electricity can’t solve the climate crisis alone — it simply can’t be used everywhere. Finkel cites long-haul transport, saying planes, trucks, trains and ships are unlikely to ever choof around with tonnes of batteries on board. “I don’t think we’ll ever be able to get on a big battery-powered plane at Sydney airport and fly nonstop to San Francisco with 350 passengers,” he says.

Hydrogen will also be needed to replace coal in the polluting steel-making industry. Globally, steel manufacture creates about 7 per cent of carbon emissions; a switch to green hydrogen there would be a boon for both the climate and the Australian steel towns of Port Kembla and Whyalla.

Australia is up against nations such as the United States, China, Brunei and Saudi Arabia in the hydrogen export race. But we have one distinct advantage: proximity to Asia and, in particular, Japan and South Korea, which have both wagered heavily on hydrogen.

By 2030, the Japanese government wants 800,000 fuel cell vehicles on the road, and 900 stations to refuel them. And at the Tokyo Olympics, delayed until July 2021, the flame will burn with hydrogen for the first time.

In December 2019, Japan launched the world’s first ship designed to transport liquefied hydrogen at the port of Kobe. Finkel was there as the 8000-tonne Hydrogen Frontier slipped into the water for the first time. “It hit me that this was the first ship ever made that will allow human beings to transport renewable energy from one continent to another,” he says. “It’s a new era.”

The global hydrogen economy suddenly appeared to be alive and thrumming in Osaka Bay. But the shape of the new world energy order is a huge unknown — not least because the Hydrogen Frontier will ship more than just sunshine. The launch marks the start of a controversial trial project in which hydrogen derived from Australia’s brown coal will be shipped to Japan. Some potential importers of Australia’s hydrogen, such as Germany, won’t consider hydrogen sourced from fossil fuels in the long term, even if some of the carbon that is produced is captured. But, Finkel says, “certainly Japan will, South Korea will, Norway will. It really depends on whether you’re focused on a technology and you hate it, or you’re focused on what counts — atmospheric emissions of carbon dioxide.”

According to the Sydney Morning Herald, Horsley Park is best known for three things: God, guns and horses. The suburb in Sydney’s southwest is one of Australia’s most devout — about 80 per cent of residents identify as Christian — and it’s home to the equestrian centre built for the Sydney Olympics. It also has a prominent gun shop on the main street. Soon, however, Horsley Park will add another feather to its cap: as a green hydrogen pioneer.

In August 2020, the NSW government approved the $18 million Western Sydney Green Gas Project, to be operated by energy infrastructure giant Jemena. Touted as Australia’s largest hydrogen demonstration, it will generate green hydrogen, mix it into the existing natural gas network and deliver it to about 250 homes around Horsley Park.

Alistair Wardrope, Jemena’s senior engineer, has experience in the hydrogen business that dates back to 2006 when he worked for a British electrolyser manufacturer. I ask if Horsley Park residents would notice any difference if, say, they’re boiling an egg on a gas cooktop and there’s hydrogen in the mix. Wardrope pauses, then eventually answers: “No. If, hypothetically, we add 10 per cent hydrogen, we do marginally decrease the calorific value of the gas. But we’re talking about a very, very small difference. So no. If you’re talking about boiling an egg it might take a second or two longer.”

In terms of a broader transition, blending hydrogen into the mains gas network is considered one of the easiest ways to build demand in Australia. Unlike a hydrogen-fuelled transport network — which would need new vehicles, refuelling stations, and a new tranche of regulations and laws — mixing hydrogen into the gas network requires little more than an electrolyser and a valve.

About 10 per cent hydrogen can generally be blended into the extant gas network without needing to upgrade household appliances. Jemena is trialling a 2 per cent mix and will deploy strict controls to make sure the limit is not exceeded. It’s a cautious approach, for good reason.

In 2018, researchers at the University of Queensland examined public attitudes to hydrogen use and found safety was the top concern. Of course, all fuels are flammable, and hydrogen is already being produced and used without incident. But hydrogen ignites easily, and the public will need convincing it’s low-risk. Hyundai says it fired bullets at the hydrogen tanks of the Hyundai Nexo to make sure they could withstand a prang; I ask Wardrope if Horsley Park residents are worried hydrogen in their pipes might explode.

“The first thing to point out is the amount of gas [involved in the project] in energy terms is a very, very small fraction of what Jemena moves on a daily basis,” Wardrope says. “And Jemena is very well versed in safely transporting and handling flammable gases — which is what hydrogen is.”

The NSW government wants 10 per cent hydrogen running through the state’s gas networks within a decade as part of its plan to reach net-zero emissions by 2050. If repeated across the country, that would be a fair bit of hydrogen. I ask Wardrope if projects such as Jemena’s might help move the dial — generating enough demand to create a mass market.

“It’s the chicken-and-egg scenario,” he replies. “You don’t have the users because you don’t have the infrastructure, and you don’t have that infrastructure because you don’t have the users. Where we can leverage off existing infrastructure to help break that cycle, it definitely helps.”

But even with public backing, and with the economics and engineering sorted out, the hydrogen shift seems incomprehensibly vast. It touches almost every facet of modern life. It needs to happen over months and years, not decades and centuries. It will take unprecedented political will — and vested fossil fuel interests won’t easily roll over. It will require permanent changes to not only our fuel sources but also the homes we live in, the cars we drive and the foundations of the global economy.

I ask Wardrope if he can see a road to a fully fledged hydrogen society. “I think, if we look at what’s happening around the world, the level of investment is increasing substantially in favour of hydrogen,” he says. “So do I think there will be a transition? Me personally, yes. [But] the jury is still out, it’s fair to say, which is why it’s important to do these trials. In terms of whether it will be a 100 per cent conversion? There is no precedent. But over the years, the network and energy users have gone through multiple energy transitions.”

Indeed, the tale of human energy use is filled with plot twists. We mastered fire and burnt plants to release energy derived from the sun. Agriculture turned the sun’s energy into food, and we harnessed wind to propel boats and grind grain. Since the industrial revolution we’ve liberated energy from fossil fuels — energy trapped millions of years ago in the fibres of ancient plants. Now we’re on the cusp of a new chapter — without carbon dioxide.

But hydrogen’s role in this future is far from assured. Storage and distribution is difficult and may slow the transition: exports, for example, require hydrogen to be compressed, piped, liquefied, sent out on ships and kept ultra-cold — at minus 253°C — in cryogenic tanks.

Producing green hydrogen will also require a huge amount of energy to split water molecules into hydrogen and oxygen. According to Deloitte, installed electricity generation capacity in Australia may have to increase more than fivefold by 2050 under the most ambitious hydrogen production scenarios.

In road transport, hydrogen fuel cells may be getting smaller and cheaper, but some say they’re no competition for electric vehicles. Tesla founder Elon Musk put it bluntly, deriding hydrogen-fuel-cell vehicles as inefficient and “mind-bogglingly stupid.”

And an extra degree of difficulty exists in Australia, the driest inhabited continent on Earth. Most energy production consumes water; it takes nine litres to make one kilogram of hydrogen via electrolysis. Coastal areas are the most likely sites of hydrogen production; there, desalinated sea water or waste water will probably be used.

Wardrope acknowledges the headwinds. “But when we look at history, in every energy transition there’s been a benefit, a positive outcome for the broader community and the environment,” he says. “History would suggest we are on the right path. We’re looking at the right technologies, but it’s still early days. Which is why we have to start small, but think big.”

Back in the hydrogen-powered Nexo, it’s time for my afternoon drive to end. But in navigating back to where we began, I’ve led the driver, Scott Nargar, off course. I squint at the road ahead, looking for a road sign and cursing Canberra’s lookalike streets.

Nargar, a gracious host, hasn’t tired of showing off the Nexo’s luxury features and barely seems to notice that we’re lost. As I get my bearings, he plays a sample of the car’s inbuilt ambient sounds.

“There’s the sound of the sea, or rainy days,” he says, before flicking to a track titled “Open-air cafe.” “It’s all about enjoying the experience of driving an eco-car.” He skips to a track filled with the chirrup of birds and insects. As we whiz past a supermarket, he asks, somewhat dryly, “Don’t you feel like you’re in a rainforest now?”

Later, driving home in my diesel-chewing hatchback, I wonder about this next junction humanity has reached. Time has handed us the bewildering and unnervingly urgent socio-techno riddle of remaking the world’s energy system. So in labs and universities and factories and boardrooms, people tinker and toil to keep humanity going as is, just without the carbon dioxide. But if hydrogen and renewable energy save us, should humanity just continue as normal after that? At the Australian National University, I put the idea to Fiona Beck. She nods, as if to acknowledge the question is never far from her mind.

“I’m reading Doughnut Economics, which is about how we can’t just keep going with endless growth,” she says, referencing the widely read 2017 book by Oxford economist Kate Raworth, which argues, in Beck’s words, that humanity should live so “we’re not destroying the planet, but not deprived either.”

“We need to electrify, we need to go to renewables, but we just can’t produce renewable energy fast enough. We also need ridiculous amounts of energy efficiency, and [we need] to change the way we use energy,” Beck says. “It’s going to necessitate a change in mindset — away from ‘as much as you can, as fast as you can’ to considering the limits of the world we live in — just thinking about the whole thing.” •

This is an edited extract from “Hail Hydrogen,” in Griffith Review 71: Remaking the Balance, edited by Ashley Hay.

The post Up, up and away? appeared first on Inside Story.

Prime minister Bob Hawke and Keating, his treasurer and successor, won support for tough reforms — holding down wages and instead giving workers universal healthcare and superannuation, subjecting once-universal welfare benefits to income and asset tests — because Australians felt themselves to be economically vulnerable. Being a big agricultural exporter was no longer a ticket to wealth. The elites of left and right agreed: we had to reform, work harder, change our game.

Ross Garnaut was at the forefront of that reform surge. He was Hawke’s economic adviser, then Australian ambassador to China and, from a prestigious base at the Australian National University, an influential advocate for free trade and enmeshing Australia in the Asia-Pacific. His 1989 report advocating scrapping tariff protection for manufacturing to make other industries more globally competitive was crucial to the government’s decision to do just that, which saw 130,000 manufacturing jobs wiped out.

At the 1996 election, John Howard swept Keating away, pledging to make Australians “relaxed and comfortable.” He led one last big reform, the introduction of the GST, and that was it. Reform gave way to media management, giveaways to voters, culture wars designed to wedge opponents, and help for vested interests. In this century the only big economic reform worth the name came when the crossbenches forced the Gillard government to adopt a carbon price, which the Coalition then scrapped on coming to office.

Garnaut played a key role in that reform too, after Kevin Rudd (one of his junior diplomats in Beijing days) asked him to write a report weighing up Australia’s climate change options and Julia Gillard brought him into the final negotiations on how to make a carbon price work. But the return of the Coalition in 2013 saw him back on the outer, as any prospect of serious economic reform disappeared.

While Bill Shorten’s period as leader raised hopes that Labor in government could renew its zeal for reform, a government led by Anthony Albanese looks no more likely to take tough decisions than a Coalition one. Those who see urgent need for reforms seem to be talking to ourselves; those able to do anything about them are simply not interested.

Ross Garnaut is undeterred. His new book, Reset: Restoring Australia after the Pandemic Recession, is a wide-ranging almanac of reform proposals to give Australia a better future: on economic, social and environmental fronts. At times, he seems to be talking directly to the Morrison government, as if hoping that it has Australia’s long-term interests at heart, despite evidence to the contrary, and could be persuaded to embark on politically difficult reforms to secure them.

Appeals to revive the spirit of the Hawke–Keating government under this government frankly seem like a waste of breath. But it is the fate of reformers to debate reform options in their own minds and with those they respect, and Garnaut’s book is full of them, all focused on creating an Australia with full employment — as soon as possible — rising standards of living, sustainable finances, and world-leading new industries based on renewable energy.

Most of the media coverage of the book has focused on Garnaut’s proposals for macroeconomic reform: lifting the growth rate by reshaping and reducing taxes, and financing those changes by issuing new government bonds bought directly by the Reserve Bank. This would further increase the federal deficit, at least initially, and loosen monetary policy to levels comparable to other Western countries, leading indirectly to a lower Australian dollar, and a more competitive economy.

Restoring full employment by transforming our international competitiveness is one of the two key themes of the book. But the other is equally central: to achieve this will require business and government to rapidly develop Australia’s new international competitive advantage in renewable energy and the products dependent on it: the hydrogen economy, ammonia and fertilisers, metal refining, and downstream processing in products such as steel and aluminium.

The macroeconomic agenda is the logical place to start. And for an economist known as a voice of orthodoxy, Garnaut’s proposals show how far that orthodoxy has moved since 2008.

He cuts through the spin we hear about Australia’s economic performance in the past decade, in what Garnaut likes to call the “Dog Days.” As I too have argued, it was unimpressive, whether compared with our past experience or with our international peers. Unemployment stalled above 5 per cent, underemployment swelled, real wages stagnated as never before, and GDP growth rates looked okay only because they were inflated by high immigration.

Without a policy reset, Garnaut argues, that past is what Australia risks going back to as we emerge from this recession. He gives the government high marks for dropping its deficit fetish after Covid-19 struck, when it successfully pumped money into households and business to stimulate spending. But like other economists, he argues it switched its focus too quickly to reining in future deficits when the bigger job is to get people back to work.

He boldly, and rightly, assails the misuse by the Reserve Bank, Treasury and others of the concept of the NAIRU (the “non-accelerating inflation rate of unemployment”), an estimate of how low unemployment can fall without causing rising inflation. The NAIRU makes good theoretical sense but in reality is impossible to calculate accurately when no such events happen. In 2012 the US Federal Reserve estimated the limit for the United States was 5.5 per cent. Yet by 2019 unemployment was 3.5 per cent and inflation almost non-existent.

Except for Western Australia during the labour shortage of the first resources boom, wage growth has not driven up inflation in Australia since the 1980s. Treasury’s estimate of the NAIRU as 5 per cent, and the Reserve Bank’s estimate of “4-point-something” are equally phoney. As Garnaut says, “We simply don’t know, and we won’t know until unemployment falls to a level at which wages rise at an accelerating rate.” He suggests aiming for a 3.5 per cent unemployment rate, and then lower unless inflation is “accelerating dangerously out of the top of the Reserve Bank’s target range.”

To get to 3.5 per cent unemployment by 2025, he estimates that Australia needs to create 1.2 million new jobs in just four years. That is a huge task, considering the headwinds we face: “the huge legacy of public debt, a smaller capital stock per person (because of low business investment)… major losses in export industries… reduced productivity… the effects of climate change, an ageing population… [and] lower population and workforce growth.”

Garnaut makes a second bold but correct call: don’t return to high immigration levels. In the past decade or two, net overseas migration has averaged 1 per cent of the nation’s population every year, mostly from people coming (or staying on) here to work, and taking jobs that in the past went to school leavers or graduates, whether in service stations or in IT and the like.

I have written about this several times. Between 2008 and 2016, roughly three-quarters of all net growth in full-time jobs went to new migrants. Of the 474,000 full-time jobs added in that time, only 74,000 went to workers born in Australia, while 168,000 went to workers born on the Indian subcontinent. Treasury looked at a different set of years and found similar numbers.

“Immigration now lowers the incomes and employment prospects of low-income Australians,” Garnaut concludes. “Integration into a global labour market [has]… contributed to persistent unemployment, rising underemployment… stagnant real wages [and]… a historic shift in the distribution of income from wages to profits.” Temporary worker migration in reality is not focused on solving skill shortages, as promised, and migrant workers are frequently exploited, as Age journalist Adele Ferguson has shown.

Garnaut argues for halving the annual net immigration rate to 0.5 per cent: in round figures, 125,000 a year rather than 250,000. Of all his reform proposals, it is one of the most viable politically.

To create those 1.2 million jobs by 2025, both fiscal and monetary policy must be set unambiguously to expansion. The Reserve Bank, Garnaut says, needs to accelerate as hard as most other central banks in the West are doing to bring the dollar down and make Australian producers more competitive. (He notes that Australia might still be making cars had the Reserve understood the damage it was doing to our competitiveness by failing to halt the dollar’s rise during the resources boom. In the new age of electric vehicles, there is no one left here to make them.)

I would add one caution, however. We can’t ask the Reserve to correct the damage from bad government policies: only governments can do that, and none of our recent governments has wanted to. So low interest rates once again are igniting an explosion of tax-driven investment in rental property that will deprive growing numbers of Australians of the chance to own their own home, perhaps forever.

On budget policy, Garnaut empathises with the Coalition’s desire to start reducing the deficit to minimise the debt it will bequeath to future governments — but concludes that this is not the time for it. The government, like the Reserve, should still have its foot on the accelerator, not the brake, and he has two big ideas on how to go about it:

• The complex tax and welfare system should be simplified to (mostly) one flat tax rate and one big welfare payment. The payment would be what is variously called a universal basic income or negative income tax — Garnaut prefers to call it the Australian Income Security, or AIS — which would guarantee all Australian citizens (except those too rich to qualify) a tax-free payment of about $15,000 a year, topped up with further payments for those who are aged, disabled, unemployed or parents with dependent children.

Conversely, all income from the first dollar would be taxed at the rate of 37 per cent up to $180,000, and 45 per cent above that. The combination of the AIS and the tax would make this more egalitarian than it might appear. Garnaut argues that it would provide a stronger welfare net, provide greater incentive to work, simplify tax and welfare administration, and provide an immediate (but temporary) boost to demand.

• Business taxation would no longer be levied on profits, but on cashflow. This would make all investment spending immediately deductible against tax, providing a permanent incentive to higher investment. But interest payments and financing costs would no longer be deductible, except for banks and financial firms, and payments overseas for royalties, marketing and management fees would be deductible only if they were incurred directly in producing the firm’s output.

Conversely, however, companies with a negative cashflow would receive a cash credit, effectively paid for by other taxpayers. For those other taxpayers, that is a risky part of the design. A similar promise of a blank cheque for losses was one factor in the downfall of the Rudd government’s mining tax in 2010.

Garnaut argues that a cashflow tax would provide an incentive to investment, especially on risky projects. (BHP’s plan to build a fast rail line between Melbourne and Sydney in the early 1990s fell over when the Keating government declined to give it such tax treatment.) He also claims that removing deductions for interest payments and payments for imported intellectual property (often to a related company) would remove “the main opportunities for corporate tax avoidance and evasion.”

It’s an idea that’s been around a long time without any country adopting it. The Republicans in Washington flirted with a version of it a few years ago, but Donald Trump killed that idea.

• Garnaut also raises a third suggestion that is much easier to implement and could provide the right sort of stimulus: dump the convention that requires cost–benefit studies of infrastructure projects to use a discount rate of 7 per cent per annum above inflation to estimate the future value of projects in today’s dollars. At one time, that vaguely matched reality, but it was long ago. In an age of minimal interest rates, the convention is inaccurate, unscientific and harmful to good decision-making.

Frankly, it seems unlikely that any Australian government will implement either of Garnaut’s two big tax and welfare reforms in the near term. The Morrison government’s derisory cup-of-coffee-a-day increase to Newstart despite widespread bipartisan support for real reform shows its aversion to tackling the hard work of economic restructuring. Anthony Albanese seems to want people to like him, above all, and thus to avoid conflict — which unfortunately is an inevitable by-product of reform.

In Garnaut’s view, the Australian economy is facing so many headwinds that business as usual will not generate the jobs required to restore full employment. We need to try a new tack: to rephrase Ken Henry’s famous advice to the Rudd government: “Go hard, go early, go renewables.”

As he spelt out in his 2019 book Superpower: Australia’s Low-Carbon Opportunity, Garnaut sees Australia’s vast land mass and solar radiation as a resource that no other country can match in the dawning age of renewable energy. Just as our coal and gas resources gave us a huge competitive advantage until we began pricing them at global parity, we can produce solar and wind energy more cheaply and plentifully than any comparable country. This could become our leading export industry of the future, as coal exports diminish and gas exports flatline. In his words:

There is no comparable opportunity for profitable expansion of business investment in other trade-exposed industries. Getting carbon right becomes an integral part of getting economic policy right.

The transformation should begin on a large scale now… It is feasible now to replace most of Australia’s large imports of ammonia-based products (such as fertilisers). Building supply from new plants in rural and provincial Australia that rely on renewable energy and hydrogen — at prices competitive with high-emission alternatives — can happen in time to contribute to full employment in 2025.

Zero-emissions electricity at prices within the range required to keep established mainland aluminium smelters alive is possible now. By contrast, aluminium smelting at Gladstone, Newcastle and Portland would not survive through the 2020s with continuous coal-based power supply.

[With budget subsidies]… the first commercial-scale hydrogen-based iron-making plant can be built as part of the movement to full employment. Make a start on commercial-scale plants, and more business investment will follow.

In Garnaut’s view, the hydrogen economy is not for the distant future, it is something we should start creating now. British billionaire Sanjeev Gupta, with whom he has worked, last month launched a feasibility study for an industrial-scale hydrogen-fuelled steel plant at Dunkirk. Three separate consortia are progressing plans to build renewables-powered hydrogen plants in the Pilbara to supply domestic and Asian markets. He sees traditional coal and gas centres like Gladstone becoming centres of hydrogen production and metal refining using renewable energy.

Not all agree. The day Garnaut’s book was released, BlueScope’s chief executive, Mark Vassella, said it plans to use old technology to update its Port Kembla steelworks, warning that “green steel” might not become mainstream for another twenty years.

But many of Australia’s heavy industrial plants will not last that long. And as the laggard of the Western world in reducing greenhouse emissions from industry, Australia now faces the prospect of tariffs in Europe and North America to force it to speed up its transition.

Garnaut argues that green steel, green aluminium and green fertilisers will command premium prices in the renewable era. Australia should be a first mover in using its wind and solar resources to produce them.

He is practical, not religious, in his outlook. Unlike the green lobby, he sees gas playing a prominent role in Australia’s future, backed by carbon capture and storage in areas where that is geologically feasible. But renewables, not gas, are the main game — and our economic flagship of the future.

One subject that appears rarely in this book is China. When Garnaut has been one of Australia’s foremost experts on China for almost four decades, that is surprising, but also a sign that we live in dangerous times.

When he does touch on China, he is careful but clear-eyed. He advises Australian firms to look to develop other markets, especially in Southeast Asia, and warns that ultimately China will look for other sources of iron ore, and of so much else that it once bought from us.

The one passage in which he does address Sino-Australian relations directly is, in my opinion, worth thinking carefully about:

There does not seem to be any early prospect of the restrictions in Sino-Australian trade lifting to leave clear air. There are real issues of Australian security to be managed. There are real Chinese responses to Australian initiatives. Australia and China will respond from time to time in ways that are influenced by the shifting dynamics of US politics and international engagement.

What might be possible is a narrowing of restriction to the minimum necessary for meeting clearly defined and essential security interests, as analysis and the passing of time causes us to see them. This will make heavy demands on Australian knowledge and analysis. It will take subtle and intense diplomacy.

It will require Australians to adjust to the realities of living in a perilous world, in which peace and prosperity, and our effective sovereignty, depend on understanding the world as it is and not as we wish it to be.

This is a world that has been inhabited by other countries of modest size alongside great powers since the beginning of the nation state. It is a world that is understood from history by our Western Pacific neighbours South Korea, Vietnam and Thailand — and by the neighbours of great powers in Europe and Central and North America.

There is pain and wisdom in these words. •

The publication of this article was supported by a grant from the Judith Neilson Institute for Journalism and Ideas.

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In Texas, the results were disastrous. The electricity generation system failed, leaving millions of people without power for days on end. Dozens of people froze to death or died from carbon monoxide poisoning when they used car heaters to keep warm. In many places the water supply system failed to restart even after power was restored.

Immediately after the blackouts came an outbreak of culture war blame-shifting familiar from extreme weather events in Australia. Republican politicians amplified by Fox News claimed that the power failures were a result of a rapidly increasing reliance on wind power. Wind turbines, ill-prepared for extreme cold, simply froze.

But it soon became clear that coal-fired and nuclear plants had failed too. And gas-fired power stations were responsible for the biggest falls in output, not because they are uniquely vulnerable but simply because they are the main source of electricity in Texas.

The real question is why Texas lost power when neighbouring states, also experiencing the freeze, did not. The answer involves regulatory failures, some of which have important implications for Australia.

The first part of the problem is that most of Texas is not connected to the rest of the US power grid. This is deliberate: the Texas Interconnection has been kept separate to ensure that it remains under Texas rather than federal control. That means the state can’t draw on electricity from the major “power pools,” notably the Southwest Power Pool. By contrast, the city of El Paso, which is connected to the SPP, maintained its power supply throughout the extreme weather.

Texas kept itself separate so it could replace its traditional integrated electricity supply with a structure that combined a pool market for the generation stage of electricity supply with a competitive market in retailing, and lightly regulated transmission and distribution. The system is run by ERCOT, the ironically titled Electric Reliability Council of Texas.

Australia’s system bears an uncanny resemblance to Texas’s. The National Electricity Market, which works in much the same way as ERCOT, was established on the pretext that it was needed to manage the National Grid, which has connected systems in Eastern Australia since the 1990s. In the market reform era, the alternative of integrating the separate state-owned systems into a single national system was never seriously considered.

After this month’s crisis, it seems unlikely that ERCOT can avoid interconnecting with the SPP. But the United States really needs a single national grid. To move away from carbon-based fuels, the entire economy will need to be electrified, which will increase the need for a reliable supply. And the benefits of interconnection will only grow as time-varying sources like solar and wind become more important. With a national grid, mid-afternoon sun in California could send power to meet early-evening peak demand in the eastern states.

A truly national grid would require connecting the eastern and western United States with transmission lines, probably using high-voltage direct current transmission. In technological terms, this is a big but manageable project. The real challenge is dealing with the political and regulatory obstacles. It will be interesting to see whether the Biden administration attempts to tackle this task and, if so, whether it succeeds.

The other failure in Texas had to do with the operation of the electricity market run by ERCOT, which was the reason the grid was kept separate. As in Australia, it’s an electricity pool market in which generators bid to supply power to the grid each day. The power failure highlighted two problems that turn out to be interconnected.

First, when lots of power plants went offline, the market price of power soared to US$9000/MWh, producing ruinous bills for customers who had chosen supply deals based on the wholesale price rather than a fixed rate. Second, the system made it unprofitable for generators to invest in “winterising” their plants to protect them against rare extreme events like the polar vortex.

The connection between the two is that in an “electricity only” market, ultra-high prices are supposed to encourage firms to invest in generation capacity or backup systems that will be used only very rarely, when the rest of the network fails. In an extreme shortage, though, prices could theoretically go far higher than the US$9000/MWh observed in Texas. That’s why, as in Australia, the designers of the system imposed a limit on the price the market can reach.

The result is a system that falls between two stools. The maximum price is high enough to create both risk and opportunities for market manipulation, but not high enough to provide incentives to invest in reliable supply.

In response to this mess, some electricity regulators have reintroduced an element of central planning by making “capacity payments” to generators willing to guarantee supply. Australia has responded with a hodgepodge of interventions run through the Energy Security Board at the national level, along with state measures such as South Australia’s “big battery.”

We need to take this further by creating what might be called a “capacity only” market. Rather than bidding to supply power in the short term, generators should tender to supply power to the market for a period of several years, specifying both their generating capacity and the reliability with which they can supply power. The market operator would then use an “order of merit” to decide which generators should operate at any given time, just as was done in the pre-privatisation days of an integrated electricity supply industry. Such a system would maintain competition in generation and retail, but would otherwise be centrally planned. •

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Last year had started badly for the government of José Maria Vasconcelos, popularly known as Taur Matan Ruak, whose annual national budget was defeated in January by his own alliance partner, Xanana Gusmão’s National Congress for Timorese Reconstruction, or CNRT. But Ruak, a one-time defence force commander, managed to hold on to government after the opposition Fretilin seized the moment and supported his government in parliament.

By May, with the assistance of the president, Fretilin’s Francisco “Lú-Olo” Guterres, the new parliamentary understanding had resulted in a remodelled government, with the CNRT now in opposition. The new government brought together Fretilin, the youth-oriented KHUNTO and Ruak’s small People’s Liberation Party. Fretilin took over a number of key ministries from departing CNRT figures.

The CNRT’s parliamentary protests and legal challenges to the constitutionality of the remodelled government — and the decisions of President Guterres — came to little. Although partisan tensions are still elevated, Dili remains calm, as the government continues to deal successfully with the threat of Covid-19.

Under the new coalition arrangements, Xanana Gusmão is out of power for the first time since 2007, apart from the term of the short-lived Fretilin minority government in 2017–18. Behind the scenes, Fretilin leader Mari Alkatiri appears to have outplayed the old master in this latest round of their post-independence tussle. Never to be underestimated, the third of the major historical leaders, José Ramos-Horta, appears to have informally aligned with Gusmão, a partnership that could see a bid by Ramos-Horta to return to the presidency in 2022.

For his part, Gusmão is spending his time party-building — something the CNRT, a classic “party of power” based on Gusmão’s charismatic legitimacy, has neglected since its foundation in 2007. Much effort is going into recruiting support within the powerful Catholic Church and building up district party structures, though the party still lacks a clear second line of leadership.

Controversially, Gusmão appeared publicly at the birthday in January of alleged paedophile priest Richard Daschbach, a move condemned by his former wife Kirsty Sword-Gusmão and their three sons as lacking sympathy for the victims of sexual abuse and potentially prejudicing a forthcoming trial. Some local commentators believe Gusmão sees potential political payoffs from elements of the Church hierarchy in dampening down the Daschbach case, which some Church figures fear may generate a larger number of historical sexual abuse cases. Daschbach was defrocked by the Pope last year in a move publicly supported by the Timorese bishops.

These elite tussles have worn thin, though, with the nation facing a possible end within a decade to the oil wealth that finances national budgets. Little progress has been made towards diversifying the economy, meaning the lack of a national consensus over the management of natural resources could undermine Timor-Leste’s long-term economic viability. A determined consensus-building effort will be needed to ensure the government can sustain the income stream from its offshore oil and gas domains.

By most estimates, Timor-Leste’s sovereign wealth petroleum fund will need to find new revenue by 2030 to support annual budgets of the size the nation has become accustomed to. (On average, outlays have been increasing by 11 per cent per year.) Despite the prospect of increased revenue from Santos’s lease in the existing Bayu-Undan fields in Timor-Leste’s maritime zone, the development of the untapped Greater Sunrise oil and gas field remains unresolved.

Political developments during 2020 created a sense of policy limbo. The Tasi Mane oil and gas processing megaproject on Timor’s south coast, centrepiece of the National Strategic Development Plan — long championed by Gusmão — is now under a cloud, with Gusmão in opposition. In the run-up to the next election in 2023 (by which time Gusmão will be seventy-seven), the question of the new government’s policies towards Greater Sunrise will loom large.

So far, the messages coming out of the remodelled government and its new executive have been mixed. While prime minister Ruak recently reiterated his support for Tasi Mane, other members of the executive, including the new petroleum minister, Vítor da Conceição Soares, have qualified their support for the plan by emphasising the need for independent feasibility studies. The government has also replaced longstanding leaders of the National Petroleum and Minerals Authority and the national oil company, Timor GAP, figures who were instrumental to articulating the CNRT’s visions for the industry.

While the Gusmão-led governments promised far larger revenue streams than would be received by downstream processing in Australia, the call for feasibility studies has the backing of a number of independent analysts. La’o Hamutuk, a prominent non-government organisation, argues that the “risks, benefits and costs” of downstream processing “have not been seriously analysed.” Illustrating the problem, the 2021 budget proposes to draw down the petroleum fund by around US$830 million more than its sustainable income level, a practice only viable for another ten years on current estimates.

Parliament’s powerful public finance committee has openly questioned the logic of some of the large transfers to megaprojects in this year’s budget, given that spending to tackle other problems, including continuing lack of access to safe drinking water in some communities, has suffered correspondingly.

La’o Hamutuk has warned of insufficient spending on the government’s stated priority areas of healthcare, education, water and agriculture, which together account for 18 per cent of the 2021 budget. This has been a common criticism over the years, and La’o Hamutuk notes the contradiction between the call for feasibility studies and the continuing allocations to organisations like the oil and gas company Timor GAP, which will receive around US$70 million during 2021.

For the government, time is ticking by. Gusmão, the great survivor, could resume power at the next parliamentary elections, in 2023, this time with a friendly president. With the presidential election due in May next year, Ruak and his colleagues may have as few as eighteen months with a president as supportive as Fretilin’s Lú-Olo.

But a Gusmão victory is no longer the certainty it once was. While he has proved a master coalition-builder over the years, the 30 per cent core support base of his main opponent, Fretilin, is also a powerful basis for alliances, and the party appears to be improving its negotiating abilities. It shouldn’t be assumed that the current government is merely a placeholder for the return of Gusmão.

Last year’s change of government therefore raises a much larger issue for Timor-Leste as a whole. With the future of the national economy at stake, and with the CNRT out of power for now, many would argue it is time for a cross-party consensus on the management of the state’s key untapped resource wealth — or at least an updated debate over the various options for development.

While this may seem a pipe-dream given the political rifts, and it would require technical support, parliament is well placed to conduct an inquiry to establish a cross-party foundation for resources policy. The operations of Timor GAP have now been referred to the National Audit Office, what is at stake is far more than a technical matter.

The options confronting government are difficult ones and go to the heart of how Timor-Leste’s major non-renewable asset is managed. Does the government proceed with the existing Tasi Mane vision, or a stripped-back version? Does it backfill the oil and gas to Darwin, leading to far lower costs to the state, but potentially lower revenues? Or are there other more innovative options that take note of the global shift away from fossil fuels? Could Timor-Leste pioneer ways of being paid for not exploiting the Greater Sunrise resource?

The nationalist politics of this issue, tied up with the now-resolved issue of maritime boundaries with Australia, remain potent, despite Gusmão’s move to opposition. While the successful maritime boundary campaign was a powerful nationalist totem, the future management of oil and gas in Greater Sunrise was always a separate issue, with various development schemes still allowable under the terms of the border treaty.

Meanwhile, the sense of political change has been highlighted by the rise of new smaller parties. Rumours suggest that the outlawed martial arts group PSHT may seek to replicate the success of KHUNTO, which was founded by a key leader of the martial arts group Kork. Gregório Saldanha, the leader of the student protests that preceded the Santa Cruz massacre in 1991 — the event that brought the struggle for independence from Indonesia back to the world’s attention — is planning a new party, Partifor. Saldanha’s party could further undermine the support base of the Democratic Party, which relies on the allegiance of many of that generation of independence activists. There is also talk of a new Green party.

In other words, East Timorese politics is in flux, and the next elections could see shifts among the minor players needed for parliamentary majorities. Many might see this as good reason for Timor-Leste’s major political forces to come together over the core economic issue facing the nation and start to plan the next ten years together. •

An earlier version of this article appeared in Asialink Insights.

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Biden’s win means that just about every major advanced economy has committed to driving net emissions down to zero by 2050 (or 2060, in the case of China). Every major advanced economy except one, that is — the one led by Scott Morrison, who declares that he won’t commit to such a target without a plan for how to achieve it and an understanding of the costs.

This prompts two obvious questions. Didn’t your government sign up to the Paris climate agreement more than four years ago? And why on earth haven’t you developed a plan and carried out an economic assessment yet?

The odd thing is that it really shouldn’t be that hard for the government to commit to net zero by 2050. Morrison himself has said that net zero is “absolutely achievable” and that a 2050 deadline is “desirable.” Energy minister Angus Taylor has said the government wants to achieve net zero emissions “as soon as possible,” though he refused to commit to doing it by 2050.

But the reality is that it isn’t politically costless, at least not among his own colleagues, as the Australian Financial Review’s political columnist Phillip Coorey reminded us earlier this month. In fact, the Coalition is probably more fragile on climate change than Labor. You need only look back at what happened to Malcolm Turnbull to understand how fragile.

Fitzgibbon might point to what happened in his own seat at the last federal election to highlight the potential electoral costs of a progressive stance on climate. His seat is ground zero for thermal coalmining in Australia, and Labor suffered a negative swing of 14.2 per cent there, with most of the lost votes flowing to a coalminer representing One Nation, who managed to win 21.6 per cent of the vote. Similar results were seen in other coalmining and gas-extraction regions, in seats normally seen as marginal, across Central and North Queensland.

These swings against Labor don’t just reflect concern that emissions reduction policies would hurt employment, of course. But the fact that the Coalition chose to campaign so hard on this issue in Central and North Queensland suggests that party polling had revealed it to be an important factor.

It’s on the question of jobs that perceptions and reality have most obviously parted company. The reality is that greening Australia’s energy supplies won’t come at the expense of very many jobs in coal or gas, simply because the production of these products is primarily driven by exports. Just 24 per cent of Queensland and New South Wales’s thermal black coal production is consumed domestically, while the figure for metallurgical coal (the main product in Queensland) is a tiny 2 per cent. For gas it’s 30 per cent.

In fact, analysis by my firm, Green Energy Markets, indicates that employment in renewable energy and energy efficiency projects in 2019 significantly exceeded employment in either coal or gas. And the employment advantage in clean energy becomes overwhelming once you compare it to employment in gas and coal production intended for domestic consumption.

Sources: see below.

Australian coalminers face little threat from policies aimed at reducing Australia’s carbon emissions. Those who are employed in coal and gas power stations most certainly do, but these power stations simply don’t employ enough people to turn an election. The number of people employed in coal-fired power stations across Queensland adds up to just under 1400. For gas power stations it’s 250. If concern about emissions reduction policies really was a major factor in turning Queensland seats to One Nation and ultimately the Liberal National Party, it was because voters were made to believe that the threat to jobs from emissions reduction is far greater than it is. The Stop Adani campaign probably made an important contribution to this misunderstanding.

Those figures give a lead to those of us pushing for a fast transition to renewables. Back in January, I wrote that greater electoral support for emissions reduction would only come with a shift away from campaigns framed around stopping or shutting down polluting facilities. Crucially, emissions reduction policies need to be tied in voters’ minds to the construction of new clean energy projects, and the attendant transmission lines, that they could readily understand would create work for tradies and lower-skilled workers.

Unfortunately for economic efficiency, an emissions trading scheme doesn’t fit that bill. It’s difficult to explain why trading permits or certificates is a more effective way of reducing emissions, and better for voters’ wallets, than directly funding clean energy projects. Tony Abbott and many of his colleagues exploited this confusion to foster suspicion that emissions trading was less about the environment than about raising tax revenue.

Joel Fitzgibbon hasn’t publicly articulated a way forward for Labor that would enable the party to maintain its advantage on climate change while recognising the concerns of working people. Luckily, it’s into this void that the unlikely saviour, Gladys Berejiklian’s NSW government, has emerged. The state’s energy minister, Matt Kean, and its deputy premier, John Barilaro, have somehow worked through their differences to produce a plan that state and federal Labor parties would never have been brave enough to conceive.

The politics of climate change policy in Australia has been the story of good people trying to vainly break the nexus between energy and carbon emissions by delicately tweaking and working within the existing market-oriented structures, usually heavily guided by the incumbent industry and regulatory organisations. Instead of trying to unpick this Gordian knot, Kean and Barilaro decided they would cut straight through it with a sharp instrument. Their Electricity Infrastructure Roadmap, released this week, will supplant the existing market by setting up new government authorities to rebuild the electricity system anew, much as state governments did four decades ago.

The scale of the plan might be audacious, but it will probably strike the person in the street as plain common sense. The owners of four of the state’s five existing coal-fired power plants, representing 87 per cent of capacity, have indicated they intend to close them between now and 2035. At the same time, they say they will have trouble financing replacement plants because of regulatory uncertainty about carbon emissions. Kean and Barilaro have therefore laid out a program to remove the investment uncertainty and underwrite the construction of the renewable power plants, energy storage and power lines needed to replace the coal plants before they close.

The plan carries a real risk of creating white elephants, with electricity consumers ultimately carrying the can for any mistakes. But the risk of leaving the electricity system a prisoner of the culture wars is far greater.

Politicians opposed to climate action can hardly complain about this lurch away from markets (although the NSW proposal will uphold and support private-sector ownership). They are the ones — Tony Abbott among them — who have talked of sending in the army to seize control of privately owned power stations and nationalise them. They are the ones — Matt Canavan and Angus Taylor among them — who have proposed that governments build and own new coal- and gas-fired power stations in their preferred locations because they’re unhappy the private sector doesn’t consider them to be wise investments.

For federal Labor, the NSW plan provides a template for a national scheme that would allow it to present climate change policy as a great big construction bonanza rather than a great big tax.

Another element to this strategy can also help Labor in the Hunter and Central and North Queensland. Emissions reduction policies and technology plans do pose a real and significant threat to coal and gas workers, but they are not the plans put forward by Labor. Rather, they are the policies of governments in places like Germany, Britain, California, South Korea, China and Japan, as well as those of president Joe Biden.

According to BP’s Statistical Review of World Energy, Europe’s demand for coal is less than half of what it was back in the 1990s, while in North America it is 40 per cent lower. Renewable energy has recently overtaken coal in power generation in the United States, while in Britain it is rare for the electricity system to use any coal at all. In fact, Britain is using less coal now than it did in 1769, when James Watt patented his steam engine.

In Asia, on the other hand, demand for coal imports has been growing significantly, and this is what has underpinned the viability of Australian coalmines. For thermal coal, though, this growth has come to an end. According to the Department of Industry, Science, Energy and Resources, India, China, Japan, South Korea and Taiwan are all expected to reduce their thermal coal imports between 2020 and 2025.

Thermal coal’s future involves a steady erosion of jobs and wages as companies face a bitter battle to survive in a contracting market. With China’s economy evolving towards services, and with countries beefing up their emissions reduction efforts, metallurgical coal will confront the same fate by around 2030. Neither Labor nor the Coalition has any power to stop this.

If it remains wedded to a strategy of backing coal to the grave, the Queensland branch of the Morrison government has no help to offer these communities. The new coal power station in Townsville or Collinsville perpetually promised by the Liberal Nationals would be horribly inefficient if it needed many more than 200 people to keep it running.

Labor still has a task ahead of it to explain why the fate of coalmining does not rest with it or the Coalition. Unlike the Coalition, though, Labor can offer an alternative. Thousands of jobs would be created by a two-step program of decarbonising Australia’s electricity supply and then exporting clean energy products. The new jobs would offer opportunities to a wide array of people, but with the bulk needing either a trade-related skill or relatively modest levels of education and qualifications — in other words, the same people who currently see coalmining and minerals processing as their best opportunity for secure and well-paid employment, and who turned away from Labor at the last federal election.

All this means that if Labor chose to follow Fitzgibbon’s advice and mimic the Coalition on climate policy, it would give away what could be a great source of political advantage in Queensland. •

Sources for chart: Employment in the coal, oil and gas industries is based on the Australian Bureau of Statistics’s March 2020 Labour Market Survey. Employment in coal power generation is based on Green Energy Markets research on employment by each power plant. Renewable energy employment is derived from the Green Energy Markets database of renewable energy projects in construction and operation in conjunction with employment factors per megawatt from the University of Technology Sydney’s Institute for Sustainable Futures. Energy Efficiency Employment is taken from Green Energy Markets.

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Contrary to Scott Morrison’s blustery claim — “I tell you what, our policies will be set here in Australia” — most of the important decisions about our energy future will be made elsewhere, by governments in Washington, Beijing and Brussels, and by energy companies and financial institutions headquartered in New York, London, Frankfurt and Tokyo.

Their decisions are reflecting the widening realisation that the world must abandon coal sooner rather than later, that our reliance on oil must also end and, increasingly, that gas is part of the problem rather than of the solution. As many commentators have noted, commitments to net zero emissions by China, Japan, South Korea and other major emitters, as well as the election of Joe Biden in the United States, have left the Australian government increasingly isolated. A recent New York Times article linked Scott Morrison’s climate denialism to that of Brazil’s authoritarian demagogue Jair Bolsonaro, someone who certainly won’t be welcome at the White House after 20 January.

Yet the government and its supporters are working on the assumption that commitments by most of our trading partners to net zero emissions by 2050 (or 2060 in the case of China) are rhetorical gestures with no real-world implications. Whatever Coalition ministers might say, they are assuming business as usual, particularly in relation to coal and gas.

The plausibility of that assumption has been gravely undermined in recent weeks by a series of announcements from the heavy engineering companies that build coal-fired power stations. After adverse publicity for their involvement in the Vung Ang 2 project in Vietnam, Samsung and KEPCO announced they would take on no further coal-fired projects. General Electric, Black & Veatch, Siemens and Toshiba have all made similar pledges over the past two weeks.

These moves reflect two main factors. First, many of these companies have global brands that are being tainted by their association with coal. Samsung stated as much in its announcement. Second, just as the pipeline of coal-fired power projects has shrunk, many existing plants have been operating at a fraction of their capacity. With the added pressure of the pandemic, the argument for getting out of coal now rather than later has proved overwhelming.

A couple of dominoes remain standing, but they are likely to fall soon. The biggest remaining Japanese firm in the field, Mitsubishi Heavy, faces the same problems as Toshiba and Samsung, with the toxic reputational effects of coal damaging its entire Mitsubishi brand. Other parts of the corporation, such as Mitsubishi UFJ Financial Group, have already dumped coal assets, taking big losses in the process. In South Korea, the Doosan Heavy group, which is involved in Vung Ang 2, is deeply indebted and facing intense pressure to pull out of coal. In India, Bharat Heavy and other firms are operating at 50 per cent capacity, the result of a shrinking pipeline of projects and intense competition from China.

At this stage, indeed, it is only China that is keeping the global coal industry afloat. Provincial governments have embarked on a program of building coal-fired power stations as a form of fiscal stimulus. Finance for new coal projects depends heavily on Chinese banks and on Xi Jinping’s Belt and Road Initiative. And, with the withdrawal of most of their competitors, Chinese heavy engineering firms like CITIC will have the business of building coal-fired power plants all to themselves.

This is a major foreign policy problem for Australia. As the Xi regime becomes more repressive domestically and more aggressive internationally, our economic dependence becomes more and more problematic. Our differences with China have already led to informal trade barriers being imposed on a wide range of products, including coal. Moreover, as its announcement of 2060 zero emissions indicates, the regime is capable of rapid policy shifts. If Xi decides to mend fences with the Biden administration, firm action to stop uneconomic coal-fired projects would be an easy first step.

Labor needs to make a choice between following the government’s line — according to which we have already done everything we need to — or committing to a policy framework consistent with the Paris agreement’s goal of holding the increase in mean global temperatures well below 2°C. Until now, the policy has been as non-committal as possible in an attempt to satisfy the majority of the party’s supporters, who want strong action, and those who pretend that inaction is a serious option.

Joel Fitzgibbon’s resignation gives Labor the chance to resolve the issue. By aligning Australia with Biden’s pro-climate position, it can regain the initiative and avoid the prospect of global isolation. •

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In some senses, this is not surprising. The cost of solar PV has been declining steadily for decades as a result of technological innovations. The cost of the silicon wafers on which solar cells are based has fallen dramatically, the efficiency with which they convert sunlight into electricity has increased, and all aspects of the manufacturing process have improved. Advances in wind power have been only slightly less dramatic.

At the same time, and despite laggards like Australia and the United States, governments around the world have committed to decarbonising the global energy system.

But the sharp change in the IEA’s analysis wasn’t primarily a reflection of technological progress or climate policy. Rather it was prompted by a decline in the interest rate used to calculate the cost of investments in energy.

Solar modules cost virtually nothing to operate, and last a long time. Manufacturers’ warranties typically run for twenty-five years, guaranteeing at least 80 per cent performance. Experience and experimental evidence suggest this is conservative: even after thirty years, modules installed today should still be working at around 85 per cent of their initial capacity. A working lifetime of twenty-five years is therefore conservative.

Solar PV is so cheap to operate that its cost arises almost entirely from the need for investors to earn a rate of return on the capital they put into constructing a solar project and connecting it to the grid. This is commonly expressed in terms of a “payback period,” the time in which a successful investment must return the capital invested. Until now, the IEA has used real rates of return ranging from 7 to 8 per cent, which implies payback periods of nine to ten years.

In its 2020 report, the IEA acknowledged how low interest rates have fallen by reducing the cost of capital to between 2.6 and 5 per cent for Europe and the United States, with somewhat higher rates for China and India. On average, the cost of capital has almost halved, implying a near doubling of the time a project needs to pay a full return to investors.

Now suppose, instead of private capital, solar projects were financed using thirty-year government bonds. Remarkably, the real rate of interest on these bonds has fallen to zero or below — and if the current judgements of investors are correct, rates will remain at or close to zero for decades to come.

Ultra-low interest rates have been obvious to anyone with a bank account or a variable rate mortgage. Until recently they have been seen as an anomaly, the result of emergency measures taken in response to the global financial crisis and then the Covid-19 pandemic. But twelve years after the GFC, and with years of low rates ahead of us, emergency conditions have become the norm.

The Australian government recently sold $15 billion in thirty-year bonds offering a yield of 1.7 per cent, less than the likely rate of inflation. European countries like France and Austria are selling bonds with maturities of fifty and even one hundred years. The US government is selling inflation-protected bonds of the same maturity for negative rates of interest. Some economists (including me) are now suggesting governments issue perpetual bonds, with a real return of zero (that is, an interest payment exactly sufficient to offset inflation).

What happens in the extreme case where interest rates fall to zero? In these circumstances, the notion of a payback period ceases to be relevant. All that is required for an investment to be justified is that its lifetime returns should exceed the cost of construction.

Once a solar module has been installed, a zero rate of interest means that the electricity it generates is virtually free. Spread over the lifetime of the module, the cost is around 2c/kWh (assuming $1/watt cost, 2000 operating hours per year and a twenty-five-year lifetime). That cost would be indexed to the rate of inflation, but would probably never exceed 3c/kWh.

There is, then, a real possibility that solar PV and other renewable technologies could fulfil the promise made decades ago by the promoters of nuclear power: that they will deliver electricity “too cheap to meter.” (Even with access to cheap capital, nuclear power never delivered on that promise.)

The prospect of electricity this cheap might seem counterintuitive to anyone whose model of investment analysis is based on concepts like “present value” and payback periods. But in the world of zero real interest rates that now appears to be upon us, such concepts are no longer relevant. Governments can, and should, invest in projects whenever the total benefits exceed the costs, regardless of how those benefits are spread over time. •

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The matter was not put to a formal vote at AGL’s annual general meeting, but BlackRock signalled its support in a bulletin to investors. The motion, which had won the backing of about one in five shareholders, was likely to have attracted support mainly from large European asset managers, but was opposed by major Australian industry super funds including Cbus, HESTA and Aware.

BlackRock, which manages assets worth US$7.32 trillion, has long called on the corporate world to take stronger action to deal with climate risks. Like Australia’s big industry super funds, though, it has mainly sought influence through private conversations with directors rather than used its voting power overtly.

If the world’s largest fund manager has decided it’s time to be more direct and public, super funds may be encouraged to change tactics too. In the absence of coherent government policy or a price on carbon, the best hope for effective action may come from enlightened business decisions, and Australia’s collective retirement savings — now nudging $3 trillion — give fund managers huge leverage.

When activist members call on their industry funds to divest from polluting companies, they’re often told that it’s better for the fund to stay engaged in order to push polluting businesses in the right direction. But the results of that strategy, at least to outsiders, seem modest and slow.

Like BlackRock, many big industry funds are members of Climate Action 100+, an international campaign by institutional investors to have boards and senior management commit to reducing greenhouse gas emissions in line with the Paris Agreement. The resolution to AGL shareholders focused on just that issue; if passed, it would have required AGL to “align the closure dates of the Bayswater and Loy Yang A coal-fired power stations with a strategy to limit the increase in global temperatures to 1.5°C above pre-industrial levels.”

AGL has pledged to close all three of its coal-fired power stations by 2050. Despite intense pressure from the federal government, it will complete the shutdown of Liddell in the Upper Hunter by April 2023. Bayswater (also in the Upper Hunter) is set to be retired in 2035, when it will be fifty years old, and Loy Yang A in Victoria’s Latrobe Valley won’t close until 2048, by which time it will be more than sixty years old.

AGL is Australia’s largest greenhouse gas polluter, responsible for 8 per cent of national carbon dioxide emissions. More than a third come from Loy Yang A, which burns emissions-intensive brown coal.

The motion for AGL’s annual general meeting was initiated by the Australasian Centre for Corporate Responsibility, or ACCR. It drew on AGL’s own analysis, which shows that even the more modest target of limiting warming to 2°C requires brown coal to be all but phased out as soon as 2030.

AGL chairman Graeme Hunt acknowledged as much at the meeting, insisting that “while closure in about 2036 was needed in a scenario where global warming was limited to no more than 1.5 degrees, it was not AGL’s policy to commit unilaterally to the outcomes of particular climate scenarios.”

ACCR also put a more commercial argument to shareholders, contending that keeping Loy Yang A running after it turns fifty would be a bad investment decision because of increased maintenance costs. “It is not commercial to keep throwing money at coal-fired power stations beyond the end of their commercial lives,” says ACCR’s executive director Brynn O’Brien.

Drawing on data in AGL’s annual reports, ACCR calculates that the amount the company must spend to “sustain” its assets grew from $80 million in 2012 to $536 million in 2020. Spending on “growth and transformation” fell from $690 million to $193 million over the same period. Maintaining ageing coal assets comes at the expense of investing in renewable technologies.

BlackRock appears to agree. It supported the resolution, it said, “to encourage the company in its efforts to proactively and ambitiously manage the climate risk in its business model.” Shareholders’ long-term interest would benefit from AGL’s offsetting financial risks and capturing “some of the opportunities of the global energy transition.” The capital spending needed to maintain Loy Yang A was “a significant factor” in BlackRock’s support for the resolution.

BlackRock chairman and chief executive Larry Fink has built a reputation for stressing the importance of environmental concerns in his company’s investment decisions. In his 2020 letter to chief executives, he argued that climate change was fundamentally reshaping finance and the allocation of capital, and warned that BlackRock would drop investments that present “a high sustainability-related risk, such as thermal coal producers.”

Until now, though, people involved in pushing for action from Australia’s corporate sector have regarded BlackRock’s advocacy as tokenistic. Last year the Guardian reported that BlackRock’s interests in coal, oil and gas had grown substantially since the 2015 Paris accords, yet it “routinely” opposed motions that would have forced directors of fossil fuel firms to act more resolutely on climate change.

ACCR’s Brynn O’Brien says this is the first time BlackRock has supported a shareholder resolution relating to climate change at an Australian AGM. “It’s too early to say whether this represents an overall shift to BlackRock using its stewardship rights more forcefully,” she says.

Responsible investment specialist Alice Martin agrees. Martin, director of consulting firm Moribus Advisory, says BlackRock has largely operated behind closed doors. “It’s great to see strong signalling from BlackRock on this issue,” she says. “However, I’d be wary of making a hero out of them just yet.” She points out that industry super funds, including her previous employer, Local Government Super, have been far more vocal and far more public in pushing Australian companies to respond to climate risks.

Martin is currently working with the Sustainable Economy program at the Centre for Policy Development, which has put increased pressure on big companies in recent years. In 2016, CPD jointly commissioned a legal opinion that found company directors could be liable for breaching their duties under the Corporations Act if they ignore or mismanage climate-related risks.

That message has been reinforced by key financial agencies including the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Reserve Bank, and by former High Court justice Kenneth Hayne, who chaired the royal commission into the financial sector. On Friday, in its latest Financial Stability Review, the Reserve Bank designated climate risk a “key focus” for Australian regulators in coming months.

Alice Martin says the Australian Council of Superannuation Investors is increasingly pushing for action on environmental, social and governance issues, including climate change. On average, its members own about 10 per cent of every ASX 200 company. Under this kind of pressure, at least eight of the forty biggest industry super funds have divested from companies that derive most of their income from mining thermal coal for power generation.

But most funds still hold shares in other fossil fuel companies, including oil and gas producers like Woodside, Santos and Origin Energy. Employees’ super contributions that go to their fund’s default investment option are likely to be partly invested in one or more of these companies. But if Woodside, Santos and Origin realise all their gas ambitions it will be impossible to hold global temperatures to the Paris level.

To achieve more and faster progress, a growing number of ordinary members would like to see their funds shift the emphasis from closed-door corporate conversations to engaging in more public action of the type foreshadowed by BlackRock. But those playing the inside game insist progress is being made by working robustly with company directors and executives.

Liza McDonald, Aware Super’s head of responsible investment, told the Sydney Morning Herald that the fund had been very successful in getting AGL to engage on climate change, including setting targets to reduce their emissions. But McDonald said Aware would not support ACCR’s resolution on Loy Yang A because its implementation was “not commercial.” Despite sharing concerns about AGL’s spending on maintenance, she said management was best placed “to manage their assets… in the most effective way.”

ACCR’s O’Brien is underwhelmed by that explanation, given Aware’s membership of the Climate Action 100+ initiative. “The overriding point of the initiative is to transcend pure short-term commerciality,” she says, adding that HESTA members, who mainly work in the health sector, would expect their fund to move more quickly given the massive health effects of global warming. A higher vote for the AGL resolution would have had “persuasive influence” on AGL’s decision-making, she says.

O’Brien has another explanation for why BlackRock supported the ACCR motion and why big Australian super funds held back. “As a global asset manager,” she says, “BlackRock is less sensitive to some of the things Australian funds are sensitive to, like political blowback.”

It remains to be seen whether BlackRock’s foray with AGL will be replicated with other corporations — and if it is, whether it encourages a new wave of investor action on climate change. In the meantime, I have asked my own super fund, UniSuper, for its position on the AGL resolution. I’m yet to receive an answer.

As part of a commitment to achieving net zero absolute carbon emissions in its portfolio by 2050, UniSuper says it engages with companies to “encourage rapid decarbonisation of their operations and supply chains.” On its website it singles out AGL as an example of why it maintains investments in companies generating profits from fossil fuels: “Often the companies that are being divested have the greatest capacity for impact — for example, AGL is both a large emitter and a large investor in renewable technology. By precluding investment in AGL, we won’t be able to be part of this transition.”

This is a familiar argument. But it raises the question, when does being “part of the transition” ramp up? If now is too soon to support resolutions that align corporate strategy with keeping average global temperature rises below 1.5°C, then when will the time be right? •

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In diplomacy, the regime has adopted a “wolf warrior” style, responding aggressively to any hint of criticism by threatening to disrupt international trade. Xi’s much-touted Belt and Road Initiative has funded the worst kinds of boondoggles in developing countries, leaving them heavily indebted for worthless projects.

Climate policy has been going much the same way. Having previously tried to stop the proliferation of coal-fired power stations — most of them developed by crony-capitalist provincial governments — the central government took off the brakes last year. China’s pandemic recovery policies, like Australia’s, have been entirely backward-looking, trying to juice up construction and heavy infrastructure projects.

In these circumstances, what should we make of Xi Jinping’s new pledge that China will be carbon neutral by 2060? The European Union has already committed to a 2050 target, and most member nations have made individual commitments consistent with that goal. If China delivers on its latest commitment and a Biden administration puts the United States on a path to net zero emissions, the prospects for stabilising the global climate will be transformed.

It may not be sufficient to hold warming below 2°C, but it should be enough to shift the world from its current catastrophic path towards 3°C or 4°C.

China’s announcement isn’t entirely about climate. It reflects two broader issues: a recognition in Beijing that Xi has bitten off more than he can chew in terms of international disputes, and an acknowledgement that backsliding on climate creates enemies everywhere. Making sure provincial governments reduce the construction of coal-fired power stations won’t be easy, but it’s probably the least-cost way of generating international goodwill. Xi is surely aware that coal-fired power is uneconomic and hugely destructive in terms of human health, even without considering the implications for the climate.

The move also anticipates the likely change of administration in the United States. While Joe Biden would wind back Trump’s attacks on trade in general, he has indicated he will apply a carbon-adjustment fee to countries that are failing to meet their climate and environmental obligations. While this policy is applicable to any country without a plan to decarbonise, it is clearly directed at China.

What does this mean for Australia? National commitments at the Paris climate talks included not only emissions targets for 2030 but also policies to hold warming well below 2°C beyond that date. Instead, the Australian government has treated its unambitious 2030 target — to be achieved (if at all) using statistical trickery — as its only goal, followed by emissions growth stretching indefinitely into the future.

Dragging the chain on our Paris commitments already looks like costing us a trade deal with the European Union, which is demanding a commitment to decarbonisation. Yet pro-coal commentators here seem to imagine that simply labelling a commitment to save the planet as “protectionism” will make the problem go away.

More than any other government in the world (with the exception of Benjamin Netanyahu’s in Israel), the Morrison government has bet its future, and ours, on the belief that Trump will score another win against the odds, just as Morrison did last year.

Taking the lead on investigating Chinese responsibility for the Covid-19 pandemic curried favour with Trump and earned fresh hostility from the Chinese government. But it didn’t win any friends on the Democratic side of US politics, where the “Chinese virus” is correctly seen as an excuse for Trump’s mismanagement. More generally, national leaders in the developed world correctly see Morrison as one of Trump’s few allies.

In a month’s time, we could find ourselves internationally friendless to an extent that we have never before experienced, still at loggerheads with China and tied to a Trump administration that seems likely to be not just defeated but also disgraced.

Having used the prospect of growing Chinese demand for coal as an excuse for continuing to mine, we have been left in the lurch by Xi Jinping. By getting in early with a commitment to decarbonisation, Xi shows that he has read the warning signs. It’s time for Scott Morrison to exhibit his well-known pragmatism and follow suit. •

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In the episode called “A Waste of Energy,” the PM’s advisers are struggling with the fact that the government’s plan to supply China with more coal will expose their boss’s grand rhetoric about fighting climate change. A brainstorming session ensues:

Adviser 1: What if we were to say we were selling them clean coal?

Adviser 2: Unfortunately, there’s a problem with that.

Adviser 1: What?

Adviser 2: [exasperated] There’s no such thing.

Adviser 1: Aren’t we working on it?

Senior Adviser: Yeah… but not with a straight face. It’s a long way off in the future. [Wistfully looking to the sky with a smile] But boy it’s been a fantastic distracting phrase.

Adviser 1: What if we come up with another one?

Senior Adviser: Pleeease!

Let’s put aside the fact that this latest technology roadmap policy is eerily similar, though less thorough, than a government document released in 2017 — which, incidentally, was also called the Low Emissions Technology Roadmap. (Yes, they aren’t much good at coming up with new distracting phrases.)

The fault with this latest roadmap doesn’t lie so much in the technologies it recommends for funding (including, you guessed it, clean coal, aka carbon capture and storage). Its fatal flaw is that even if it managed to achieve all its “stretch targets” for these technologies by the ten-year mark, we’d still be no closer to achieving emissions-reduction goals unless the government also accepted the need for a carbon price.

Of the five nominated technology priorities, three would remain completely uncommercial without a significant carbon price or some other incentive for carbon abatement.

Hydrogen: The government’s target is a production cost of $2 per kilogram. This equates to a price per gigajoule of energy of almost $17 (measured by lower heating value). Yet manufacturers say they’ll be ruined by gas prices in the realm of $8 to $12 per gigajoule and energy minister Angus Taylor talks of bringing that figure down to $6 per gigajoule as part of his gas-fired recovery.

Low carbon metals: The government has set a target of $900 per tonne for low-emissions steel and $2700 per tonne for aluminium. Yet the average price for a conventional tonne of raw steel has been around $500 to $650 per tonne and for aluminium between about $2000 and $2500.

Carbon capture and storage: Here the target is $20 per tonne of CO2 captured and stored underground. But this involves extra equipment and a reduction in the conversion efficiency of existing fossil fuel burning processes, which means it will cost an extra $20 per tonne of CO2 relative to what we’ve done in the past.

The remaining two of the roadmap’s five technological priorities — long-term storage and enriched soil carbon — are also hamstrung by the lack of a carbon price or some other financial incentive for reduced emissions. Long-term energy storage is completely unnecessary unless we significantly expand renewables, but investment commitments in wind and solar farms have collapsed over the past twelve months except where state government initiatives apply.

Enriching soil carbon certainly provides agricultural productivity benefits to farmers. But the roadmap effectively concedes that this too relies on a carbon price. Its aim isn’t to foster technologies to help farmers increase soil carbon; it is to measure soil carbon more cheaply so farmers can then make money selling carbon credits.

The government wants us all to think about the technologies we might need ten or twenty years down the track. But this is just a distraction from its failure to materially reduce emissions right now. And for those future technologies to be of any interest to the private sector they will need exactly the same type of policy mechanism that we need to reduce emissions immediately.

Getting businesses to adopt new technologies to reduce emissions, or even to use old and well-proven technologies, isn’t rocket science. You don’t need to be the chief scientist, or a Rhodes scholar, or have a technology roadmap. For businesses to reduce emissions they need an attractive financial incentive to do so.

Yet the government’s one and only mechanism to do this — the Emissions Reduction Fund, since rebranded as the Climate Solutions Fund — is hamstrung by an inadequate budget and an inability to attract meaningful levels of abatement at a price the Clean Energy Regulator is able to pay. The two charts below help to explain why the government is so desperate to distract us from the here and now.

The grey line in the first chart shows that by 2030 emissions will be almost the same as they were in 2000. This is based on the government’s own projections and includes an array of optimistic assumptions about what existing policies will achieve.

Let that sink in for a second or two: this would represent three decades of almost no progress in getting our emissions down.

Source: Green Energy Markets LGC/Carbon Credits Price Drivers Report derived from data within the Federal Government’s Emissions Projections 2019

The blue dashed line extrapolates the trend of the small annual average emissions declines the government expects over the 2020s all the way to 2050, and the green line shows the emissions trajectory required to 2030 to meet the government’s target of a 26 per cent reduction in emissions relative to 2005 (conveniently the year when our emissions almost peaked).

I’ve then extended this green line beyond 2030 to illustrate the path we’d need to take to bring emissions down to net zero by 2050. This is consistent with the targets adopted by Britain, New Zealand, France, Germany, Korea, Canada, Chile, Norway… the list goes on. It will include the United States, too, if Joe Biden is elected president in November, and China has recently committed to net zero by 2060.

The yellow bars that build steadily from 2020 to hit 530 million tonnes of CO2 by 2030 represent the amount of new abatement the government needs to acquire to meet its 2030 target. This is a function of emissions not just in the year 2030, but in all the years from 2021 to 2030. The government will of course claim that because Australia’s historical emissions were below prior targets under the Kyoto Protocol this counts as credit towards its Paris 2030 target. There’s just one problem — the other major signatories to Paris don’t agree.

That brings us to the next chart, which looks at what the government’s Emissions Reduction/Climate Solutions Fund has actually achieved. The green bars show how much annual abatement the projects contracted in each year’s auctions will deliver. The blue bar towering above most of these green bars is the annual amount of abatement the fund needs to be contracting each year in its auctions if the government is to achieve the 2030 target.

Source: Green Energy Markets LGC/Carbon Credits Price Drivers Report based on data within the Clean Energy Regulator’s Carbon Abatement Contract Register and the Federal Government’s Emissions Projections – 2019.
Note: Lapsed or terminated contracts are excluded. Annual abatement is calculated by dividing the total contracted abatement by total contract length including time to fulfil conditions precedent. The amount of annual abatement the government needs to contract in each year’s auctions is not 530 million tonnes divided by ten years. Rather, it is a function of the fact that projects contracted to deliver abatement in 2021 will provide that annual abatement over ten years; meanwhile, the next year the projects contracted will only be able to contribute nine years’ worth of abatement towards the 2020–30 Paris target, the subsequent year’s contracted projects provide eight years’ abatement, and so on. So the total number of years for which the auctions can contract projects to deliver abatement to 2030 is fifty-five.

The two auctions in 2015 contracted a combined total of 10.3 million tonnes of abatement per annum, in line with what the government needs to be procuring in future years. Unfortunately the amount of abatement the fund has procured has since collapsed.

Why? When the fund began conducting auctions in 2015 it had the benefit of being able to piggyback on myriad abatement projects that had been developed either under the Gillard government’s carbon pricing regime or, in many cases, with the support of the old Renewable Energy Target or the NSW Greenhouse Gas Abatement Scheme (the world’s first emissions trading scheme). And a big bunch of low-hanging fruit — NSW land-clearing permits — were another cheap, never-to-be-repeated pick-up.

The other side of the equation is the price the Clean Energy Regulator has been prepared to offer for abatement, which is shown by the yellow line with blue dots. While the volume contracted in 2017 collapsed, it still had to pay a higher price to get this much-diminished volume compared with what it paid in 2016. Since then the regulator has slowly increased the price it will pay, but the abatement volume offered remains tiny.

In order to stimulate abatement volumes to remotely near what’s required, the regulator will almost certainly have to pay a substantially higher price than the roughly $16 per tonne offered recently. But to make its budget of $2 billion stretch to purchasing 530 million tonnes, it can only afford to pay $3.77 per tonne.

The government likes to assert that its climate policy is about technology, not taxes. But it’s not technologies that we’re lacking, it’s the money to drive businesses to use and improve them. And that has to come from either a carbon price of some kind, or raising other taxes. •

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The ABC’s three-part series Fight for Planet A was already in the making when last summer’s bushfire catastrophe began to unfold, and was completed before the pandemic hit. If the three-month deferral of the broadcast date was arranged in anticipation of some reprieve from the pandemic emergency, things haven’t worked out that way.

Presenter Craig Reucassel delivers a brief introduction to camera explaining this unforeseen convergence of events. Watching it now, though, the series unavoidably comes across as something of an anomaly. Reucassel’s buoyant approach and the program’s whole “yes we can” premise seem out of tune with what looks like a depression looming.

Five Australian households participate in a challenge to see how much they can reduce their carbon footprint. The presumption is that they are all, in their different ways, guilty of ecological extravagance, but how does this come across now that the livelihoods of so many households are in jeopardy? The ABC’s manager of documentaries, Stephen Oliver, sees some advantage in shifting the focus from the pandemic, which leaves us “sitting there waiting for the experts to find a vaccine,” back to climate change, where we can all be instrumental in finding solutions.

At the beginning and end of the series, the five households assemble in the studio for an audit of their joint carbon emissions, represented as a bouquet of black balloons attached to a model house. In episode one, the house is in midair; the challenge is to reduce the balloon count enough to ground it. To achieve this, they must change diets, modes of transport and household energy consumption.

On its own, this aspect of the series could make for fairly bland lifestyle television. But Reucassel never allows us to lose touch with the sterner dimensions of his subject. The flair for performative interventions he demonstrated in The Chaser’s War on Everything (2002–09) comes to the fore as he uses forms of street theatre to engage passers-by in the broader challenge.

“The hardest part is getting people to visualise emissions,” says Reucassel. He heads for the beach with a cloud of carbon balloons attached to his back, intending to head off the prime minister, who is taking a weekend stroll in board shorts. Per capita emissions in Australia are among the highest in the world: can he get Morrison to “see” what this means? As it turns out, the strongest visual image is of the prime minister scrambling awkwardly over the beach wall to escape the encounter.

Reucassel has more success persuading ordinary people to front up to the problem. While the household challenge is under way, he sets off around the city and across the country to tackle the larger issues. As a nation, we emit 539 million tonnes of carbon each year, which makes a massive contribution to the melting of 463 billion tonnes of ice in Greenland and Antarctica. But what do such abstract statistics mean to most of us? A 6.5 tonne wall of ice, trucked into a square in the city centre, is a good way to draw attention. Curious onlookers are invited to guess how long it takes for the average Australian to melt this much ice. The bids come in. Ten years? A year? A month? Ten days, is the answer. People literally stop in their tracks.

Closer to home, though still remote from city dwellers, is land clearing. A road trip to a cattle station 300 kilometres from Cairns provides another kind of shock. Australia has one of the highest rates of land clearing in the developed world. Drone shots show trees falling in rapid succession, keeling over like infantry under machine-gun fire. Some 390,000 hectares are cleared in Queensland in a year, but when the drone shows what a 2000 hectare expanse actually looks like, the larger figure defies comprehension.

Back in the city, seventy volunteers assemble on the banks of the Yarra in Melbourne, holding up green umbrellas to represent a forested area the size of a modest free-standing house. Up on the bridge with a loud hailer, Reucassel starts another bidding game. How long does it take to clear this much land in Australia? “Every hour?” someone ventures. He encourages the punters to go lower, then eventually turns to the group below him and makes the call. The umbrellas snap closed in an instant, and the shock is palpable.

Our eye-watering national deficit to the planet continues to grow while governments prioritise anxieties about the economy. Yet what is the economy, after all, without the underpinning of natural resources? Fight for Planet A is structured so that the carbon audit of the five participating households is counterpoised by snapshots from the bigger picture. Ledgers of debit and credit are checked intermittently, with the implication that there is a clear analogy between the household economy and the macro economy of the planetary ecosystem.

There’s a risk of a significant misconception here, just as there is when household budgets are cited as a model for government budgets. For overarching questions of resource management, it’s the bigger players who call the tune and determine the parameters within which the rest of us operate. We’ve seen some outstanding environmental documentaries from Four Corners, focusing directly on corporate and government responsibilities for our woeful national report card. Linton Besser’s investigation into water management on the Murray–Darling (2017) is a prime example, but it also demonstrated how the politics of it all can leave us feeling angry and hopeless.

There’s plenty of anger among the respondents in Reucassel’s experiments, but his refusal of hopelessness is wonderfully effective. He has a gift for engaging the public imagination and galvanising community spirit. Whether he’s talking to ten-year-olds in the schoolyard, the guys in a student share house, the three generations of a well-heeled suburban family or an outback farmer, he has a way of connecting that is energising without ever being patronising.

Reucassel’s previous series, War on Waste, involved groups of high school students in skilfully organised campaigns that proved remarkably effective. It was a runaway success in 2017 with a sequel the following year. A youth perspective remains at the heart of this new series, reinforcing the message that renewal is not only necessary but also possible. •

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The Covid-19 crisis has been a lifeline for the government. During the last election the prime minister didn’t define his government by what it would do if re-elected, but rather by what it would not do. It got the government over the line, but after the election he and his colleagues appeared rudderless. And then, within months of the election, he was besieged by sustained criticism over his inaction on climate change as a terrifying bushfire season began.

Morrison’s response to Covid-19 couldn’t provide a greater contrast. While managing the health risks of an epidemic is generally the responsibility of state government — just like the bushfires — the PM wasn’t about to sit back this time. He was quick to take a position, if not at the head of the pack, then not far behind. In terms of the economic response, he unleashed a flood of government assistance that dwarves Kevin Rudd’s stimulus spending during the global financial crisis. The electorate appears to approve, and federal Labor has largely been relegated to being a bit player in the unfolding crisis.

But while Covid-19 has given Morrison a chance to shine, it has been a curse for the re-election chances of Donald Trump. The American president’s strategy for re-election was built entirely on a claim that he single-handedly reinvigorated the economy, a claim now in complete tatters. According to the polling analysts at FiveThirtyEight, the race between Trump and Joe Biden is “verging on a landside” to Biden. Of course, a week — let alone several months — is a long time in politics, but things look very bad for Trump.

And that means the climate change denial wing of the Morrison government may be about to lose the card it believes trumps all calls for action.

It is hard to overstate Trump’s importance to the denialist wing of the Liberal and National parties in its fight for a policy that almost no major Australian stakeholder wants. Even the biggest polluters in the country — Origin, AGL, EnergyAustralia and other owners of coal-fired power stations — want an emissions trading scheme (as the National Energy Guarantee effectively was). And so do the large energy consumers represented by the Australian Industry Group and the Energy Users’ Association; charity groups representing the poor and disadvantaged; the financial sector; and even big mining, oil and gas companies like BHP, BP and Shell.

Across Europe and even Trump’s United States, meanwhile, coal is in severe decline. According to the federal government’s own forecasts, Asia’s demand for coal, which had been dramatically expanding, is also expected to fall. Perhaps most ominous for the coalminers is the share market’s judgement: the Dow Jones US Coal Index is down a staggering 92 per cent on its peak back in May 2018, during a period in which the Dow Jones Industrial Average has risen 9 per cent.

Having Trump in the White House has allowed members of the Coalition’s climate change denial wing to block out all this inconvenient information. They can point to him and claim that Australia can safely ignore the Paris Agreement because without US involvement the deal is meaningless.

But last month Joe Biden unveiled what he plans to do if he replaces Trump, and it makes for an uncomfortable contrast with the Morrison government’s position.

Biden will seek to legislate a scheme to gradually ratchet up the proportion of electricity coming from zero-emission sources (renewables, nuclear and energy efficiency) to 100 per cent by 2035. By comparison, the Morrison government argued during the election that Labor’s commitment to 50 per cent renewables would “deindustrialise” and “wreck” the economy. (Strangely, the government is now boasting that Australia will achieve that target.)

Biden announced that he will aim to put the American economy on a path to zero net emissions by 2050 — a target Labor has adopted, but which the deputy prime minister claims would destroy Australian manufacturing. Biden said he will revitalise the American auto industry by stimulating the production of electric vehicles and rolling out half a million electric vehicle charging stations; Morrison declared that Labor’s electric vehicle plans would “end the weekend” (yes, he really did say that).

Australia is already under pressure from other countries unhappy with its reluctance to reduce emissions. Negotiations with Britain for a free-trade agreement are said to have hit a snag over Britain’s insistence on clauses requiring action to reduce carbon emissions, and the same problems have emerged in Australia’s trade negotiations with the European Union. Just in the past few weeks the European Union unveiled a Covid-19 recovery program of more than a trillion dollars emphasising projects to decarbonise member countries’ industries. To help fund this stimulus Brussels is moving ahead with a tax on imports from countries with lower carbon emissions standards than Europe’s.

A climate policy built on three-word slogans like Angus Taylor’s “technology not taxes” isn’t going to fool the European Union or the United States. A convincing policy needs to be backed by billions of dollars in funding to drive serious reductions in our use of fossil fuels. Covid-19 has bought the government time on climate change policy, but it hasn’t granted it a permanent exemption. •

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The country’s rate of economic growth sank rapidly from 13.5 per cent in 2014 to a 1.1 per cent contraction in 2018, before a temporary bounce-back to 5 per cent last year. The latter came too late to save Marape’s predecessor, Peter O’Neill. In June, the government was forced to seek a rapid credit facility loan of A$490 million from the International Monetary Fund, coming on top of a A$440 million loan from the Australian government last November to repay debt.

Workers in clinics and hospitals around the country — which are mostly operated in rural areas by the mainstream churches — are funded chiefly by the government. They had to wait until the start of July for their March wages, and have yet to be paid for their work since then. Ulch Tapia, the chief executive of Church Health Services, said he had hurried to deposit the cheque for March’s wages: “I hope it clears because sometimes the cheque bounces.”

According to John Leahy, the president of the PNG Chamber of Commerce and Industry, the government owes businesses more than a billion kina (A$408 million). “Failure by the national government to pay its debts is a major concern identified by chambers throughout the country,” he told the National newspaper. “It is a major issue for all businesses but for small to medium enterprises it can be crippling.”

Medical supplies and GST refunds for exporters have also gone unpaid, Leahy added, while “we are aware that substantial payments have been made to road construction contractors for the Highlands Highway for work that has not been done.” That road construction — and in fact most contracting work — is now conducted by Chinese state-owned corporations.

The view ahead isn’t any rosier. The Asian Development Bank expects inflation to reach a worrying 4.4 per cent next year, and is forecasting PNG’s economy to contract by 1.5 per cent in 2020. The World Bank anticipates worse, a 2 per cent contraction. Public debt is projected to rise to 45.4 per cent of GDP in 2021. Covid-19 restrictions have added to these burdens, with a Business Council of PNG survey finding only two-thirds of respondents to be confident that their firms can survive another year under current conditions.

The country’s core problems aren’t new, but they are worsening as its population of 8.5 million grows (currently at a rate of 2 per cent, or slightly more, each year). Fortunately, a significant though declining proportion of families retain enough access to traditional land to feed themselves. But this once-lauded “subsistence affluence” has slumped into a form of poverty with the growing importance of the cash economy, even in deeply rural areas — via mobile phone towers beaming signals into remote valleys and islands, for instance.

Although PNG has hosted a series of increasingly large commodity projects over the decades, the central government has failed to convert the revenue into a broad-based upscaling of the country’s skills and infrastructure to attract the domestic and foreign investment needed to create jobs. Of course, some of the resource revenue has been used to pay for services in this geographically challenging country. But progress has been slow, and in some core areas, including health and education, standards have declined, at least in the view of many Papua New Guineans.

Agriculture is the most obviously sustainable sector for widely accessible growth, tourism being ruled out for now because of infrastructure and security challenges. Marape agrees, saying recently: “I want hardworking citizens in PNG to become millionaires. Eighty per cent of the people rely on land but are dependent on the 20 per cent who have some form of formal income to solve their financial needs. Although the 80 per cent own land, they do not fully utilise the land to make money.”

His answer is a new national export agency. This, he says, would significantly benefit crops like coffee, the country’s biggest agricultural export. While production has slumped from one million to 600,000 bags, Marape claims the agency — with help from MPs, each of whom his government is giving A$615,000 this year to boost business activities — will see three million bags of coffee produced annually within a decade. “You can see your MPs and access these funds in the district,” the PM says, apparently confident of hope trumping experience.

Inevitably, corruption is blamed for the gap between expectations and reality. Peter O’Neill has been charged over the purchase of two Israeli-made generators in 2013, allegedly facilitated by an unauthorised payment of A$20.5 million. He has denied all charges, is on bail, and remains an active MP and leader of the National People’s Congress, the largest party in parliament.

The country has a poor record of prosecuting corruption, a task chiefly in the hands of an often under-resourced Ombudsman Commission that has often lacked political backing. The attempted assassination of former chief commissioner Chronox Manek in 2009 illustrates the dangers inherent in tackling corruption in PNG; he died less than three years later, having never fully recovered from the shooting.

The fierce independence of PNG’s courts also appears to be on the wane. Late last month, magistrate Ernest Wilmot, sitting alone, dismissed twenty-two serious criminal charges against PNG’s most powerful lawyer, Paul Paraka, bringing to an abrupt end (without an expository judgement) a case laid seven years ago.

The charges emerged from the troubling 818-page report of an inquiry chaired by retired judge Maurice Sheehan. It revealed massive, cunningly conceived fraud in various government departments, and recommended the criminal prosecution of fifty-seven people, including some of PNG’s top bureaucrats and lawyers. Among those named was Isaac Lupari, who retained his position as chief secretary to the government when O’Neill was pushed aside in May last year.

In another case, just last month, foreign minister Patrick Pruaitch was automatically suspended from office when the chief justice appointed a leadership tribunal to hear allegations by the Ombudsman Commission. But Pruaitch continues to run the foreign ministry regardless, presumably with Marape’s backing.

The commission’s reference related to a series of offences he allegedly committed when he was forests minister a decade and a half ago. A staunch supporter of a greater Chinese role in the region, Pruaitch has vowed to review the agreement that gave Australia and the United States the right to redevelop PNG’s Manus naval base as a deep-water port.

The most recent of PNG’s high-profile corruption cases, revealed last year by a parliamentary committee, involved extensive bribery of health department officials by companies supplying and distributing medicines. The committee found that the integrity of the contractors and the quality of their drugs were rarely subjected to due diligence.

Crimes like these will be investigated when the country’s Independent Commission Against Corruption finally begins operation after a decade of promises. All that needs to happen now is the enabling legislation’s final parliamentary reading, which is due next month. Health minister Jelta Wong says the first corruption commissioner should come from overseas “so that it’s a fair and just system.”

Opposition leader Belden Namah is testing the balance of power in parliament by challenging the constitutionality of James Marape’s election as prime minister last year. Marape, a Seventh Day Adventist elder who was finance minister for seven years, comes from the same Southern Highlands region as his predecessor, Peter O’Neill, who has again become highly active in recent weeks. Perhaps O’Neill senses an opportunity to return to the leadership via a parliamentary vote, regardless of the charges hanging over him.

It’s unlikely that Namah would muster the numbers to unseat Marape, but O’Neill might. The complex PNG constitutional arrangements permit a vote of no-confidence in a prime minister from 28 November this year to 24 July next year, after which a PM is “safe” until the next five-year parliamentary election in mid 2022.

At such a time in the parliamentary calendar, a challenger stands a chance of taking power. Jobs can be promised to potential supporters, and ministers and vice-ministers have a strong chance of surviving in office until the next election, reinforcing their campaign resources.

Despite its persisting “big man” mode, though, PNG’s political system remains vibrant and contested, and the military under the direction of the civilian government. Court processes are mostly fair and free, although where power is at its zenith judges increasingly find the going heavy.

The country can still retain, attract and lure back talent. While some of its best and brightest have chalked up achievements internationally, the majority return. Thus, for instance, the flourishing of Niugini Geeks, an ICT company with a strong software base, owned by developer Glory Group. As its general manager Claire Lee told Business Advantage PNG, “We have a big dream. We hope to create a PNG version of Silicon Valley in Port Moresby.”

And the country’s middle class continues to grow. Despite Covid-19 constraints, a new A$12.5 million shopping mall has just opened in Port Moresby; the developer is the Brian Bell Group, founded by a Queenslander who devoted his life to PNG.

Whoever is in government when the music stops is unlikely to be left with money in the kitty, however — unless Beijing rides to the rescue, big-time. The loans from the IMF, and possibly from the World Bank and the Asian Development Bank, and the generosity of Australian taxpayers are likely to be fully drained to pay public service wages and keep essential services going.

China offers loans rather than grants through its Belt and Road Initiative — but it’s the cash that counts in the Great Game of PNG politics, not where it comes from. Beijing’s influence on the PNG government has leapt under ambassador Xue Bing, a diplomat whose vast experience in the Pacific region includes senior postings in Canberra. For its part, Australia has struggled to advance its “Pacific Step-Up” program.

Meanwhile, the biggest single source of revenue during PNG’s forty-five independent years, mining and hydrocarbons, is hitting hurdles, some of them home-made. Discerning a clear trend in decision-making is difficult, but Chinese companies are figuring as both victims and, more often, beneficiaries of evolving government policy.

In June, the Marape government amended both the Oil and Gas Act and the Mining Act to fulfil its slogan to “take back PNG,” specifying that the state will take a larger role in resource projects. “Attracting foreign investors and capital is important,” the prime minister told parliament, “but this cannot remain unchecked forever.”

The government had decided in late April not to renew the lease of the vast Porgera mine, which is operated by the world’s second-largest gold producer, Canadian company Barrick Gold, with Chinese firm Zijin Mining Group. The mine, with monthly revenue of about A$50 million, consequently closed down and 2700 people were made redundant, almost all from the Enga province in the central Highlands. Barrick has initiated a legal challenge.

Plans have long been under way to massively increase the country’s liquefied natural gas output. Exxon, the operator of the LNG plant in Port Moresby, is leading one of two huge new projects, P’Nyang, while French giant Total leads Papua LNG. The former has been on hold since a renegotiation was ordered after Marape became prime minister. The need to reduce costs by sharing some facilities has also delayed Papua LNG.

As the resources investment climate thus cools, Oil Search — the country’s largest company, and a partner in all of the gas ventures — has made 550 employees redundant.

Through RamuNico, China already operates what is now probably the largest mining business in PNG, and that country seems to have an appetite for more involvement. Its Frieda River gold project may prove overambitious, but the determination of the Chinese, the record of challenging resource projects proceeding in PNG, and the government’s desire to grant greater access to Chinese businesses mean that its approval and operation shouldn’t be ruled out.

China’s increasing capacity to influence PNG has also seen immigration minister Westly Nukundj halt a massive police operation against the large-scale use of illegal immigrants in logging, mining and other projects in the Central and Gulf provinces. In response to widespread online criticism, Nukundj said that he will instead initiate a departmental investigation. Grassroots protests have grown in response to the purchase of retail businesses by immigrants, including many from China.

On 13 May Patrick Pruaitch co-chaired a video conference on Covid-19 with China’s vice–foreign minister Zheng Zeguang. In attendance were China’s ten diplomatic partners in the islands region, including recent converts Solomon Islands and Kiribati. A month later Pruaitch participated in a “high-level” video conference on the Belt and Road Initiative, of which PNG is an eager signatory, during which he said it was “every Papua New Guinean’s dream to have our country connected from east to west and north to south by railway, which I see happening through the BRI program.”

Finally, the immense challenges facing Marape also include the fate of Bougainville. Last December, 88 per cent of registered electors voted in a referendum on independence, with 98 per cent of them supporting the move. The longer this issue is left effectively unattended, the greater the risk of an eventual explosion of frustration.

The PNG government will need to deal with this clearly expressed desire of Bougainvilleans or face the risk of a return to the civil war that debilitated not just the region itself but the whole of the country for a decade. Recent skirmishes between undisciplined soldiers and police in Port Moresby, including a murder, underline the fact that the military option is not realistic, if it ever was. Constitutional alternatives need to be considered and clearly articulated — perhaps including a federation that permits free trade and movement of people while ceding political sovereignty.

No PNG prime minister wishes to be viewed as responsible for “losing” a significant part of the nation. But Port Moresby can’t expect the current grace period to be extended ad infinitum by the rising Bougainvillean generation, whose patience may not match that of the region’s statesman-like outgoing president, former Catholic priest John Momis.

With the window for a no-confidence vote opening on 28 November, Marape faces a period of grave political danger. But one element of the future is known: he will not be replaced by what would be PNG’s first female PM. There is not a single woman among the 111 members of this parliament. •

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Economics — ironically one of the disciplines that will be made more expensive by these changes — would suggest this is unwise. Australian governments have a long and unusually proud history of being terrible at picking winners. The changes to university fees are just the latest example.

As we teach our first-year students in economics, if an industry has a shortage of skilled workers, the businesses in that industry will compete vigorously with one another to attract that limited supply of workers by offering higher wages and better working conditions. Those wages and working conditions then attract more people to enter that industry, thus dealing with the shortage.

If this process isn’t happening — and there is evidence that this is the case — then one of the assumptions underpinning this model is false. Institutional constraints could be preventing wages from rising. The firms in that industry may have market power and be suppressing wages. Or perhaps information is asymmetric: future workers (today’s students) may not be receiving the career advice they need to identify the industries that have the highest salaries and the most opportunities.

Getting to the core of why the market is not solving the problem, and better designing our markets so that they do solve the problem, is the most effective approach. Having the government guess which industries will need workers in the future and changing government subsidies to deliver that outcome is not helpful, particularly given that HECS defers the cost of degrees into the never-never for people who, given their tender age, aren’t thinking that far ahead anyway.

The university fee changes are just the latest example of how successive Australian governments prefer their own guesswork over the working of the market. History shows that this delivers worse outcomes for Australians, particularly when politicians and their ideological and industrial preferences start shaping outcomes.

In the post-Covid-19 recovery, the government is considering picking which industries are to be declared “essential industries” and thus deserving of government subsidies and protection from competition. It remains to be seen which industries, if any, it will deem to be “non-essential industries.”

On climate change, successive governments have revealed a strong preference for using taxpayers’ dollars to clean up the mess left by big polluters rather than using a price on carbon to get big polluters to reduce their pollution in the first place by having the market achieve least-cost abatement.

On energy, the government is considering using taxpayers’ dollars to build a coal-fired power plant instead of setting a predictable and credible energy policy that allows the market to decide the cheapest and most efficient form of energy generation.

On trade, normally it is businesses and households that determine how much trade we have and with which countries we have it. But the government seems set on imposing restrictions so that Australia doesn’t have “too much” trade with any one country, where what constitutes “too much” will be, again, determined by bureaucrats.

On investment, the government’s new foreign investment regime adds more unpredictability and arbitrariness to a system that already had too much of both. Not only does treasurer Josh Frydenberg have the power to decide which investments are “okay” and which are not — and without giving detailed reasons for doing so — but he can also now withdraw approvals that were previously given.

Perhaps the preference for picking winners is tapping into the public’s mood. Many have lost trust in markets out of a belief, often true, that they are not delivering the outcomes society wants. But this doesn’t mean markets do not work. It just means that we are terrible at designing our markets properly.

When my brother and I were kids, we decided to build a cubbyhouse while on holidays in the Grampians National Park. We used flimsy ropes to hold up a floor made of brittle sticks. It didn’t end well. Does this mean that cubbyhouses don’t work? Of course not. The problem isn’t the concept of cubby houses, the problem is that my brother and I were terrible at designing them.

The same is true for markets. If markets are not delivering the outcomes society wants, it doesn’t mean that the concept of markets is flawed, it means that we are awful at designing markets and should strive to do better. The reason firms pollute too much is that we’ve made it free for them to do so — hardly a surprising outcome. Making pollution free is a very unusual decision given the costs of pollution for our health and wellbeing. But, nevertheless, that’s the choice Australians have made through our elected officials.

The outcomes markets deliver are shaped by the rules we develop to govern those markets. Indeed, markets can’t function without rules. Take away property rights and information from buyers and sellers, for example, and markets quickly fail.

Australians need to get smarter about how we design our markets. If markets are not delivering the outcomes we want, the solution is not to abandon them. Government guesswork has not provided good outcomes thus far. There’s no reason to think it will do any better in the future. •

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The saga began towards the end of that year, when the management of the country’s coalmines rejected a pay claim by the miners’ union. The miners banned overtime, which dramatically reduced the supply of coal to power stations and threatened the country’s electricity supply. Compounding the energy woes was the recent decision of the oil-producing OPEC countries to cut supplies to Britain and other countries they believed were supporting the Israelis in the Arab–Israeli war.

The day after the overtime ban began, Conservative prime minister Ted Heath declared a state of emergency, warning of “serious difficulty for every factory, for every farm and for every family in this country.” By early December, the chancellor of the exchequer was warning cabinet that “the country is now facing the gravest economic crisis since the end of the war.” The forecasts were so dire that he was unwilling to put them in writing.

On 12 December an exhausted Heath addressed the nation about this “grave emergency,” warning that “we shall have a harder Christmas than we have known since the war.” Britons, he said, must “close our ranks so that we can deal together with the difficulties.” (He did, however, persuade the Queen to drop a reference to her “deep concern” about Britain’s “special difficulties” from her Christmas message.) In the same month the government resorted to limiting industrial and commercial electricity use to just three days a week.

The stand-off between miners and management continued into the new year, with strikes reducing coal production to near-zero between 10 February and 11 March 1974. By then, the government had introduced specific measures to reduce energy use. The speed limit for cars and trucks was cut from seventy to fifty miles per hour. Heating on commercial premises was restricted. Police returned to walking the beat rather than driving. Ministers sternly advised citizens to brush their teeth in the dark and share baths (by which they probably meant bathwater). Petrol was rationed, streetlights turned off and children sent home from school. Amid panic-buying, some shops ran out of toilet paper. The Australian high commission was deluged with enquiries about emigration.

With both sides increasingly intransigent, the apocalyptic rhetoric intensified. The vice-president of the National Union of Mineworkers threatened “massive action, the like of which has never been seen in this country before.” Heath declared that the government would not yield to the “brute force of industrial power” and stressed that the three-day week would “prevent essential services from being placed in jeopardy” and ensure “a reasonable level of industrial activity.” Without the restrictions, a government official warned, “we face the most savage power cuts ever known in this country or indeed the world.”

Workers affected by the cutbacks could claim two days’ unemployment benefit a week. No special measures were adopted to assist employers.

Labour MP Tony Benn’s diary recorded that political meetings were being held by candlelight. One factory restarted a waterwheel last used in 1737. Some office workers wrapped themselves in blankets. Many pubs were closed, and television networks stopped broadcasting at 10.30 each evening. With many people left at a loose end, it’s little wonder that the birthrate was higher in October and November 1974 than in the same months of the following year.

The three-day week remained in force from 31 December to 9 March, concentrating its economic impact in the March quarter of 1974. The Confederation of British Industry initially estimated that the output of firms fell by around 20 per cent in January, which would suggest a fall in quarterly output of 10–15 per cent. Shortages of many materials and components were widely reported.

In the event, though, production declined much less than expected. Industrial production fell by 7 per cent in January, was flat in February and rebounded by 3.5 per cent in March and a further 5 per cent in April. By May, it had regained its October 1973 peak. (This showed “how inefficient five-day working must have been,” quipped journalist Andrew Marr.)

Economists now believe that Britain’s real GDP contracted by 2.7 per cent in the March quarter of 1974. While less than expected at the time, it is still the sharpest contraction on record (for now, at least!).

Social security benefits meant that household incomes fell less than working hours or production. Despite (or perhaps because of) the scenes of queues outside shops, consumer spending fell by only 1 per cent during the quarter — less than the fall in real incomes — which implies that people reduced their savings to pay for their day-to-day needs. But some discretionary spending — on durable goods and cars, for example — fell very sharply. With consumption falling less than output, retailers’ inventories ran down significantly.

Once it was clear that sales had held up better than expected, the Bank of England judged that the impact of the three-day week on companies’ financial positions was less than originally feared. Businesses nonetheless slowed their investment plans, and the rate of new home commencements in the private sector fell by more than a fifth in the March quarter, partly because of shortages of building materials.

The reported unemployment rate rose only a little, from 3.4 to 3.6 per cent, partly because many companies were reluctant to lay off workers and partly because many of those who did lose their jobs — including the million-plus who applied for the unemployment benefit — didn’t think it was a good time to look for work.

In the midst of the turmoil, Heath called a general election on the theme “Who governs Britain?” Three weeks later, the electorate responded, “Not you.” Harold Wilson’s Labour Party formed a minority government, the mining dispute was soon settled and the three-day week came to an end. When the new government brought down its budget on 26 March, the expansionary impact of higher pensions was offset by increases in taxation.

The Bank of England reported that output rose in the June quarter of 1974 but “did not entirely reverse the reduction which occurred in the first.” Real GDP rebounded by just 1.4 per cent in that quarter — with consumer spending increasing only slightly — and by just 0.6 per cent in the September quarter. It didn’t regain its June quarter 1973 peak until the end of 1976.

Looking back, the British experience might suggest that economies don’t necessarily shrink as much as expected during a lockdown. Perhaps firms and workers are more adaptable than some economists assume. But the three-day week also suggests that economies don’t simply “snap back” to pre-crisis levels of activity after a major shock of this kind.

Of course, the three-day week is by no means a perfect analogy with the current situation. It was a supply shock, depressing the output of goods and services, whereas the coronavirus has produced a demand shock as well. Even once cinemas, gyms and dining venues, for example, fully reopen in coming weeks, customers may remain wary for many months. And the three-day week was restricted to Britain, whereas the current pandemic, and its downturn, is global.

Even after Australian domestic demand recovers, demand for our service exports (notably international tourism and education) is likely to remain subdued. With the global economy weaker, both the volume and prices of Australian exports will be adversely affected for some time. More stimulus is likely to be needed, and for longer, than would have been desirable in Britain in 1973.

Back on television, the three-day week was quite possibly the inspiration for the mid-1970s sitcom The Good Life, in which Richard Briers and Felicity Kendal played a couple trying to live a self-sufficient lifestyle on their suburban block. We’ll find out in a year or two whether the coronavirus leaves a similar imprint on Australian screens. •

The post “The gravest economic crisis since the end of the war” appeared first on Inside Story.

Oil Under Troubled Water, published this month by Melbourne University Press, is a trenchant and deeply researched account of those negotiations. It shows how the Australian government and its lawyers unscrupulously misrepresented petroleum discoveries in the seabed and used high-pressure tactics to push the cash-strapped UN administration and then the new Timor-Leste government into premature and disadvantageous agreements. And it recounts Australia’s March 2002 decision to withdraw from the jurisdiction of international courts on questions of maritime boundaries, a move that continues to jar with Canberra’s admonitions about a “rules-based international order.”

The bombshell in this book is that the Australian government, with the Coalition in power at the critical times, neglected to include in production-sharing contracts any mention of the helium component of the gas flow from discoveries in the area of joint exploitation. The price of this inert lighter-than-air gas — a critical component in high-tech processes including magnetic resonance imaging and liquid crystal displays — has shot up in recent years.

Helium is mostly recovered from flows of natural gas, and the Bayu-Undan field in the Timor Sea had more than enough to justify extraction. ConocoPhillips, the operators of that field, got it for free, and sent it via pipeline to a liquified natural gas plant in Darwin. The US oil major then sold the helium fraction to BOC Australia, owned by the multinational industrial gases group Linde, which opened a plant next door to the Darwin LNG terminal in 2010.

By 2015, according to Collaery, the annual output of the plant, which cost perhaps $50 million to build, was an estimated 200 million standard cubic feet. At prevailing prices, that’s $2 billion in revenue per year. When I enquired, BOC Australia refused to comment on these claims, saying it cannot reveal confidential information about agreements with suppliers or customers.

As Collaery’s account stands, both the Australian and Timor-Leste governments have neglected to obtain any revenue benefits for their people from a resource whose value seems to be greater than the petroleum gas in which it has been hidden. The same will go for the much larger Greater Sunrise field unless its production-sharing agreement with the Woodside Petroleum consortium is modified.

Timor-Leste’s negotiators, initially led by then prime minister Mari Alkatiri, were advised by a Norwegian expert to add the words “and inerts” to the Bayu-Undan and Greater Sunrise contracts, but did not pursue the point. They were bound by a statement — signed by Alkatiri, Xanana Gusmão and José Ramos-Horta — that the holders of contracts signed under the Indonesian–Australian regime would continue to enjoy the same rights under an independent Timor-Leste on terms that were “no more onerous.”

The statement was drafted and signed in September 1999 at a meeting in Darwin with officials from the Department of Foreign Affairs and Trade and Phillips Petroleum, later ConocoPhillips. Australian-led peacekeepers had barely begun securing East Timor from the rampaging of departing Indonesian troops and militias, and the Timorese had no legal advisers with them.

Collaery’s book will upset many of Timor-Leste’s friends. It is bitterly critical of Alkatiri and other Fretilin leaders, whom Collaery accuses of adhering to undemocratic doctrines and Leninist organisation and rushing to sign unfavourable agreements to secure revenue flows. He is comparatively soft on Gusmão, whom he has advised for twenty years.

Most of all, though, he paints an invidious picture of Alexander Downer, who was foreign minister for all the period from Timor’s move towards independence to the ratification of treaties in 2006 deferring any redrafting of the maritime border for thirty years and giving Australia half the revenue from Greater Sunrise. Downer was in thrall to Woodside Petroleum, Collaery believes, and came to identify its commercial interest with the national interest.

Warned about further prosecution and a possible ten-year jail term under post-9/11 intelligence laws, Collaery studiously avoids the matter that has him facing trial in the ACT Supreme Court: the Australian Secret Intelligence Service’s bugging of Timor-Leste’s cabinet room at the height of the maritime treaty negotiations in 2004.

Collaery is charged with conspiracy to communicate secret intelligence information to the government of Timor-Leste between May 2008 and May 2013, and with sharing some of this information with ABC journalists. One of the ASIS operatives involved in the Dili bugging, known to the public only as Witness K, is charged with breaching the Intelligence Services Act by discussing the operation with Collaery, even though he had been cleared to take his misgivings about the operation to Collaery as a legal adviser.

Collaery, deputy chief minister and attorney-general in the ACT government between 1989 and 1991, has spooky elements in his own early background. His book mentions training in commando-type operations while at university, an activity ASIS pursued with trusty potential recruits at least until the bungled “hostage rescue” at Melbourne’s Sheraton Hotel in 1983. He also worked for a little-known security section of the immigration department, and was a first secretary of the Australian embassy in Paris. This and his later political experience seem to have gained him the security clearances that led Witness K to his office.

Whether or not it was Collaery who told them, the Timorese informed then prime minister Julia Gillard in December 2012 that they knew of the 2004 bugging operation and were intending to use it as evidence of bad faith in negotiations to annul the treaties reached with Downer.

Not long after, the Australian Security Intelligence Organisation (then led by the ASIS chief at the time of the Dili operation, David Irvine) raided Collaery’s office and seized material. Later, the government withdrew Witness K’s passport to prevent him from testifying at the proceedings Timor-Leste had launched at the International Court of Justice in The Hague. After years of manoeuvres ended with Timor-Leste’s decision to withdraw its bad-faith case (to Collaery’s great disappointment), Canberra agreed to mediation supervised from The Hague. The result was a vastly more favourable carve-up of Great Sunrise for the Timorese.

While Canberra’s lawyers were fighting the bad-faith accusation in the International Court of Justice it would have been counterproductive to prosecute Collaery and Witness K for leaking about the ASIS operation. The threat of international condemnation removed, attorney-general Christian Porter authorised the director of public prosecutions to go ahead with charges against both.

In a hearing scheduled for mid April, Witness K is ready to plead guilty, apparently in return for not having a conviction recorded and being free again to travel. Collaery’s case will go to a jury trial, possibly in May if Covid-19 does not disrupt court schedules. But a preliminary hearing will test Porter’s invocation of the 2004 National Security Information Act, which allows intelligence material to be revealed only in closed court. So far, it seems, even Collaery’s own defence counsel have not been allowed to see the evidence being brought against him.

Affidavits have been given to the court by former foreign minister Gareth Evans and former defence forces chief Chris Barrie. According to Justice David Mossop, both men challenge Porter’s assertion that the evidence, if disclosed, would threaten national security. Both Gusmão and Ramos-Horta are ready to testify as defence witnesses.

Whether or not Collaery’s lawyers manage to have the trial held in the open with Downer and officials cross-examined, this book has given the case a wider moral setting that will greatly influence the court of public opinion. If they manage to have it introduced as evidence, it might well sway the jury.

The Dili operation taints not just the diplomatic and intelligence figures involved, but also the entire government of the time. Could Downer and his department head, Ashton Calvert, have authorised the bugging without seeking approval from cabinet’s national security committee, whose other members would have been prime minister John Howard, deputy prime minister John Anderson, treasurer Peter Costello, attorney-general Philip Ruddock and immigration minister Amanda Vanstone?

Why, one wonders, has Porter chosen to pick at this scab? The fact the prosecutions were launched confirms the ASIS bugging happened. With its 2015 decision to return to international jurisdiction, the Labor Party ended the shameful bipartisan effort to rob the Indonesians and Timorese. Porter is inviting a royal commission by a future government. •

The post Bernard Collaery’s bombshell appeared first on Inside Story.

I happened to have been travelling in that very area only a week earlier. Our tourist ship had entered Hope Bay, where Esperanza station sits, on the morning of 29 January. Dark grey clouds were hanging low over the glaciers and mountains around the bay, and the water was open but for a few bergy lumps. Although the cloud obscured the warming sun, we had a good view over the Adélie and gentoo penguin rookeries that surround the small village of red buildings. Here, human and penguin colonies cluster close together.

Hope Bay is perhaps fated to be an Antarctic hotspot. On 1 February 1952 it was the site of the only armed encounter in Antarctic history, part of the decades-long territorial contest between Britain and Argentina. When a party of British scientists had begun re-establishing a base there, the encamped Argentine naval personnel tried to ward them off, first with a small burst of machine-gun fire and then with rifles, at which point the British took to their ship. Interestingly, the onboard historian for our cruise, a very experienced British Antarctic hand who had himself been an unwilling guest of the invading Argentines on South Georgia in 1982, neglected to mention this interesting piece of human history in his commentary from the bridge.

Shades of grey: approaching Esperanza Base on 29 January. Alessandro Antonello

The day before our brief visit to Hope Bay another Antarctic hotspot was in the news. Scientists working at Thwaites Glacier — an outlet glacier of the West Antarctic Ice Sheet — released the first-ever footage of its “grounding line,” the place where glacial ice meets continental rock. These lines, below sea level, are highly sensitive to increasing water temperatures, making them the sheet’s weak points. Were it to fully melt, the West Antarctic Ice Sheet would add three to six metres to the global sea-level, so a great deal of research effort is going into understanding its dynamics.

The media, perhaps unhelpfully, calls this the doomsday glacier. At higher latitudes, the satellite internet on the ship was slowing considerably, so it was a little difficult for us to view the footage from Thwaites Glacier clearly. Having studied the history of glaciology, including the historical efforts to understand the unstable West Antarctic Ice Sheet, I knew the importance of the moment. Since the 1970s, glaciologists and geophysicists have known that a marine-grounded ice sheet like this one would be vulnerable to rising temperatures. With the summer just finishing, we must now wait for the scientists to evaluate their data and present their analyses.

The ship I was on crossed sixty degrees south — the northern boundary of the Antarctic Treaty area — at about seven in the morning on 27 January. We were welcomed by a blanket of fog and a calm sea; our field of vision was defined by a spectrum of greys, blacks and whites. It was an auspicious day to enter the Antarctic, 200 years after Russian navigator Faddei Faddeyevich Bellingshausen made the first recorded sighting of the Antarctic continent. Aboard the Vostok — joined by the Mirny under the command of Mikhail Petrovich Lazarev — Bellingshausen saw what is now the Crown Princess Martha Coast in Queen Maud Land, part of the territory claimed by Norway. Poor Edward Bransfield, a British naval officer who saw the Trinity Peninsula on 30 January 1820, missed out on being first by only a few days.

Two hundred years after Bellingshausen, Russia is pushing on with its Antarctic efforts. On 12 February, the Russian state geological survey agency, Rosgeologia, announced it had spent the beginning of 2020 exploring the Antarctic continental shelf for oil and gas. In the Riiser-Larsen Sea — a few degrees to the east of the coastline Bellingshausen saw — it found what it describes as “potential hydrocarbon resources… estimated at about seventy billion tons.”

For those concerned about global carbon emissions and also environmental protection in Antarctica, this is worrying news. Mineral exploitation in Antarctica is banned under the 1991 Madrid Protocol to the Antarctic Treaty. Any suggestion, let alone an outright confirmation, that it will happen raises the geopolitical heat within the Antarctic Treaty System.

Rosgeologia’s work this summer is part of a decades-long search for oil and gas in the Antarctic by countries working within the Antarctic Treaty of 1959. There were early hopes of a hydrocarbon cornucopia that might supply a world cursed by energy scarcity as a result of either the “population bomb” or an Arab oil embargo. In 1969, oil was placed firmly on the Antarctic Treaty agenda when several companies began asking for exploration licences.

Soon it was the United States that seemed most eager and most capable of drilling for oil in Antarctica. Production was expanding into the Alaskan Arctic, so the challenges of a polar environment seemed technically surmountable; even the offshore drilling in the Gulf of Mexico and the North Sea, with their tempests, seemed to suggest that overcoming environmental barriers was merely a matter of technology and time. Throughout the 1970s, US diplomats, pushed and pulled by oil and energy interests at home, obstructed attempts by other countries within the Antarctic Treaty to restrain oil exploration and exploitation.

Even scientific drilling hasn’t been immune from suspicion. Drilling for ice cores (notably including the one extracted at the Soviet Union’s Vostok station in the 1970s and 1980s) has transformed our knowledge of climate change by demonstrating the link between carbon dioxide levels and global temperatures, but some geophysical research has inadvertently touched upon oil and gas.

When the research ship Glomar Challenger went to Antarctica in the summer of 1972–73, its drill penetrated gas deposits. As the Australian geoscientist Elizabeth Truswell details in her recent book about that voyage, A Memory of Ice, she and the other scientists on board were trying to understand the Antarctic ice sheet’s history. They pushed its known age back from three million years to at least twenty-five million years (a few more million years have since been added) but had to stop drilling when they hit gas, because of the danger to their vessel. The world’s media interpreted their results as another sign of Antarctica’s potential oil and gas wealth.

Warming times: Wilhelmina Bay on the Antarctic Peninsula. Alessandro Antonello

In the end, no commercial oil and gas drilling has ever taken place in Antarctica. Yet there have been vivid examples of the environmental dangers associated with it. The most significant oil spill came from the Argentine ship Bahia Paraiso, which ran aground in the Antarctic Peninsula in January 1989, spilling about 600,000 litres of oil. That incident, along with the catastrophic Exxon Valdez spill in Alaskan waters only two months later, highlighted the dangers of oil exploitation and transport. They contributed to the Antarctic Treaty parties’ agreeing to ban mining indefinitely in their 1991 Madrid Protocol, a deal that was hastily negotiated in place of a convention signed in 1988 that would have allowed mining.

News of Russia’s exploring for oil and gas in Antarctica is therefore not unprecedented. In the short term, the concern is less that Russia will begin full commercial operations in the Southern Ocean (a highly unlikely proposition) and more that it didn’t bother to disguise its efforts under the generic label of “scientific research.” Is this just another part of Putin’s global mischief-making? Russia also announced that it would send the world’s only nuclear-powered cargo ship, Sevmorput, south next summer with building supplies for Vostok station. Is that visit — apparently the first by a nuclear-powered vessel to Antarctica — part of a larger plan to raise the geopolitical heat?

The Bellingshausen anniversary has been a good opportunity for Russia to weave historic discovery and legitimation through its Antarctic activities. The Russian foreign minister, Sergei Lavrov, dutifully marked the anniversary and intriguingly, in an official recorded interview, stressed how Russian ambassadors and consuls around the world were essential to Bellingshausen’s success. Science, he was saying, did not happen without the state.

The Russian government has often used Bellingshausen’s achievement to justify its presence in Antarctica. In 1948, when the United States tried to pursue a solution to “the Antarctic problem” — the territorial conflict between Britain, Argentina and Chile and the contested territorial claims of Australia, France, New Zealand and Norway — the Soviet Union, newly armed with nuclear weapons and willing to contest American hegemony anywhere in the world, adduced the one example of historical connection to the Antarctic it had.

Lavrov wasn’t the only significant government figure to mark the Bellingshausen anniversary. The president of Estonia made an official visit to the Antarctic Peninsula aboard a small yacht. Bellingshausen, having been born in Riga to an Estonian-German family, has recently been somewhat reclaimed by Estonia as part of its post-Soviet identity. Estonia is making a name for itself as a “digital nation,” and so the president used her digital signature to conduct the business of state while she was observing the ravages of climate change. This seductive vision of non-territorial digital citizens roaming the globe, free to live their lives and do their work wherever they please, quickly butts up against the reality that the infrastructure of travel and computing blast out emissions that are helping to undermine Antarctica’s stability.

The summer also began with another big anniversary. Sixty years ago, on 1 December 1959, twelve nations signed the Antarctic Treaty in Washington, DC. The treaty was initially intended to guarantee freedom of scientific research and defuse territorial conflict in the region. Over its sixty years, it has been significantly enlarged and is now forcefully directed towards environmental protection and management. From twelve signatory nations there are now fifty-four parties, of whom twenty-nine are known as “consultative parties” — states with a right to participate in decision-making meetings for the continent.

“I believe no one wants to undermine the treaty,” Lavrov declared during the interview in January. “There are no signs of putting the treaty at risk.” Fine words indeed, but Russia’s actions in recent years can hardly be described as advancing the cause of environmental protection that is now so central to Antarctica’s governance. In addition to this summer’s search for fossil fuels, Russia has been obstructing action to conserve marine systems and fisheries in the Southern Ocean. In a working paper submitted to the 2019 Antarctic Treaty Consultative Meeting, it referred to “the ‘postponed’ use of mineral resources of the region.”

Russia isn’t the only country that still sees Antarctica as a potential site for drilling and mining. China clearly regards both the Antarctic and Arctic as resource frontiers where it will manifest its status as a “great polar power.” And several new or prospective Antarctic Treaty parties have also explicitly mentioned oil and mineral resources as part of their reasons for being in Antarctica and seeking “consultative” status within the treaty system.

Many Antarctic commentators are judging the treaty in terms of its ability to contain urges of this kind and the larger geopolitical manoeuvring they reflect. If this dreadful baking summer suggests anything, perhaps it’s that the need for broader global decarbonisation — rapidly, at that — will continue to undercut any justification for oil and gas exploration. While some countries will intermittently explore for oil and gas in Antarctica —openly or discreetly — the profound difficulties and expense of operating in Antarctic waters should prevent any serious exploitation. If a major oil company can’t see a future for drilling in the Great Australian Bight, can we seriously expect another to commence operations in Antarctica?

Summer is coming to an end. The last scientific resupply ships and flights are making the journeys that enable the permanent human occupation of the continent. This is the last season for the thirty-one-year-old Australian icebreaker Aurora Australis; it left the continent for the last time on 23 February, having resupplied Davis station. Sarah Laverick’s recent book Through Ice and Fire narrates the history of this fine vessel and its exceptional contributions to knowledge of the continent and the Southern Ocean. The launch of its replacement, Nuyina — a beautiful word for the southern lights from the Palawa kani language of Tasmania — is slightly delayed but promises a great future for Australian science in the south.

The season’s last flight from Australia’s Wilkins aerodrome leaves in early March. It has not been a happy summer for the ice runway, which was shuttered for nine weeks because the temperatures were too high. This phenomenon, sure to remain a problem over coming years, is encouraging environmentally destructive behaviour elsewhere. Australia plans to build a paved concrete runway in the Vestfold Hills, which will affect a significant patch of ice-free area and its delicate ecosystem. Although the plan is still undergoing environmental impact assessments — Antarctica is the one continent in which nearly all activities are carefully evaluated in this way — it does seem a foregone conclusion that the runway will be built.

While most tourist vessels have completed their season around the Antarctic Peninsula, some will ply the waters until late March. Warming in the peninsula is reducing sea ice and allowing the tourist season to operate over many months. In the parlance of the industry, what happens in Antarctica is “expedition cruising” and the tourists are thus “explorers.” This summer the explorers numbered more than 78,000, well up on last year’s figure of just over 56,000. These visits are not evenly spread across the region, with a few dozen sites bearing the brunt. New ships designed for polar tourism are being launched over coming seasons, so that number will only increase.

The hotspots we see in Antarctica — whether atmospheric or geopolitical — are related, though they have led to different kinds of responses. Those who look south through the lens of security see threats emerging from Antarctica. They see a platform for competition that we in Australia, or the West more generally, should be occupying with greater intensity in order to suppress, or at least match, any geopolitical threat from Russia and China. I’m more inclined to see the greater threat as the threat to Antarctica. The stability of the ice sheet and the health of animal populations rely on humanity drastically curbing emissions, and perhaps even curbing our footprint in the south.

The Australian author Meredith Hooper travelled to Antarctica a handful of times in the late 1990s and early 2000s. She spent the 2001–02 summer at the American Palmer station, a small base in the Antarctic Peninsula principally dedicated to studying the marine environment. Having trailed the ornithologists studying the local penguin rookeries, she called that season “the ferocious summer.” At the turn of the millennium, decades of data and scientific effort was showing that global warming was a dire problem. As a historian looking south, the most disconcerting element of this summer’s heat is that it repeats and renews the heat of past summers. Affairs seem not shockingly new but shamefully repetitive. •

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While this progress is remarkable, only a minority of institutional investors have so far adopted a comprehensive policy of divestment from companies extracting or using carbon-based fuels. At the moment the spotlight is on UniSuper, the industry superannuation fund covering the university sector, which continues to include unsustainable investments in its standard portfolios.

With most national governments falling far short of the commitments needed to reach the goals set out in the Paris Agreement, the case for divestment has only become more urgent. Investing in such corporations is not a defensible option for institutions, like universities, that expect to endure for centuries.

A core argument for divestment is that extracting and burning known reserves of coal, oil and gas using current technologies would result in catastrophic climate change. This would include, at a minimum, massive species extinction and the destruction or radical transformation of all nature and the planet as we know it.

While that ethical argument should be compelling, the case can also be phrased in a way that appeals to the more immediate concerns of investors. Governments around the world have already agreed to take steps to reduce emissions of carbon dioxide. That means leaving a great deal of carbon in the ground, which will reduce the profitability of extracting coal, oil and gas. Ultimately, the value of fossil fuel resources and the companies that exploit them must fall to zero.

Are there any counterarguments? The most plausible argument put forward by opponents of immediate action is that some form of “clean coal” technology will emerge to obviate any need for costly changes to our current way of doing things. This is the argument zealously promoted by Australia’s resources minister, Matt Canavan.

The term “clean coal” is a misnomer. Despite the impressive-sounding description, these plants achieve only a 30 to 40 per cent reduction in emissions relative to standard coal-fired power plants. They aren’t as clean as gas-fired fossil fuel plants, let alone renewables. Carbon capture and storage and other potential “clean coal” alternatives have also been exposed as unviable.

After decades of work, exactly one operational power plant, the Boundary Dam project in Canada, is using carbon capture and storage, or CCS. With renewables now cheaper than coal, investors are not going to stack up money for expensive, failed methods of coal generation.

The end of coal is inevitable, but divestment will help to accelerate the process. In particular, it’s important to stop the development of new coalmines, such as the potentially disastrous Adani mine in Queensland’s Galilee Basin. Most commercial lenders have already backed away from this project, but any bank that supports it must be included in a divestment policy.

Technological improvements have revolutionised renewables. And the flipside of divesting from fossil fuels is the option to invest in projects and corporations that help stabilise the global climate through renewable energy generation, improved energy efficiency or carbon sequestration in forests and agricultural land.

Such investments obviously require more care than the purchase of shares in large mining corporations. When successful, however, they have often generated high returns, particularly in comparison with the losses that have been incurred by investments in carbon-based fuel.

The failure of our political leaders and the diversion of the political debate into the morass of resentment-driven populism mean that we can’t rely on governments to do the work of stabilising the global environment. We are all responsible for our own choices, as consumers and investors. Divesting from carbon-based fuel investments is more important than ever. •

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The proposed solar farm, near Tennant Creek, would be the world’s biggest by a comfortable margin. It would stretch as far as the eye can see across an area equal to more than 20,000 soccer fields.

Despite Cannon-Brookes’s self-deprecating description of the project as “batshit insane,” it might actually make technical and economic sense. And it’s not the only mega-renewable energy project being pursued by credible Australian companies with the aim of powering the many hundreds of millions of people living to the north of us.

The scheme is a long way from a done deal, of course. Its commercial and technical challenges are enormous, and with a $20 billion price tag it would be one of Australia’s largest-ever construction projects.

Making sense: Mike Cannon-Brookes, chief executive officer of Atlassian. Karen Dias/Bloomberg via Getty Images

But people who know the man behind the project — David Griffin, chief executive of Sun Cable — talk in glowing terms about his ability to take an empty paddock and convert it into a power station fuelled by wind or sun. Griffin hails from one of Australia’s pioneering renewable energy companies, Infigen Energy. Most recently he sewed up a deal to provide Australia’s second-largest employer, Coles, with 10 per cent of its electricity from solar. As one former colleague says, whenever Griffin encounters a barrier — and there are plenty ahead — he manages to “go round, go over, or… blows [it] up.”

So how can Griffin go from powering a tenth of Coles to powering a fifth of Singapore? In terms of technology, it’s not a big jump. The Tennant Creek farm will use the same type of solar panel, just a heck of a lot more of them.

One difference, though, is that the project will use an ingenious Australian-made technology to simplify and accelerate the installation of the panels. Rather than construct the framing out in the field, an Australian company, 5B, in conjunction with former car-parts supplier IXL, will assemble the panels into a concertina-style kit in factories in Darwin and Adelaide. They will then be progressively transported to Tennant Creek in shipping containers on a staggering kilometre-long train. There, a forklift will simply unload and unfold the concertinas to create rows of panels arranged in A frames facing east or west.

Unlike the alternating current system that transports the vast bulk of Australia’s electricity, the cable to Singapore will use direct current, minimising the loss of electricity over those thousands of kilometres. While it isn’t common, this technology is already deployed at different sites across the globe, including under Bass Strait.

So how on earth does it stack up economically?

What is yet to sink into the minds of many Australian policy-makers and commentators is that solar panels have dropped so much in cost, and are so quick and easy to install, that they are approaching the point of being the cheapest-available source of electricity globally. Importantly, solar is already cheaper than the fuel Singapore gets most of its power from — imported liquefied natural gas, or LNG.

The cost of electricity from LNG lies somewhere between $80 and $120 per megawatt-hour. By comparison, Snowy Hydro says it has signed up several solar farms to supply power in the $40s. Given its scale and solar resource, it’s conceivable that the Tennant Creek project could get this down to a flat $40 or possibly as low as $35 prior to transmission to Singapore.

The difference between that figure of $35–$40 and the cost of LNG — a gap of at least $40 and as much as $85 — provides the room to pay for the cable to Singapore and, the project’s proponents hope, generate a profit.

Why wouldn’t Singapore install solar panels itself? The other factor that plays in Australia’s favour and counts against many of our northern neighbours is that we have lots of very sunny and sparsely populated space.

Almost every skerrick of Singapore is taken up with buildings, and where that isn’t the case the island state has its highly prized parkland. Sure, they could install solar on top of the buildings, but the roofs of high-rises are often cluttered with building services equipment or shadowed by even taller buildings. And even if lots of solar panels were deployed — on floating pontoons, for instance — they would be subject to wide and rapid variations in cloud cover. Being almost right on the equator, the city is often subject to long periods of cloudy, rainy weather.

You couldn’t find a much greater contrast with Tennant Creek, a place almost completely devoid of people with an average annual rainfall of just 399 millimetres compared to Singapore’s 2340 millimetres. A satellite-eye view on Google Maps reveals that a solar farm at Tennant Creek would be situated just south of where the Northern Territory turns from shades of green and grey to a distinct red–brown colour, signifying a climate free of tropical monsoons. While the solar farm would take up an area even smaller than Singapore, the less frequent and less intense cloud cover means batteries could more easily manage the variation in solar output.

Ideal conditions: the proposed solar farm site near Tennant Creek. Google Maps

Garnaut’s pathways

Singapore represents a true extreme, but other parts of Asia confront similar challenges. Prime minister Bob Hawke’s economic adviser and former ambassador to China, Ross Garnaut, lays out the broader opportunity for Australia offered by cheap renewable energy in his book, Superpower: Australia’s Low-Carbon Opportunity.

Garnaut describes Australian renewable energy as “a path to low-cost reductions in emissions in the rest of the world.” This can happen, he says, through three pathways. We can use direct-current cables to supply electricity to Southeast Asia. We can use the electricity from wind and solar plants to convert water into hydrogen and ship this to the “renewable-energy-resource-poor countries of Asia, notably Japan and Korea,” where land is scarce and energy demand high. And we can use both the electricity and the hydrogen from renewable energy to process ores into metals (or batteries) for export.

Beyond Tennant Creek, two other mega-renewable energy projects are taking shape to take advantage not just of Australia’s superior solar resource but also of our world-class wind resource. Both are located in Western Australia, one in the Pilbara and the other further south near Kalbarri.

The Pilbara project, which is by far the largest, had its genesis in disappointment. Several years ago the company behind the project, CWP Renewables, sought to expand into Indonesia. It was lured there by the country’s huge population, a government policy to expand renewable energy, and a demand for electricity that will massively expand over the next few decades. But finding good wind sites and negotiating some degree of security over development rights proved too difficult.

CWP Australia’s managing director, Alex Hewitt, wasn’t prepared to give up. For anyone passionate about combatting global warming, Indonesia is one of the big fish. Reliant on coal for electricity, it is going through a rapid process of economic development, much like China did two decades ago, with an accompanying growth in electricity demand. The fact that Japan has just half the population of Indonesia but consumes close to four times as much electricity gives an idea of how much demand could grow. What’s more, Japan is quite an energy-efficient economy. Powered by coal, Indonesia’s likely expansion in electricity consumption over the next few decades would be disastrous for containing global warming.

What Hewitt’s team found was that an area in the northwest of Western Australia, inland from the Eighty Mile Beach Caravan Park and the Pardoo Roadhouse in the Pilbara, experiences consistently high winds over an extraordinarily large area. It also receives among the highest level of solar radiation in the world. If you only had an eye to domestic needs, the location would be highly problematic: remote, without transmission infrastructure, several hundred kilometres from any major electricity demand. Getting people and materials to such a location would be an enormous logistical challenge. Only a gigawatt-scale project could be viable.

So two problems coalesced into an opportunity called the Asian Renewable Energy Hub. It is planned to combine the world’s biggest wind farm with the world’s second-biggest solar farm (Sun Cable’s Tennant Creek would be the biggest), all feeding zero-emissions electricity to Indonesia by high-voltage direct current cable. This single project would produce more power than all the wind farms and solar farms built so far in this country.

CWP’s Hewitt says this is the project that would allow him to die a happy man. He was smiling when he made the remark, but underneath you could sense a deadly serious ambition to make a major and lasting contribution to containing global warming.

Enter the miracle molecule

In a sign of the challenges that might await Sun Cable, the Asian Renewable Energy Hub has now pivoted away from direct-current transmission to Indonesia. Instead, the project has focused on Garnaut’s second opportunity, an export industry built on generating electricity to produce hydrogen from water via electrolysis. It will also supply three of its fifteen gigawatts to the Pilbara’s iron ore and LNG producers.

Hydrogen opens the possibility of supplying not just electricity and not just Southeast Asia. We could provide zero-emissions fuel for heating and transport to countries as far afield as Japan and Korea, and possibly even to Europe. But the technology and economics are more challenging than supplying power via cable.

On the customer side, the equipment that would use hydrogen as a fuel to power cars or provide heat for industrial processes is still only small-scale. Further technological progress is required to bring down costs and ensure reliability. On the production side, savings are needed at all stages. In favourable circumstances, with renewable energy costing about $45 per MWh, hydrogen could potentially be produced via electrolysis for around $25 to $30 per gigajoule. This looks reasonably competitive: while petrol is around $17.50 to $23.40 per gigajoule, hydrogen fuel cell-electric cars are about double the efficiency of a conventional petrol car. But then there’s the cost of transporting the hydrogen to Asia. With present technologies, this makes it more expensive than petrol (ignoring carbon externalities), let alone LNG, which costs roughly $9 to $14 per gigajoule delivered to north Asia.

But a range of foreseeable innovations and greater economies of scale could bring down the cost of producing hydrogen to around $11 to $12 per gigajoule by 2030, and it could then be delivered to ports in North Asia for around $26 to $28 per gigajoule. Given the superior efficiency of fuel cells, that kind of price tag would make it an attractive option for decarbonising transport. This would be a massive market, although further cost reductions would be necessary to displace gas as well.

By shifting focus to hydrogen, in other words, the Asian Renewable Energy Hub has sacrificed speed in the expectation it will capture a far larger prize.

The high cost of transporting hydrogen shows why Ross Garnaut sees Australia’s biggest opportunity not in the direct export of renewable energy but in using cheap renewable energy to produce metal products for export. Transporting oil, coal or gas over long distances overseas has become relatively cheap and easy. Direct current power lines have also been demonstrated to work well, but they don’t come cheap if you want to run them thousands of kilometres through the ocean. And, as we saw with the extended Tasmania Bass Link outage in 2016, if these cables suffer a fault it can be hard to diagnose and fix. Hydrogen’s problem is that it takes lots of energy and expensive equipment to convert it into a liquid small enough in volume to viably ship overseas.

Producing metals in Australia would save on transport costs because Australia already produces a large proportion of the world’s metal ores. Refined metals weigh much less than ore but are worth significantly more. Garnaut’s partnership with the British steel tycoon, Sanjeev Gupta, to revive the Whyalla Steel Mill and build an energy company backed by renewables is an effort to realise this vision.

Glimpses of an alternative future: steel tycoon Sanjeev Gupta. Liberty2017/Wikimedia Commons

But that pathway is not without challenges either. Just like those Aussie men who have little to no involvement in construction yet somehow feel they must drive a hulking dual-cab ute, politicians the world over seem to think that if you don’t have metal smelters you aren’t a real economy. Consequently, metal smelters across the globe are heavily subsidised and the market burdened by excess production capacity.

Australia’s steel mills, aluminium smelters and other industrial plants are struggling, and Gupta’s Whyalla plant, which lost $185 million last year, is no exception While power from wind and solar in Australia is approaching world-competitive prices, we haven’t yet got the cost of storage and hydrogen technologies down to where they need to be. This is beginning to look possible by as soon as 2030, but we need to encourage other countries to accelerate their efforts in decarbonising energy.

How the economics is transforming the politics

What Ross Garnaut highlights is that the rapid decline in the cost of wind and solar, alongside further reductions in battery and hydrogen-processing costs, can slice through the Gordian knot holding back Australian climate policy.

Senior policy-makers, including many on the Labor side, have long seen emissions-reduction efforts as a major economic threat — after all, Australia is the world’s largest seaborne exporter of coal and gas. And while industrial manufacturing in Australia is often sub-economic in scale, far from end users and weighed down by relatively high labour costs, it could defend itself using low-cost energy built on plentiful supplies of coal and gas. As a consequence, Australia has not only been reluctant to implement emissions-reduction policies at home, we’ve also tried to sabotage global efforts.

Yet it turns out that aggressive efforts by governments overseas to push down the cost of wind and solar have delivered Australia a potential competitive advantage. For this advantage to be fulfilled, though, two more things need to change. We need other countries to accelerate their efforts to increase the scale and reduce the cost of battery and hydrogen technologies. And we need them to enact tighter emission controls that will increase the cost of using fossil fuels and shift them towards renewable energy.

If these two things happen then renewable energy becomes the dominant fuel for energy and Australia moves into the box seat. What is often forgotten by policy-makers and commentators is that while Australia is the biggest exporter of coal and gas by sea, our exports are small relative to the amounts of coal and gas other countries produce domestically or import via pipeline. China has plenty of coal; India has plenty of coal. Russia and the United States have plenty of coal and gas. Yes, these countries also have plenty of renewable energy resources, but theirs aren’t nearly as rich and plentiful as Australia’s.

Meanwhile, the alliance between fossil fuel producers and industrial manufacturing in Australia has broken down. While manufacturers’ industry associations were busy in Canberra helping fight the Renewable Energy Target and the carbon price, energy companies were planning the price increases that made the impact of the carbon price look like a rounding error. In 2013, when the price was operating, wholesale gas prices were $4 per gigajoule; by 2018, with it long gone, wholesale gas prices had risen to anywhere between $9 and $15. Wholesale electricity prices duly followed, rising from around $55 to around $90 per megawatt-hour.

Manufacturers’ only hope for energy price relief turns out to be the fuel source their lobby groups fought against with the fervour of a Christian evangelist from America’s deep south. Interestingly, mining companies, except if they’re digging up coal, are also looking to cheap wind and solar to improve their competitiveness. Twiggy Forest’s iron ore operation in the Pilbara is about to replace a large chunk of its gas-fired power with a solar farm. Goldmines in Western Australia that have been paying large premiums to truck diesel and gas thousands of kilometres to their mines have noticed that lower-cost energy sources — sun and wind — exist right above them. Australia also hosts some of the richest deposits of the resources required to produce batteries.

The interests of Australia’s big business groups are beginning to split, with the potential to decisively shift the political dynamics. It is becoming apparent that the long-term financial interests of Australia’s industrial manufacturers, and also of some miners, are best served by strong global action to reduce emissions and to progress renewable energy, hydrogen and battery technology.

Morality meets economics

Politics, though, is taking a while to catch up. When the man who abolished the carbon price, Tony Abbott, lost his seat to Zali Steggall, an advocate of climate action, he delivered a message not of contrition but of celebration. What mattered, the former PM said during his concession speech, was that the Coalition as a whole had won government. While it had suffered losses in stronghold seats like Warringah, it was doing well in working-class seats. “Where climate change is a moral issue we Liberals do it tough,” said Abbott. “Where climate change is an economic issue, as the result tonight shows, we do very, very well.”

After preferences, the Coalition had indeed gained significantly in pivotal Queensland marginal seats where mining and industrial manufacturing are important. There, the message to blue-collar voters from the Coalition, as well as from Pauline Hanson’s One Nation, was that Labor’s climate change policies would put them out of work and drive up the cost of living.

The problem for the Coalition is twofold: gas prices are stuck at levels at least twice what they used to be, and financiers aren’t interested in sinking their money into building new coal-fired power stations. Energy prices will consequently remain high, and industrial manufacturing on tenterhooks. While coalmining and gas extraction are fine, they don’t actually support very many jobs once the necessary infrastructure is built.

Until recently the environmental movement and the Labor Party have tended to talk about solutions to climate change in terms of policy settings or broad technological solutions, like renewable energy. When it came to specifics, environment groups usually focused on the Adani coalmine, the Hazelwood power station and the other things they want to shut down.

What many are coming to realise is that they should be talking about specific projects they want to build. For a concreter or electrician in Gladstone or Townsville, an emissions-trading scheme sounds suspiciously like something that makes a Sydney banker rich. Even a Renewable Energy Target or a slogan like 100 per cent renewables is probably too remote from everyday financial worries. And shutting down a mine — well that sounds like it’ll end in the dole queue. But a huge hydro–wind–solar hub in North Queensland with a new transmission line to support mining expansion in Mt Isa sounds like employment and cash for them.

Of course, this is not what economists would recommend. They would say governments should set the overarching emissions target and leave it to the private sector to work out which projects should proceed. They’re right, but strangely it was the party of free enterprise that rejected this advice. Tony Abbott managed to demonise such an approach and good economic theory became a political albatross for Labor.

An opportunity is emerging for a talented politician to sell voters an alternative vision of economic security, one aligned with the need to contain global warming. Sun Cable and the Asian Renewable Energy Hub provide a picture of what’s possible over the long-term. But blue-collar workers need to be offered not just a vision of Australia becoming an energy exporting superpower in a decade’s time, but also shovel-ready projects for the next term of government. As a rich country we also need to demonstrate leadership in the here and now if we want other countries to accelerate a shift away from fossil fuels.

Coalition contradictions

Oddly enough it is the Coalition, not Labor, that has stumbled on half the answer. For all their talk of free enterprise and small government, the Liberals and the Nationals have converted energy policy into something like a showbag. They continue to proclaim that it would be a disaster if we were to shut down a single coal-fired power station — even one like Liddell that’s badly limping and well past retirement age. But whenever things start to get difficult in the energy or climate arena, they pluck out a new, impressive-sounding energy project.

Snowy 2.0 was just the beginning of what has become an array of projects extending all the way from Darwin Airport to Einasleigh, inland from Townsville, then stretching all the way south to Roseberry in Tasmania and plenty of places in between. Most of these projects involve energy storage via pumped hydro or a big battery, or new power transmission lines.

What the feasibility studies for these big-ticket projects show is that they only make economic sense if you plan on shutting down much of Australia’s existing coal-generating fleet and replace it with wind and solar. The Coalition knows it needs to be doing things to replace ageing coal power plants and increase competition in the electricity market, but it also wants to continue using Labor’s climate change policies as an instrument of fear. This half-hearted approach to transforming our energy system leaves it in danger of tangling itself in a net of contradictions.

Those contradictions are set on a collision course in Tasmania. Along with Queensland, the Coalition owes its unlikely election victory in May to two seats in northern Tasmania, Bass and Braddon. Scott Morrison led Tasmanians to believe that his government would deliver a major expansion of the state’s hydroelectricity system through a series of pumped hydro projects — essentially turning Tasmania into what is billed as the Battery of the Nation. This expansion hinges on the construction of a second direct-current transmission interconnector with the mainland — the Marinus Link — which would send excess electricity to Melbourne during peak-demand periods. Morrison claimed that this interconnector could be built as soon as 2025, although this has since shifted to 2027.

The problem facing the federal government is that the Australian Energy Regulator will only sign off on the plan if the new transmission line passes what is known as the regulatory investment test, an economic cost–benefit evaluation. But the feasibility study for the second interconnector made it very clear that the project made no economic sense unless several mainland coal generators closed down. According to the study, the Marinus Link’s benefits are likely to outweigh its costs only when around 7000 MW of the National Energy Market’s present coal-fired generation capacity retires.

To put that 7000MW into perspective, Victoria’s entire coal fleet is equal to 4775MW. After the closure of Liddell, New South Wales’s remaining coal fleet capacity is 8160MW. In other words, the Coalition is incredibly enthusiastic about building the Battery of the Nation yet has a conniption about the shutdown of the Liddell power station (from which we can only count on 1000MW at peak times), claiming they’ll build a brand new coal-fired facility in Queensland and keep Yallourn operating in Victoria.

Something doesn’t compute, and by the time of the next federal election Labor will have an opening to win back these Tasmanian seats. It simply needs to point out that the expansion of the Battery of the Nation, and the extra jobs it brings, hinges on electing a government that will transition Australia out of coal.

Winning over Queensland seats is trickier because there will be losers as well as winners there from the transition (although most of that state’s coalmining jobs are in coking coal, which is not immediately and directly threatened by renewable energy). Yet a power scheme rivalling Battery of the Nation in scope and ambition — the kind of project Joh Bjelke-Petersen would be proud of and Bob Katter is enthusiastically backing — is already on the drawing board. Like Battery of the Nation, it involves a major new transmission line, this one running inland from Townsville to Mt Isa and linking the main national grid with major mines in the North West Minerals Province to provide the mines with much cheaper electricity. It would also open up access to one of the world’s best solar resources. Further transmission lines would be necessary to link the 1000 megawatt Kennedy Wind Farm, pumped hydro plants and other major renewable energy projects with the industrial city of Gladstone.

The end result would be a triangle linking wind, solar and hydro projects with large mining and industrial electricity consumers across central and north Queensland. Power would be provided at a cost that would encourage mining in the northwest to expand, and would retain, or possibly attract, minerals-processing plants along the coast. The potential increase in jobs would dwarf those that might flow from the Adani Coal Mine.

For this to happen, the government needs, at a minimum, to act as underwriter and facilitator of long-term contracts between power suppliers and major mining and industrial customers. This would bring down the risk, allowing low-cost finance from superannuation funds and banks to flow in. The total investment would be significant, but in line with the Snowy 2.0 scheme once you include its supporting transmission.

If Labor were to promise such a scheme, the Coalition would face difficult choices. So far it has had some success by talking favourably about coal projects in the knowledge that Labor would struggle to do the same. But it hasn’t had a hand in seeing anything built. The Queensland electricity system is already oversupplied with coal-fired baseload power stations: more than 8000MW of coal-powered capacity for just 6000MW of average demand. Justifying more coal-fired stations is difficult unless you accept that you have to shut some of the existing ones down. And no credible power companies are lining up to build any new coal power stations.

The LNP’s talk-a-lot-about-coal strategy isn’t likely to win a battle for hearts and minds once it’s pitted against the far larger set of renewable energy and transmission projects already under development, backed by credible power project developers. (Note that the Collinsville coal power plant cited by resources minister Matt Canavan as worthy of government support is proposed by a company that appears never to have financed or built a major power station.)

It might be hard to imagine now, but if Labor promised such a scheme the Coalition would probably not be far behind. Self-preservation has a habit of winning out over ideology. This would represent a watershed moment: the Northern Queensland tail has been wagging the entire country’s energy and climate policy for the past few years.

Making possible the impossible

Sun Cable, Pilbara’s Asian Renewable Energy Hub and the Gupta’s plans for metal manufacturing provide tangible glimpses of an alternative future tied to renewable energy rather than fossil fuels. Lots of hurdles have to be overcome to convert it into a reality.

But some steps have already been taken. Over the space of just five years, between 2016 and 2021, the contribution of renewables to Australia’s electricity supply will have risen from 15 per cent to 30 per cent. A number of major manufacturers and mining companies are signing up to new renewable energy projects in order to lower their energy costs. Research company Green Energy Markets estimates that wind and solar projects already under development could produce more electricity than Australia currently consumes. Partly thanks to Malcolm Turnbull, Scott Morrison and Liberal state energy ministers, the energy storage and transmission projects already under way can take the country well beyond 50 per cent renewables.

While Tony Abbott may have been right about the last election, he could be very wrong about the next one. Who knows, we may even have a bipartisan approach to renewable energy and climate change. Nelson Mandela once said, “It always seems impossible until it’s done.” Thanks to an unlikely alliance of three billionaires — Mike Cannon-Brookes, Twiggy Forrest and Sanjeev Gupta — we can now see how it can be done. The economics are moving in the right direction. Let’s hope the political will is not far behind. •

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And he sees the vision splendid of the sunlit plains extended,
And at night the wond’rous glory of the everlasting stars.

Garnaut has his own vision. Given Australia’s substantial comparative advantage in variable renewable energy (especially solar), he believes that we can become global leaders in the export of energy-intensive processed minerals and develop hydrogen as a fuel source. Rather than being prohibitively expensive, energy can be cost-competitive and plentiful. Gladstone, for example, could be home to aluminium smelting, steel and silicon manufacture, and hydrogen production.

Dreams of establishing globally competitive exports of processed minerals are not new, but they have foundered on comparatively high labour and transport costs, particularly in harsh and remote areas of the country. This time it may work. Mining and processing are far more automated and Australia has a compelling renewable-energy advantage — an advantage that is not yet widely recognised.

Garnaut argues his case carefully and spells out the steps needed to bridge the gap between the present policy incoherence and net zero carbon emissions globally by mid century. Denial and avoidance need to stop so our knowledge of how to deal with rising temperatures can be applied.

Superpower begins in the Murray-Darling, where dead fish, rivers that barely flow and dried lake systems remind us that once-fertile food bowls can degenerate. Of course, one severe drought (and poor water management) doesn’t prove the point, but the continuing run of extreme weather events adds to a mounting near certainty.

Garnaut discusses the costs of mitigation in some detail, as well as the benefits of keeping the increase in temperatures to 3°C or preferably lower. Over time, he shows, the costs and benefits of mitigation have become more certain. His preference is a target of 1.5°C increase and for the world to reach net zero emissions by mid century, as the Paris Agreement envisages. Given his background and experience it is not surprising to find an excellent summary of the various UN initiatives over time and the progress that countries have made. While there have been some disappointing outcomes, considerable progress has been made — albeit threatened by developments like US president Donald Trump’s decision to withdraw his country from the Paris Agreement by the end of his term.

As well as dealing with events globally, Garnaut nicely sets out the diabolical policy challenges that Australia has visited upon itself in recent decades. His lament for the emissions trading scheme and the Gillard-era carbon price is heartfelt. He explains the Coalition’s alternative policy of direct action and regulation (with a relatively modest target for emissions reduction) and sets out an international comparison of the costs of emissions reduction under different alternative policies. As is well known, a price on carbon is the least costly and most efficient policy route. But this is one policy we have well and truly mucked up and Garnaut doesn’t advocate its adoption without bilateral political support.

We have been saved by both technology and the fact that ageing coal generators must retire. In electricity, which is the key sector for transformation, technology has become remarkably cheaper. The costs of wind and solar generation, as well as battery storage, have declined rapidly and the trend is continuing. It is not widely appreciated that the cost of electricity from wind and solar is multiples less than the cost from coal generation.

Within the electricity system Garnaut suggests three major changes. First, we should adopt the Australian Competition and Consumer Commission’s recommendation that government should underwrite “firm” power sales from new electricity-generation facilities. Although this recommendation is still to be fully implemented, some progress has been made; its final form is yet to become clear. The second step is for unregulated owners of electricity transmission lines to be encouraged and rewarded for the benefits they provide by allowing electricity to move to where it’s needed within the existing regulated system. Whether this proposal would encourage sufficiently more transmission investment needs further assessment.

Finally, and perhaps more controversially, Garnaut proposes that Snowy Hydro be split into two companies, one concerning itself with generation and retail sales only, the other providing services based on its pumped hydro activities. In this latter role Snowy would be given the task of ensuring the reliability of the National Energy Market and balancing demand and supply for electricity in all regions. A specified maximum price would be set for this service and the company could purchase pumped hydro from other sources if required. While it is true that Snowy 2.0 as currently proposed will become the dominant player in the electricity hedging market (and steps will need to be taken to curb that market power) it is not clear that Garnaut’s proposal is the better future option. It is an interesting idea that needs more debate.

In the shorter term, large gains can be made. Garnaut concludes with several steps that can be taken using existing institutions. These are first steps across the bridge between where we currently are and where we need to be. He suggests that the roles of the Australian Renewable Energy Agency, the Clean Energy Finance Corporation and the Clean Energy Regulator be expanded; that the Climate Change Authority be restored to give independent advice on emissions reduction targets; and that the Productivity Commission be asked to review arrangements when needed. His other proposals cover charging infrastructure for electric vehicles and the pricing rules for powering them; more research on carbon sequestration; and sensible land-clearing policy.

The measurable costs of mitigating climate change, and the benefits of doing so, are now much more certain and the positive gap between benefits and costs has increased. Garnaut describes four types of benefits, including those that lie outside our conventional view of the market. This latter type of benefit is important. As economists we are all aware of the intergenerational inequality associated with climate change, and it is not surprising to see younger people protesting about insufficient action. But Pope Francis in Laudato si argues that climate change is also imposing costs disproportionately on people in poor countries. Humans have a responsibility to take care of our common home not only because it is important to humanity but also because it is valuable in itself. For the more secular-minded, Garnaut refers to similar arguments put forward by John Broome at Oxford University.

In summary, this is a book that provides a path forward and a vision for a better future than others we may easily fall into. •

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That’s hardly new. What’s important is who is saying it this week: the International Energy Agency, the Paris-based global data source and think tank established and funded by more than fifty governments, including Australia, as the world’s authoritative source of advice on energy policy.

The IEA’s annual flagship review, World Energy Outlook 2019, puts it bluntly. On current policies, the world is on track for a “relentless upward march in energy-related emissions, as well as growing strains on almost all aspects of energy security.” Even governments’ stated policies, including promised changes in future, would merely slow that growth a little, leaving the world far short of meeting its goals in 2040.

The agency’s executive director, Turkish energy economist Fatih Birol, was equally forthright:

The world urgently needs to put a laser-like focus on bringing down global emissions. This calls for a grand coalition encompassing governments, investors, companies and everyone else who is committed to tackling climate change… For this to happen, we need strong leadership from policymakers, as governments hold the clearest responsibility to act and have the greatest scope to shape the future.

Dr Birol and his team are no “raving inner-city lunatics,” as deputy PM Michael McCormack characterised climate change protesters. They are experienced public servants, experts in their field, who collect the data from all over the world, identify the trends, and model their consequences. And their conclusion is that we’re failing.

But they also have a very different viewpoint from pretty well anybody who writes about these issues in Australia. The IEA’s focus is on “all fuels and all technologies.” While it sees expanding renewable energy — and storage — as one of the two main drivers for reducing global energy emissions, it regards improved efficiency of energy use as having even more potential, and envisages significant roles for gas, nuclear power, and carbon capture and storage.

“What comes through with crystal clarity in this year’s World Energy Outlook is that there is no single or simple solution to transforming global energy systems,” Dr Birol warns. It is an issue where the green economists and IEA part ways sharply.

We’ll come back to that. Let’s first run through the key messages from the Outlook:

• On governments’ stated policies, energy use will continue rising by 1 per cent a year for the next two decades. Greenhouse gas emissions from energy use will also rise, although more slowly, peaking in 2045 at thirty-six billion tonnes a year, up from thirty-three billion now. And energy is the sector where it is cheapest and easiest to reduce emissions.

• Global emissions from energy use fell earlier in the decade, but rebounded in 2017 and 2018 as developing countries, starting from way behind, expanded faster than the developed countries reduced emissions. Most of this was in electricity generation, where most new power stations in developing countries burn fossil fuels.

• The two biggest influences on future emissions are developing Asia — where coal, gas and solar will battle for market dominance over the next twenty years — and Africa. In 2018 the entire continent of Africa had fewer solar panels than Australia now adds in a year. Excluding South Africa, the rest of sub-Saharan Africa had fewer cars than Australia, despite having twenty times more people.

• Currently the second-biggest source of growth in global emissions is the replacement of cars by SUVs. On average, the IEA says, SUVs need 25 per cent more fuel to drive a kilometre than a car does — and they are now taking over global markets. In Australia and the United States, 60 per cent of non-commercial vehicle sales are SUVs. Global emissions from SUVs now exceed Australia’s total emissions. We’ll come back to that too.

• The pace of gains in energy efficiency is slowing. The IEA estimates that global use of energy improved just 1.2 per cent in efficiency in 2018, way short of its target of annual 3 per cent improvements. SUVs are one example of forces pushing the other way. Only a third of energy emissions face any efficiency requirements, yet the potential gains from imposing them are enormous.

• The cheapest sources of new power vary widely from country to country. The IEA estimates that solar is now the cheapest option in India, and gas in the United States (thanks to the shale industry) and Europe, but that coal remains the cheapest energy source in China. By 2040, however, solar and wind will be the cheapest everywhere.

• The Outlook highlights the massive potential emission reductions from developing offshore wind resources, especially in Europe but also globally. Offshore wind can deliver energy at a load factor of 40 per cent, giving it the potential lead role in replacing fossil fuels as a source of 24/7 power.

The IEA emphasises that there is nothing inevitable about our trajectory. With different priorities it is feasible to meet, or at least come close to meeting, the Paris targets by 2040. But it will take that “laser-like focus” that Dr Birol urged, with governments taking the lead.

With the right policies, the Outlook’s “sustainable development scenario” estimates that global emissions from energy use could be reduced by almost ten billion tonnes a year by 2030, and from 35.9 to 9.75 billion tonnes a year by 2050. But it estimates that only a third of this would come from increased use of renewable energy.

Rather, on the IEA’s modelling, the biggest potential gains (37 per cent) come from improving energy efficiency across the board: in vehicles, buildings, factories, mines and other workplaces, everywhere. A hefty carbon price — around US$100 per tonne in 2030 rising to US$140 by 2040 — would be needed to drive this. Finding energy efficiencies means you avoid paying the tax.

Wind and solar energy would become the two biggest sources of power for electricity generation by 2040, allowing electricity use to expand — among other things, to fuel the electric vehicles that are expected to make up 75 per cent of global car sales by 2050. But even by 2040, with that hefty carbon tax, the IEA modelling anticipates that wind and solar would fuel only 40 per cent of the world’s electricity use, up from 7 per cent now.

Hydro (18 per cent) and bioenergy (9 per cent) would give renewables a two-thirds share. Nuclear energy would provide 11 per cent (mostly in what are now developing countries), coal- and gas-fired plants with carbon capture and storage 5 per cent, with the other 17 per cent coming from coal and gas plants without carbon capture, almost all in developing countries.

That is the IEA modelling its assumptions of what is feasible, and seeing where that leads. Like many analysts, it underestimated the spectacular reduction in the costs of solar and wind energy in this decade; in assuming slower cost reductions ahead, it may be underestimating them again. This is particularly relevant to the marginal role it assigns to battery storage in its sustainable scenario.

But achieving gains in energy efficiency can also be politically difficult, as we saw in the May election, when the Coalition saw political advantage in campaigning against the widespread use of electric vehicles — and got away with it.

IEA modellers Laura Cozzi and Apostolos Petropoulos point out that “there are now 200 million SUVs in the world, up from about thirty-five million in 2010, accounting for about 60 per cent of the increase in the global car fleet since 2010.” That was driven by consumers, not governments. The IEA estimates that the world’s SUVs now emit roughly 700 million tonnes a year of CO2, more than Australia’s entire high-emissions economy. The savings from electric cars so far have been a fleabite by contrast.

It is safe to say that Australia will not be leading the way in applying a laser-like focus on bringing down emissions. Indeed, with the country’s annual emissions from energy use having risen by 34.6 million tonnes or 8.5 per cent in the five years since the Coalition axed the carbon tax, there is no evidence that the government seriously intends to reduce carbon emissions full stop.

This IEA report doesn’t focus on individual countries, and Australia appears in its 800 pages mainly as an exporter of coal and gas. Again, we appear to be out of sync with the goal of reducing carbon emissions. While even under existing policies the IEA modelling forecasts that global coal use will shrink by 168 million tonnes a year by 2040, with China closing more coalmines than it opens, Australia would increase its production by forty-two million tonnes (10 per cent) in that time, second only to India. It would become the main source of growth in coal exports in a world that is turning away from coal. The IEA notes in passing that that could be a risky business strategy.

The outlook for Australian gas is seriously worrying. In case you’ve yawned through this saga, the Rudd government in 2010 gave the three gas exporters permission to export (and hence, make contracts for) gas they did not have. It and they assumed the gas would come from new fracking operations. Instead, local opposition ended fracking virtually everywhere outside Queensland, and hey, the exporters had to buy the extra gas from the domestic market. That drove up gas prices, massively, and because of the swing role gas played in the national electricity market, electricity prices went up with them. It was one of the worst policy disasters Australia has seen.

But wait, forecasts the IEA, there’s more to come. Australia already exports 67 per cent of its gas production — compared with 1 per cent in North America and 17 per cent in the Middle East — and the IEA modelling suggests that on stated policies those exports will double in the next twenty years. It notes sagely, “Australia will face some near-term challenges to maintain service for both domestic consumption growth and natural gas exports.” You bet it will.

With the Victorian Labor government having banned any gas exploration onshore — despite the state’s manufacturing employment having slumped by 33,600 or 11 per cent since 2012 — and most other states effectively banning the kind of fracking that unleashed the shale gas revolution in the United States, the prospects for sensible energy policy here appear remote.

But it is nice to have the IEA outline its version of what a sensible policy would be like. It would have a serious carbon price, gas as the transition fuel to back up solar and wind, genuine energy efficiency standards across the economy — and a real commitment to making it all work. •

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Tony Abbott famously described the Labor government’s carbon “tax” (a price, in reality) as a “wrecking ball” through the Australian economy. But neither its introduction under Julia Gillard nor its removal by Abbott had any measurable effect on economic growth. Indeed, the economic outlook presented in the budget statements in those years didn’t mention carbon pricing as a factor in our overall performance.

Why did these apocalyptic predictions go so badly wrong? In the case of the ABARE modelling, it was the result of three main factors: exaggerated assumptions about the cost of reducing emissions, inappropriate choices in the modelling process, and misleading presentation of results.

The problems began with a decision to exclude any consideration of technological progress in energy efficiency or renewable electricity generation. This led to an overestimation of the cost of reducing electricity consumption and replacing coal-fired electricity with renewables. Relative to business-as-usual projections, most of the emissions reductions since then have come from these sources, along with a reduction in land clearing.

The second set of problems related to decisions about how the model’s solution is derived. Depending on how this is done, the costs of a policy can either be understated or overstated, and ABARE consistently chose the latter course. An important example is the question of what will be done with the revenue derived from a carbon tax. A common assumption, used by ABARE, is that the money is either kept by government or handed back to households as a lump sum. In reality, the proceeds of the carbon tax were allocated primarily to reducing income tax, which greatly reduced the economic impact predicted by standard models.

Even with these choices, the ABARE model yielded an estimated cost of less than 1 per cent of GDP, equivalent to a few months’ worth of economic growth. That’s clearly a price well worth paying as part of a global agreement to stabilise the climate. To obscure that problem, ABARE took all of the costs estimated to be incurred over twenty to twenty-five years and used a “present value” calculation to present them as a lump sum. The figure was further exaggerated by using a mythical average family of four, disregarding the fact that, because incomes are unequal, most households get a lot less than the (arithmetic) average.

All of these difficulties were pointed out at the time, by leading economic modellers such as Peter Dixon and Warwick McKibbin, and policy economists, of whom I was one. So why bring up this history now? The director of ABARE at the time was Brian Fisher, the man who has just released alarming estimates of the cost of Labor’s climate policy derived from a new model produced by his BAEconomics consultancy. Far from correcting the errors of the 1996 model, his model repeats them all, and adds new ones.

First, the cost of wholesale electricity is estimated to be as high as $135 per megawatt hour. In reality, contracts for solar PV, with battery storage, are currently being signed at costs of US$30/MWh (about A$40/MWh), and this number is sure to fall. By ignoring this, Fisher produces the absurd suggestion of a carbon price as high as $405 per tonne. That’s nearly twenty times the level that produced significant reductions under the last Labor government and has also produced big reductions in the European Union.

Second, instead of assuming that the state of the economy is determined by the decisions of the Reserve Bank, with the economic impacts of climate policy reflected in wages and prices, Fisher assumes that there will be a permanent increase in unemployment. This greatly exaggerates the economic costs of any policy.

Even so, as in 1996, the estimated effects remain small — around 2 per cent of GDP for the policy simulation closest to Labor’s announced policy. So Fisher then repeats the 1996 trick of adding up impacts over ten years. The end result is the scary cost range of $264 billion to $542 billion trumpeted in the media last week.

Once the obvious errors in the BAEconomics model are corrected, it is clear that the impact of Labor’s policy on aggregate GDP will be well below 1 per cent. That is so small as to be lost in the noise generated by exchange rate change, statistical revisions and the like.

While the average Australian family won’t even notice the cost, and some will benefit from the expansion of employment and business opportunities in renewable energy, it is crucial to support a just transition for workers and communities dependent on fossil fuels. The cost of such support, like that of the transition as a whole, will be very small in relation to the economic capacity of Australia as a whole. •

The post How much will it cost to deal with climate change? appeared first on Inside Story.

Snowy 2.0 would deliver round-the-clock renewable and reliable power, he declared. A second interconnector between Tasmania and Victoria would unlock the “battery of the nation” to supply more zero-emissions hydro power to the mainland. The Coalition would spend $2 billion over ten years to buy more emissions reductions. New initiatives would promote energy efficiency among households and, wait for it, a national strategy would encourage electric vehicles.

For a moment it looked as though he was responding to public sentiment, in the shape of polling showing rising levels of concern over climate change.

But ScoMo’s attempt at catch-up was soon overwhelmed by the visceral urge to mount another fear campaign against Labor. The idea was to label Labor as extreme on climate change, but in the process the PM sent a different message — a message about a Coalition that is dragging its heels on climate change and doesn’t believe in its own policies.

The problem for the government is that, for anyone who cares to take a look, the main elements of Labor climate change policy are conservative — literally. Or, as Tony Wood of the Grattan Institute puts it, “Labor is basically proposing to take the Coalition’s policy vehicle, put its own badge on the bonnet, and then drive it faster.” It has adopted the Coalition’s safeguard mechanism, under which the biggest polluters have limits placed on their emissions, but made it tougher. It has promised to introduce the national energy guarantee adopted by the Turnbull government before the Coalition’s hard-right flank torpedoed it.

Other measures go further than the Coalition, including ending our unenviable status as one of the few remaining developed countries without a limit on carbon emissions from vehicles. But, overall, it is a less ambitious policy than the explicit, economy-wide price on carbon introduced by the Gillard government, even though the problem has become more serious and urgent in the intervening years. It ignores the need to phase out coal, despite the fact that — again in the words of Grattan’s Tony Wood — “the world must eliminate coal-fired power within about thirty years for any chance to meet agreed climate change targets.” Politically clever it may be, but that comes at the price of inadequate policy.

But this is an election campaign in which, as in war, truth is the first casualty. With Labor unwilling to say what its policies cost, the government has helped out with some figures on the burden for business: $13 billion, $26 billion, $35 billion — take your pick. The best that can be said for these numbers is that they are wild guesses.

The highest figure is based on an assumption that 50 per cent of the reduction in emissions under Labor’s policy would come from companies buying international permits at the highest possible forecast price. Bloomberg New Energy Finance, whose research was cited by the government, says $35 billion is “not a credible estimate.”

Providing access to international permits is intended to give business more flexibility in finding ways to reduce its emissions. Business has welcomed the policy for this reason. But if it is cheaper to cut emissions directly or offset them domestically, companies won’t buy international permits. How many they will buy is impossible to tell at this stage, since the companies themselves don’t know.

Either way, there will be a cost, whether it is absorbed by companies facing competition or passed on to consumers. The government’s scheme also comes at a cost — mainly to taxpayers. The one certainty is that the cost of not acting is much greater.

By the way, the Coalition actually thinks international permits are a good idea — or it did only a little more than a year ago. As it said in its review of climate change policies in December 2017, “The government supports, in principle, the use of international units.” The review acknowledged some uncertainty about the price and the quality of international permits — that is, whether they represented genuine reductions in emissions. But, it said, “access to high-quality international units will provide greater flexibility to business and government in meeting emissions reduction targets.” In other words, Morrison is criticising his own policy.

As he is in other areas. Together with trying to scare voters over Labor’s 50 per cent target for sales of new electric cars by 2030, the government jumped on Bill Shorten’s comment that it could take only eight to ten minutes to charge an electric car. That’s perhaps a little optimistic, at least for a full charge, but there are already charging stations that can do a full charge in fifteen minutes, and an eight-minute charge can take you 200 kilometres.

And, guess what, the Morrison government is subsidising them. In October last year, energy minister Angus Taylor announced that the government, through the Australian Renewable Energy Agency, would contribute $6 million towards a network of “ultra-rapid charging stations powered by renewable energy.” The ultra-rapid charge, he said, “will provide a range of up to 400 kilometres in just fifteen minutes, compared to a current charging time of several hours.”

Looking at the electricity industry as a whole in his 2017 review of energy policy, chief scientist Alan Finkel said his plan to achieve the government’s 26 per cent reduction in emissions would see 42 per cent of electricity demand met by renewable energy by 2030. The Finkel review, like so many other independent assessments, was a casualty of the Coalition’s internal climate wars.

But the government says it remains committed to the 26 per cent target and it is counting on the electricity sector to do the heavy lifting. Labor’s target of 50 per cent renewables is not much higher than Finkel’s estimate of 42 per cent under the Coalition’s policy. Certainly the difference is nowhere near big enough to justify Angus Taylor’s accusations about “Labor’s economic wrecking ball.”

Taylor epitomises the Coalition’s problems with climate change policy. A strong conservative, he is an ally of fellow Rhodes scholar Tony Abbott and is mentioned periodically as future leadership material. Like Abbott, he says he believes in climate change. But he has been a strong critic of wind farms. In 2013, shortly before he was elected for his first term as the MP for the NSW provincial seat of Hume, he described subsidies for wind farms as “economic lunacy and bad public policy.” He railed against “a massive, unintended policy failure” and “the absurdity of the economics of wind farms.”

His electorate, which covers much of the Southern Tablelands, is one of the three leading locations in Australia for wind farms, and more big projects are on the drawing board — all providing jobs and contracts for local businesses, and benefits to land owners and local communities. Asked whether his views had changed, he avoided the question, instead telling Inside Story through his office that the Coalition had a strong record on renewable energy but that the unprecedented growth in generation from wind and solar reinforced the need for the government’s policy of more investment in reliable 24/7 generation.

A hint that his underlying views remain the same is that he was notable by his absence at the opening of a new wind farm at Crookwell last November. You might well have expected the local member to attend such an event, especially if he is also the minister for energy. •

The post Whose climate policy is that? appeared first on Inside Story.

The answer can be found in this graph released by Ofgem, the British electricity regulator. As it shows, coal (shown in orange) supplied around 40 per cent of British electricity in 2006, yet by 2018 its contribution was negligible. (The graph on Ofgem’s site is interactive, so you can see the actual numbers there.)

British electricity generation by fuel source 2006–18

Source: Ofgem, January 2019

Generation from gas and nuclear plants displaced substantial volumes of coal-fired power during the second half of the twentieth century, but has been virtually constant since 2006.

Coal’s elimination has come from two main sources. First, total electricity use has declined, reflecting increased efficiency. Second, wind (offshore and onshore) has expanded to the point where it is about as big a source as nuclear. Solar photovoltaics have also grown strongly, though they contribute only about 3 per cent of total generation. The few remaining coal-fired generators operate as backup supplies, used only to meet peak demand in winter.

The result of the end of coal-fired power, and the twentieth-century shift away from coal-burning heavy industry, is that Britain has reduced CO2 emissions to the levels of 1888. A complete phase-out of coal-fired electricity generation is anticipated by 2025.

Given Britain’s substantial reliance on gas, further reductions in CO2 emissions from the electricity sector are more problematic. At least Britain, unlike Germany, didn’t hamstring its decarbonisation efforts by mandating the early closure of its nuclear power plants. The contribution from nuclear power may even increase if the Hinkley Point C power plant, now in the early stages of construction, is ultimately completed. But the massive cost of that project has led to the abandonment of most remaining proposals for new plants. Over the next couple of decades, most of the existing nuclear fleet will reach the end of its scheduled operating life and will need to be replaced or refurbished.

If the costs of renewable electricity continue their steep decline, some of the older gas-fired power stations built during the 1990s “dash for gas” may be retired over the next few years. A complete shift away from gas is a long way off, however.

Even with these problems, decarbonising electricity is just the easy bit. Reducing, and ultimately eliminating, emissions from transport and industry will be much more difficult.

Against the general trend of declining emissions, CO2 emissions from Britain’s road transport industry have risen recently, driven by the shift away from diesel engines and from passenger cars to SUVs. The only long-run solution is electrification, which will require further expansion of renewable generation.

The British government has promised to end the sale of petrol and diesel cars by 2040, but the task of conversion will need to begin almost immediately. The same is true in Australia, where Labor has announced that it will seek to make electric vehicles 50 per cent of new car sales by 2030 and to ensure the government fleet reaches that goal by 2025.

Reducing emissions from industry is even more difficult, since each industrial process has its own needs, and most of them are built around carbon-based fuels. One positive recent step has been the announcement that Britain’s largest remaining steelworks, at Scunthorpe, will construct an electric arc furnace for recycling scrap in order to offset recent reductions in raw steel production capacity. This raises the global issue of the need to improve scrap recovery and shift the balance of steel production from crude steel to recycling.

Despite these continuing challenges, the ease with which Britain, the birthplace of the modern industrial economy, has abandoned coal-fired electricity gives the lie to those in Australia who claim that decarbonising the economy will be ruinously expensive.

In nearly all respects, Australia is better placed now than Britain was in 2006 to break with coal-fired electricity. Admittedly, we are starting from a higher coal share, in part because we avoided the false promise of “too cheap to meter” nuclear power back in the 1970s. Against that, we have substantial existing hydro resources, with Snowy 2.0 as a possible expansion, far more sites for onshore wind and, of course, a massively greater potential for solar energy. Even more importantly, we can take advantage of more than a decade’s worth of technological improvement that has driven down the cost of renewable energy and storage by factors of 80 per cent or more. •

The post How Britain kicked coal appeared first on Inside Story.

For their part, Labor governments would clearly like Adani to pull up stumps and leave, but they don’t want to be blamed for the loss of (largely imaginary) jobs or to be sued under the ISDS. Given that no financial institution in the world seems willing to finance this appalling project, that result has seemed like a safe bet.

Adani’s announcement in November that the project would be financed with $2 billion of its own resources was a clever move to undercut this hope. But Adani doesn’t want to spend such a massive sum, of course, any more than it spent the $400 million supposedly released for preconstruction works in 2017. So, having announced a start on construction “before Christmas,” the company did nothing.

Its jobs portal, set up with great fanfare in 2017, has so far listed only four or five Adani jobs (though other employers use it quite a bit). This is presumably what the company was referring to when it claimed recently that “our advertisements in Brisbane and regional Queensland highlight that we are ready to deliver the jobs and business opportunities that we have promised for Queensland.”

The self-funding announcement stirred the pot for a while, but something more was needed. So Adani announced that it was moving heavy earth-breaking equipment to the site in readiness for an immediate start. It released a couple of pictures (see below) and stated: “We have since moved the first earthmoving equipment to the site to be ready to commence work once the outstanding management plans are finalised. Early works to prepare the rail project for construction can now begin under current project approvals but work on the mine will not commence until the management plans are finalised as we noted when announcing financing for the project.”

You don’t need to be an expert to see that only one, or maybe two, of the vehicles in these pictures could be described as “heavy earthmoving equipment.” They look more suited to clearing scrub around the mining camp than digging a massive coalmine, or even carrying out “early works to prepare the rail project for construction,” which the company claims is happening now. And while the camp (which was apparently constructed in 2016) can accommodate 300 workers (rather fewer than the 10,000 we were once promised), the collection of vehicles parked out the front suggests that actual occupancy is more like twenty.

Just like Prince Potemkin’s famous (if possibly apocryphal) villages, moved from place to place along the Dnieper to give Catherine the Great an impression of bustling activity, there’s every chance that this arrangement is just for show.

The Queensland Labor government has responded in kind. Whereas Adani suggested that its radically revised proposal was still covered by previous approvals, the government is sending it back to the drawing board on a range of issues. That provides Adani with more excuses to do nothing while continuing to blame government obstruction.

If federal Labor wins government in May (as seems highly likely), it will need to face up to the issue later this year. First of all, it will need to develop a coherent policy on phasing out coal exports — ideally involving a ban on new coalmines, though this is almost certainly too much for Labor to contemplate. That proposal also faces the counterargument, put forward by both mining companies and unions, that reduced Australian exports would be replaced by lower-quality coal from other countries.

The argument has some force, but there’s a way of taking it into account. Australia’s benchmark export is Newcastle coal, with an energy content of 6000 kilocalories per kilogram and a correspondingly low ash content. The premium for this higher-quality coal has risen greatly, though it has declined somewhat in recent years. Galilee Basin coal’s heat content, by contrast, is estimated at less than 5000 kcal/kg, and its ash content is 26 per cent, worse than coal from many competing countries. A policy that stops short of a blanket ban but requires new mines to supply coal of, say, 5500 kcal/kg or more would put an end to any idea of developing Galilee, while allowing for some smaller, higher-quality projects to proceed.

But that might not protect Australia from action by Adani under the ISDS. For this and other reasons, a Labor government should urgently negotiate the removal of all ISDS clauses from existing trade agreements, and exclude such clauses from any future agreements. This process should be backed up, if necessary, with the threat of repudiation.

All of that is in the future. For the moment, Adani continues to issue media releases and display banners claiming that it is ready to start mining at any moment, while carefully avoiding spending any more of its own money. Governments continue to temporise, hoping that the economic irrationality of the project will cause it to fall over without the need for any action on their part.

Sooner or later, the issue must be resolved. In the meantime, my guess is that we will see a fair bit more shadow-boxing. •

The post Adani’s Potemkin village appeared first on Inside Story.

First, in October, the Intergovernmental Panel on Climate Change released a special report on the effects and feasibility of holding warming to within 1.5°C above preindustrial levels. That figure was enshrined as an aspiration in the Paris Agreement, and the report shows why it is a better benchmark for mitigating catastrophic climate change than the 2°C goal that has long been the focal point of international negotiations. To meet the 1.5°C goal, says the IPCC, net global greenhouse gas emissions need to be phased out by around 2050.

To do this without relying on expensive, risky and massively scaled carbon capture and storage technology will require an especially rapid phase-out of fossil fuels used for power generation. And it is coal-fired power generation and coalmining that most urgently need to be phased out. Coal is the most emissions-intensive fuel source. Of all fossil fuels, it creates the least economic value per unit of energy. In most parts of the world it can be replaced at low cost by solar, wind and other clean sources of electricity, which are becoming increasingly cheap to generate and store. And its production, transportation and combustion have many other harmful social and environmental effects, including the air pollution that kills millions each year.

Partly because of these technological, economic, social and environmental pressures, overall global coal demand is flatlining. Yet a number of countries — including Poland, Indonesia, South Africa and Australia — are still building new coalmines. As of December 2017, Australia alone had more than fifty new coalmining projects, worth more than an estimated $75 billion, in the “investment pipeline.” And senior Australian government ministers regularly talk up the country’s future role as a major global coal exporter.

This kind of hypocrisy cast a pall over the second major UN-level climate event for the year — the twenty-fourth annual Conference of the Parties to the UN Framework Convention on Climate Change, or COP24, in Katowice, Poland, which concluded at the weekend. The Polish government attracted special attention by making the “just transition” from coal a key priority of the conference, yet its plans to build new coalmines showed that its own transition was going in the wrong direction.

Championed by the trade union movement and more widely in civil society, the notion of a just transition is enshrined in the Paris Agreement. The basic idea is twofold. First, the interests of employees in emissions-intensive industries, and their communities, must be taken into account in the process of cutting emissions. Second, employees should be supported through the transition with public investment in communities, social protections, and job retraining that equips workers to take advantage of economic opportunities in expanding sectors, including zero-carbon industries.

The imperative for a just transition is reaffirmed in the official COP24 conference document, which reflected the outcome of the negotiations in Katowice. Yet that document, like the Paris Agreement itself, doesn’t mention the need to stop building new coalmines, let alone to phase out coal — an omission that reflects the realities of the consensus-based UN process in which all countries, including those expanding their consumption and supply of fossil fuels, effectively have a veto.

The COP24 outcome also underscores how pressure to phase out fossil fuels needs to emerge through different channels, including other multilateral forums and groupings, to complement the more universal and abstract process set in motion by the Paris Agreement.

This is where the creative thinking comes in. One idea we have been promoting is a system of Fossil Fuel Free Zones, which would enable leaders at multiple jurisdictional levels to increase pressure on laggards. A related idea, which we explore here, is a moratorium on new coalmines — in fact, a plethora of moratoriums at multiple jurisdictional levels, from subnational governments right through to countries and international groupings. (Here, we’ll refer to “a” moratorium, but we intend this to mean moratoriums, plural, in any jurisdiction — though a global moratorium would be ideal.)

A coalmining moratorium is a prerequisite both to phasing out greenhouse gas emissions and to making a just transition away from coal. Banning new coalmines represents a significant, intermediate step that governments could take that would demonstrate their commitment to both of these objectives and act as a litmus test for their good-faith implementation of the Paris Agreement. And it is surprisingly politically feasible.

The reason why banning new coalmines is a prerequisite to phasing out greenhouse gas emissions requires little elaboration. It is obvious that a world serious about phasing out coal needs fewer coalmines, not more. The more jurisdictions that ban new coalmines, the more moral pressure it puts on expanding coal producers to rein in their expansion plans.

How such a moratorium would create a just transition for coal workers and dependent communities is less obvious, but equally compelling. For one thing, building new mines threatens the jobs of existing coalminers. While government approvals and subsidies for new coalmines might look like they support coal workers, any first-year economics student will tell you that if demand for a product is flat (remember, global coal demand is flatlining) any increase in supply will simply lower its price. All else being equal, the price drop caused by the new entrants into the market will eat into the profits of existing coal suppliers, threatening their viability and the jobs of their existing workforce. Shrinking profits in the coal industry also mean that coal companies will be less able, or inclined, to pay their taxes, finance site rehabilitation, and pay employee entitlements when mines close.

Take the Hunter Valley, for example. Australia is the world’s second-largest coal exporter and the Port of Newcastle is the world’s largest coal port. But one of the major short-term threats to coal workers in the Hunter isn’t the global climate negotiations, it’s the opening of the Adani and other mega-coalmines in Queensland’s Galilee basin, whose coal would be exported through a different port. According to modelling by resource analytics firm Wood Mackenzie, these new coalmines would reduce exports from the Port of Newcastle by one-third and lead to thousands of jobs being lost. The result would be a rapid but not very just transition for Hunter coal workers.

A moratorium on new coalmines would insulate companies with existing mines from the economic pressures that would otherwise come from new mines. It would improve the job security of existing workers and provide additional time and financial headroom for just-transition initiatives. Trade unions can then argue with companies and governments for a greater share of industry profits and taxes to be spent on social protection, worker retraining and job creation.

A moratorium would also be more politically feasible than most schemes proposed to reduce emissions. Incumbent coalmining companies should back it because it increases their profits. Unions should back it because it supports existing jobs and buys time for a just transition. And it should appeal to governments because they get to help existing workers and companies while doing something about climate change.

International bans on things we want less of — whether it’s whaling, nuclear testing or lead in petrol — are not novel, and bans on fossil fuel–related activities around the world have increased rapidly over the last couple of years. Countries willing to ban new mines could easily coordinate their efforts and hold one another to account because the transaction and monitoring costs would be low — it’s hard to build a covert coalmine, which means it is hard to cheat. And while not all countries will want to sign up straight away, the more that do so, the harder it will be for countries like Poland and Australia to hold out. Global norms matter in international diplomacy, and “anti–fossil fuel norms” are evolving rapidly. Norms against new coal infrastructure have never been more important.

The world urgently needs a just transition away from coal. A moratorium on new coalmines is a necessary step that has the power to unite multiple powerful interests and protect vulnerable workers and communities. In the challenging game of climate policy, that’s a rare combination. •

The post Thinking creatively about phasing out coal appeared first on Inside Story.

The fact that Adani has been unable to find external funding is well known, as is the fact that a starting date has been announced several times in the last eighteen months. But the pattern stretches back years, and goes far beyond problems with finance.

For at least five years, Adani has been announcing the imminent, or actual, start of the project. Over this period, business partnerships have been announced, only to then break down. In Adani’s telling, these serial divorces were due to the fact that the other party was no longer needed.

Preliminary design and construction work was under way in 2013 with a consortium that included Parsons Brinckerhoff as project manager and a fifty-strong engineering team from Worley Parsons. The project was suspended in 2015, however, and virtually all of the workforce was sacked. Two years later, the American engineering firm AECOM replaced Worley Parsons, only to pull out in May 2018.

In July 2014, Adani signed a “binding agreement” with South Korean company POSCO to build a standard gauge rail line, with construction expected to start in 2015. That deal also came to nothing, as did proposals for POSCO to invest in the project and buy around five million tonnes of coal. Another Korean customer, LG, signed letters of intent to buy four million tonnes of coal, but pulled out in 2015.

In January 2015, the company announced the awarding of a $2 billion contract to Downer EDI, stating that construction was expected to begin later in the year. That deal was cancelled in December 2017. In May that year, with POSCO out of the picture, Adani had announced it would be buying $74 million worth of steel from Arrium, owner of the troubled Whyalla steelworks. It’s unclear whether that deal is dead, but obviously the cut-down project now being proposed won’t need nearly as much steel.

Adani hasn’t treated its own staff any differently. When its Townsville regional headquarters was opened in 2017, 500 jobs were promised. In reality, there were never more than 150, many of them transferred from the Brisbane office. In June the number was reduced to one hundred and more staff were told their contracts would not be renewed.

All of this raises big questions about the claim that construction will begin before Christmas (or, in some versions, just after the new year). As far as can be determined, Adani’s Carmichael operation has no construction contractors, no professional engineering team and a staff level that would see it officially classified as a medium enterprise in Australia (from fifteen to 200 employees, according to the Australian Bureau of Statistics) and a small business in many other countries.

There’s no sign that this is changing. In June 2017, Adani set up a jobs portal for its Regional Content Strategy. The portal was open to other employers, which was perhaps fortunate. Adani advertised a handful of jobs initially, but soon stopped. Despite yesterday’s announcement, a search of the site for Adani jobs produces nothing, just as it has done for months.

Yet Adani claims to be able to jump-start a $2 billion project with over 1500 workers in a matter of weeks. Casting further doubt on the announcement is the fact that the proposed project has been radically redesigned in the past few months, with a completely different route for the rail line and a new access arrangement with Aurizon, which operates the Goonyella-to-Abbot-Point line on which the coal will now travel.

The absurdity of the project is reinforced by the fall in the price of the low-quality coal to be produced from the Galilee Basin. Coal quality is measured in kilocalories per kilogram (kcal/kg), with higher values indicating more heat content and less ash. The standard is 6000 kcal/kg Newcastle coal, the price of which rose between 2016 and the recent closure of the Chinese import market for December. But the strong demand for high-quality coal has massively increased the discount for coal graded 5500 or below. The Australian Financial Review recently estimated that Adani would be lucky to get US$55/tonne for its coal, compared to a Newcastle price of US$100/tonne.

At that price, it’s unlikely that Adani could cover the costs of mining, railing and shipping coal, let alone earn a return on a $2 billion investment.

It’s highly likely, therefore, that this is yet another mirage designed to keep the project alive without committing any real funds. Perhaps Gautam Adani doesn’t want to write off the billions he has already wasted, or perhaps he just doesn’t like admitting defeat. Or perhaps he is hoping to establish enough “facts on the ground” to extract compensation from the Queensland and Australian governments if the project fails to get the new approvals that it needs.

Suppose, however, that Adani goes ahead with the project seriously, raising the disastrous prospect that the entire Galilee Basin will be opened to mining. Such a huge expansion in the global production of coal would virtually eliminate any prospect of holding global warming to 2°C, let alone the 1.5°C needed to minimise the harm from climate change.

At that point, the Labor Party will have to take a stand on the issue, something it has successfully avoided so far. Achieving the Paris goals will require a rapid move away from coal, implying the need for a moratorium on new coalmines as well as the orderly closure of existing mines.

It would be a brave step for Labor to lead the world in announcing such a moratorium. But the current opposition has shown surprising bravery on a number of issues, most notably tax policy, and has suffered no apparent electoral costs — rather the reverse. The majority of Australians want action on climate change and understand that the economic benefits Adani has long promised are illusory. Let’s hope that this economic and ecological disaster can still be stopped. •

The post Another Adani alarm appeared first on Inside Story.

In Australia, Barry Jones raised the issue the following year in his book Sleepers, Wake! As science minister in the Hawke government he set up the Commission for the Future which, among other things, produced a report on the greenhouse effect that received international recognition. Later in the decade, the United Nations established the Intergovernmental Panel on Climate Change, or IPCC, which produced its latest report this week.

Hawke’s environment minister, Graham Richardson, an archetypal NSW Labor-right exponent of “whatever it takes” (which was also the title of his memoirs), had much more political clout than Jones. But in 1989 he couldn’t persuade cabinet to adopt his proposal to stabilise emissions at 1988 levels by 2000 and reduce them by 20 per cent by 2005. Treasurer Paul Keating won the day by arguing that the economic costs were too high, and so the Coalition under Andrew Peacock went to the 1990 election with a stronger climate target than Labor’s.

In 1990, British prime minister Margaret Thatcher gave a classic exposition of the precautionary principle at the second World Climate Conference in Geneva. “The danger of global warming is as yet unseen, but real enough for us to make changes and sacrifices, so that we do not live at the expense of future generations…” she said. “Any of the precautionary actions that we need to take would be sensible in any event. It is sensible to improve energy efficiency… and to develop alternative and sustainable sources of supply; it’s sensible to replant the forests which we consume; it’s sensible to re-examine industrial processes; it’s sensible to tackle the problem of waste.”

True to conservative principles, Thatcher saw these policies as “a sort of premium on insurance against fire, flood or other disaster.” As she concluded, “It may be cheaper or more cost-effective to take action now than to wait and find we have to pay much more later.”

Among other things, Thatcher set up the Hadley Centre, which became a world leader in climate research and much later became the target for a largely unfounded attack by climate sceptics. This was an era before climate science was hijacked by commercial interests, who recruited big “C” conservatives to turn the issue into a political and ideological crusade against change.

Like the boiling frog, we have become so used to the planet slowly warming that we barely notice the harm it has caused already and are oblivious to the accumulating evidence of much worse to come. “The next few years are probably the most important in our history,” says Debra Roberts, a South African scientist who co-chaired one of the working groups that produced the latest IPCC report. The context is the report’s finding that limiting global warming to 1.5°C would require “rapid, far-reaching and unprecedented changes in all aspects of society.” Although we have left it very late, in other words, an unprecedented global effort could still avoid some of the worst consequences of climate change.

This is the considered view of the hundreds of scientists whose work has been distilled by a UN panel that critics say errs on the conservative side in its findings. The contrast with the nothing-to-see-here insouciance of our prime minister could not be starker.

In a pre-emptive strike a few hours before the release of the IPCC report, Scott Morrison assured Alan Jones that Australia would take no notice of its findings. “No, we’re not held to any of them at all, Alan, nor are we bound to go and tip money into that big climate fund [to help developing countries] — we’re not going to do that either. So I’m not going to spend money on global climate conferences and all that sort of nonsense.”

In a moment of rare courage for a politician under shock-jock fire, the prime minister resisted Jones’s urging that Australia follow the US lead and withdraw from the Paris accord. His reasoning was that it was the Coalition government, under Tony Abbott, that had signed up (“and when Australia puts its word to something, it means something”), that climate was an important issue for countries in the Pacific, and that our commitment to cut emissions by 26 per cent from 2005 levels by 2030 would have no impact at all on jobs or electricity prices. For good measure, he repeated that Australia would meet its Paris commitment “in a canter,” despite the expert advice, including from his own energy department, that this is impossible under the present trajectory of rising emissions.

This is what passes for leadership these days: meeting the demands of an undisciplined Liberal Party and ignoring the national interest. Morrison no doubt figures he won’t be around in 2030 to be held accountable for his irresponsible statements and the lack of any policy to deal with climate change beyond 2020.

It is not that the world has done nothing to address the issue over the past twenty or so years. It is simply, as the IPCC report makes clear, that we have not done enough. Despite most countries committing under the Paris accord to limiting global warming to below 2°C, the actions they have taken would see temperatures rising by 3°C by 2100 and more thereafter. This would greatly increase the risk of reaching tipping points such as the melting of the Antarctic and Greenland ice sheets, which would cause sea-level rises of many metres over hundreds or even thousands of years.

The report warns that these still could be triggered with temperature rises limited to 1.5°C–2°C. But a 1.5°C ceiling could reduce sea-level rises by ten centimetres by 2100, which may not seem much but which the IPCC says would protect ten million people in low-lying areas.

We need to take other comforting crumbs where we can find them. For example, coral reefs would decline by a mere 70–90 per cent with 1.5°C warming, compared to “more than” 99 per cent at 2°C.

The IPCC calculates that the use of coal for electricity generation would need to be reduced to close to zero by 2050 to limit warming to 1.5°C. That this is a bridge too far for the leaders of our main parties is clear not just from the outright rejection of such a target by the Liberals and the Nationals but also by the equivocation of Bill Shorten, who told journalists on Monday that “we are not saying that there won’t be fossil fuel as part of our energy mix going forward.”

But there is some good news: Australia has the capacity to meet not only its present 2030 target in a canter but also Labor’s more ambitious goal of a 45 per cent reduction. That is the view of a report last month by Monash University’s ClimateWorks Australia, which found that Australia has the potential to cut emissions by 55 per cent on 2005 levels by 2030.

Between 2009 and 2013, the report points out, we reduced greenhouse gases at a rate close to what was needed to achieve net zero emissions by 2050. That included most of the brief period when Australia had a price on carbon, and a time of large reductions in emissions from land clearing.

“Australia enjoys world-leading renewable energy resources, along with potential to store carbon in the land,” says the report. For example, electricity-sector emissions could be cut by 68 per cent by 2030 with a renewable energy share of 70 per cent. Emissions from the land sector, mainly through revegetation and afforestation, have the potential to be reduced by 103 per cent by 2030 — broadly the rate between 2005 and 2016.

The ClimateWorks scenario looks optimistic on present policies and trends. To take just one example: unlike most developed nations, we still have no fuel-emission standards for vehicles, nor any government incentives for electric vehicles.

The success of far-right leaders, most recently in Brazil, doesn’t augur well for further progress. Countries that have led the way in the past under conservative leaders, such as Britain and Germany, have been backsliding or showing signs of it.

We can only hope that leaders will rediscover the art of leadership and the will to act in the broader interest. •

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The government wants a deal the Coalition can unite behind — one so nuanced that both its realists and its climate change deniers can support it — while convincing the public that the policy will actually reduce prices, improve network reliability and reduce emissions.

To achieve that, the plan has to win the support of the electricity industry — which, by and large, it has done — the states, which appear to be holding out, and probably the federal Labor Party, which is yet to declare its hand.

Long negotiations have seen the plan’s details change repeatedly, and there will be more changes ahead. The silliest comment being made now is that this is “the only plan on the table.” Yes, this week, it is. But before that we had many other plans — the Finkel report’s clean energy target, the Climate Change Authority’s emissions-intensity scheme — as well as many variations of this one, with more to come.

The negotiations that really matter have been within the Coalition. They have been between the Liberal Party and the Liberal Party — and, of course, the National Party. The Turnbull government and its Energy Security Board have made numerous concessions to try to win over those in the Coalition ranks who are opposed to doing anything to tackle climate change. The most important of these concessions is that it offer no concessions to Labor.

So far, Malcolm Turnbull and Josh Frydenberg have offered no significant compromise to win the support of federal Labor or the Labor-run states. That may change in the weeks ahead. But right now it is asking them to give bipartisan endorsement to a deal that has been negotiated entirely within the Coalition, tramples on Labor’s own policy, and would mean that Australia effectively abandons our share of the Paris agreement to cut greenhouse gas emissions worldwide.

There are differences within Labor ranks over what to do, at least ultimately. In the short term, they are playing for time, and demanding that the Commonwealth decide its position first — in the Coalition party room — before asking the states to come on board.

The Turnbull government is insisting that the states agree to the plan first before it goes to the Coalition party room — where it could well be changed. The Labor states, not unreasonably, are insisting that the Coalition should decide first what its policy is, before putting it to them.

Who will give way? Would the government dare to put the plan before the party room before it has got the Labor states to commit? If not, why not?

If it does intend to make concessions to try to get a genuine bipartisan agreement, this might be the best time to reveal them. Otherwise, why expect Labor to endorse a policy that is radically different from its own — above all, one that would cut emissions from the electricity sector by only 26 per cent between 2005 and 2030 — which it had no say in drafting?

The consequences matter. In Paris in 2015, the Abbott government committed Australia to cut its total emissions in 2030 by at least 26 per cent from 2005 levels. While Tony Abbott wants Australia to now walk away from that, the Turnbull government still officially upholds that pledge.

But the cheapest place to cut emissions is in the electricity sector, where old emissions-intensive coal-fired power stations can be replaced with emissions-free energy from the wind and the sun — backed up by batteries and hydro storage. It would be prohibitively expensive to make similar cuts in Australia’s other major sources of emissions: agriculture, transport, industry and mining.

The emissions target for the NEG means that Australia would effectively abandon its commitment under the Paris agreement. If emissions in the electricity sector are to fall by only 26 per cent, it will be impossible to meet our commitment to reduce total emissions by 26 per cent.

The government’s own figures show how Australia’s emissions have progressed since 2005:

Emissions from electricity generation in the second half of 2017 were about 10 per cent below 2005 levels and declining. But combined emissions in industry, transport, agriculture and mining were up 15 per cent and rising. It is completely unrealistic to expect that they can decline at the same pace as emissions from electricity generation — as the NEG targets imply.

Those who argue for the NEG as it stands — all the business groups and the mainstream media — are effectively calling on Australia to abandon its Paris commitment. They never admit that, and nor does the government, but it follows inescapably. How could Labor agree to that?

Well, Labor too is in the business of trying to win elections. And it knows that, above all, Australia is fed up with the climate wars that have divided us for the past decade. Ordinary Australians and the electricity industry just want an agreement, any agreement, that will end the debate, and allow us to move on to something else.

If the government refuses to compromise, Labor’s feet will be held to the fire. If it stands up for the Paris agreement, it will be attacked by the government and the mainstream media for wrecking the so-called “experts’ plan” to end the climate wars — and that could lose it seats and support to the Coalition.

If it accepts the NEG in its current form and effectively abandons the Paris agreement, it will be seen as betraying its supporters, like Kevin Rudd did in 2010 — and that could lose it seats and support to the Greens.

The short-term political equation is that Labor can lose seats to the Greens and still form government. But if it loses seats to the Coalition, it risks its chances to form government.

The longer-term political equation is that if Labor forms a government after accepting the Coalition’s emissions target written in law — as the Coalition is demanding — it will have to try to get the Senate (and possibly the states) to amend that law after the election. That would be difficult, even impossible; as I have argued elsewhere, Labor is likely to face an unfriendly Senate even if it wins comfortably in the House. But it is unrealistic to think that Labor can govern successfully with this policy.

If the Coalition can get the NEG past the Labor states, past the party dissidents, past the Senate, and then win re-election, we would have three years of the policy security its Energy Security Board has promised.

But energy companies will not make long-term investments if they are secure under only one side of politics. Long-term policy security — and the consumer savings the board predicts will flow from that — will come only if there is genuine bipartisan agreement.

This policy is not it. If the Turnbull government wants the NEG to have genuine bipartisan support, it has a number of options to make changes to achieve that. So far, it has rejected the lot.

● The only way to provide certainty to investors is through a bipartisan agreement on Australia’s overall emissions target for 2030. There is room to do so, because Labor’s leaders must be aware that their current target of a 45 per cent reduction in emissions is quite unrealistic. Instead, the Turnbull government has moved the other way, trimming Australia’s Paris commitment to reduce emissions from 2005 levels by “26 to 28 per cent” by 2030 to just 26 per cent.

● The government could have asked Labor to accept Australia’s Paris target, and in return set a realistic target to reduce electricity emissions by 2030 — say, by 45 to 50 per cent — to ensure it is met. Instead, the Coalition has pledged to reduce electricity emissions by just 26 per cent. Since it is not possible to reduce other emissions by 26 per cent, that ensures that Australia will not meet its Paris commitment.

● It could have offered Labor a mechanism that would allow the government of the day to change the emissions target, by setting it as a regulation. Instead, it is insisting that its target be adopted in legislation, so that a future government would need to pass another bill through both houses to amend it.

● It could have allowed state governments to set their own renewable energy targets to provide further emissions reduction. Instead, it insists that the NEG disregard these targets, making them useless, because lower emissions in one state would allow higher emissions in another.

This is not minor nit-picking. The Paris agreement is the most important international agreement of recent years. The commitments each country made are crucial to achieving progress, however inadequate, towards reducing the pace and extent of global warming. Australia already produces the highest per capita emissions of any country outside the Middle East. We cannot walk away from our pledge.

I have repeatedly defended the government’s commitment to cut our emissions by 26 to 28 per cent against criticism from the left that it is too small; in fact, it requires us to halve our per capita emissions in a generation. Yet with each year showing how real the threat of global warming is, it is bizarre that the target is now under attack, openly or surreptitiously, by those who wrote and supported it.

It is misleading to call the NEG “the experts’ plan.” Malcolm Turnbull created the Energy Security Board to sit above the three existing electricity agencies, and brought in his old colleague Kerry Schott, a veteran problem-solver who worked with him for years at the Turnbull Wran merchant bank, to come up with a fix that would meet his political objectives. And that she has done.

The plan is tailored to meet political objectives. And whether it can achieve its professed goals — knocking $150 off the average household electricity bill, guaranteeing electricity supply, and lowering emissions — is debatable for prices and security, and clearly impossible for emissions, where its own modelling predicts it will have virtually no impact.

The technical debates about the merits of the NEG are another story, which I will not enter here. It is certainly true that the plan now has consensus support from the electricity industry, but it is far from clear how great an improvement, if any, it will actually make. The supposed $150 per household saving appears to have been plucked out of thin air. The report’s claim that most of it will come from “unleashing new investment” is contradicted by its own modelling, which forecasts minimal change to generation capacity compared with what would happen anyway.

I can only refer those interested to the best of the criticisms: by Victoria University energy analyst Bruce Mountain in the Financial Review (paywall), by Giles Parkinson in Renew Economy, and by Simon Holmes à Court in the same publication today.

The case for the scheme has been put best by Australian Industry Group chief executive Innes Willox today in the Age. But his argument that the Labor states should just pass it now and try to fix it later really defies the political law of gravity. The time to fix it is now, before it becomes law. It would be much harder to do so afterwards.

The government has rejected other plans that were once the only game in town: the Finkel report’s clean energy target, and the emissions-intensity scheme for the electricity industry (Labor’s preferred option, and in my view the best politically plausible option that has been put on the table). And, of course, it rescinded Labor’s carbon tax, which by now would have seen an emissions trading scheme covering most of the economy.

The government rejected all of these because of opposition from party hardliners. For the same reason, it has refused to compromise with Labor now, even though it knows that without that, it cannot achieve a genuine, lasting bipartisan agreement that will unlock investment.

No company is going to build new coal-fired stations, or gas-fired stations unless gas prices fall. We now have three million homes producing solar power or hot water on their rooftops, but only a fraction of those producing solar power can store it for when it’s needed. And across the country, solar and wind farms have gone up far in advance of the batteries or pumped hydro plants that could store their power to use at peak times. Those crucial storage investments will be in doubt without a bipartisan blueprint to meet Australia’s Paris commitment.

So far, the Turnbull government has not even tried to reach a genuine bipartisan deal. The inescapable conclusion is that the Coalition in its current state is incapable of negotiating an agreement. If Frydenberg offered Labor a deal it could accept, that deal would be rejected by the Coalition’s own backbench.

That will not change until the Liberals and the Nationals have leaders like Gough Whitlam or Bob Hawke who are prepared to take on those in their own party who are blocking the way to a realistic policy. There is no sign of that now. It might be years away. ●

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Thankfully, much of the territory covered in the debate is now common ground between the Coalition and Labor. But key gaps remain, and everyone wants a say in the outcome. A final bipartisan agreement on the structure for Australia’s energy and emissions policies is within reach — but it does require common sense to prevail, especially on the Coalition side. In energy policy, that’s no certainty.

The outcome matters for three reasons. First, in just ten years, electricity and gas prices for Australians have doubled. From being among the cheapest in the Western world, they are now among the most expensive. Electricity prices are the reason battlers are angry about the rising cost of living. And those prices are threatening the existence of our energy-intensive industries, which set up here because we had cheap power and now find it is so expensive it could put them out of business.

Here’s the evidence. Since the birth of the National Electricity Market, or NEM, almost twenty years ago, power prices have risen by 232 per cent nationally — and by 100 per cent in real terms, relative to the prices of other goods and services.

Prices have risen far higher in the east coast cities, where the NEM operates, than in Perth and Darwin, where it doesn’t (or in Hobart, where it’s made little difference). Moreover, the more privatised a city’s electricity system is, the more its prices have risen. That is not what the regulators or the politicians want to hear, but it is what the evidence is telling us.

The contrast between east and west shows that the national market has been a failure. We want electricity and gas prices to fall substantially. And two reports by government agencies in recent days propose reforms that they argue will do that.

The second reason why an agreement matters is that global governments, including Australia’s, have promised to reduce or reverse emissions growth to keep global temperatures no more than two degrees above pre-industrial levels. But most governments, including Australia’s, have shrunk from implementing policies that would deliver the targets they signed up to.

Tony Abbott is calling on Australia to abandon his pledge in Paris three years ago to reduce our greenhouse gas emissions in 2030 to 26–28 per cent below their 2005 levels. But the Turnbull government has already effectively abandoned that commitment by promising to reduce electricity emissions by only that amount — although they are by far the easiest and cheapest emissions to reduce and so could support greater reductions.

The government’s own figures show that Australia’s greenhouse gas emissions grew from 516 million tonnes to 534 million tonnes between 2013 and 2017. To meet the Paris target, emissions would need to shrink to roughly 450 million tonnes by 2030. There is no sign of that happening. Last year, emissions grew by 1.25 per cent — despite the closure of the Hazelwood power station, Australia’s single worst polluter.

Of the two latest government reports — from the Australian Competition and Consumer Commission and the Australian Energy Market Operator — one sets out a road map for meeting the government’s modest target while the other, for all its strengths, ignores the target and proposes a change that could threaten even that.

The third reason is energy security. The only power plants being built in Australia are wind and solar; they rely on nature, and nature does not commit to supply power when we need it. Look ahead, and in a renewables-based future we will need to also meet our energy needs when the sun is not shining and the wind is not blowing. For the right, that means new coal-fired stations. For the policy-makers, it means a mix of existing coal and gas stations, batteries to store solar and wind energy, hydro power using pumped storage, and contracts with large customers or groups of customers to cut off their power when a crisis looms.

That’s the context of our long, bitter energy policy debate. It is about to come to a head, with environment minister Josh Frydenberg trying to get the states (and, in effect, federal Labor) to sign up next month to the government’s plan for a National Energy Guarantee, or NEG, as a policy framework for meeting whatever emissions targets the government of the day decides.

And it’s the context for the mob of reports that have assembled in recent days. Last week began with a warning from the Grattan Institute: “Get used to high energy prices.”

Grattan analysts Tony Wood and David Blowers argue that while wholesale (generators) electricity prices have doubled in two years, the reasons were largely beyond government control, and while some reforms would help trim them, any lowering of prices will be minimal.

That message barely had time to register before the Australian Competition and Consumer Commission released its diagnosis of why Australia’s electricity has become so expensive. The ACCC proposes reforms it says would slash up to $420 a year off the high electricity prices we’ve just been told to get used to — including a very conditional government guarantee to help new generators into the market.

“PM Weighs Coal Fix for Energy Wars,” shouted the Australian, reporting that Nationals MPs and Tony Abbott saw the report as calling for new coal-fired (or “baseload”) power stations. No, replied Malcolm Turnbull, my government is technology-neutral. And ACCC chairman Rod Sims said the firms that had raised the guarantee idea with him were working on potential gas generators or pumped storage, not coal.

Then the Australian Energy Market Operator, or AEMO, issued its own “integrated system plan,” telling us we could save billions of dollars a year by focusing on upgrading transmission links between the states to provide future energy security, rather than building new generation powered by fossil fuels.

“King Coal to Rule for 20 More Years,” shouted the Australian. No, the AEMO plan foresees no new coal-fired station whatsoever. It merely suggests that some existing ones be renovated so that they last fifty years rather than thirty or forty. In twenty years’ time, on its “neutral” projection, only 18 per cent of east coast electricity will be generated by coal. Some kingdom.

We could also throw in the International Energy Agency’s annual World Energy Investment roundup, released this week, which reports that commitments were made last year to build just 31 GW (gigawatts) of new coal-fired generation — down by almost two-thirds in two years from the 87 GW approved in 2015. China still accounted for half of that, though its investment fell even faster than the rest. India committed to build just 5 GW, equivalent to two Bayswaters. The aversion to coal is worldwide.

The AEMO blueprint is a key document, since AEMO coordinates what we call the National Electricity Market, although it actually covers less than three-quarters of Australia’s electricity use (essentially, the eastern seaboard, Tasmania and South Australia). It is effectively a detailed map of how we will achieve our goals of cleaner generation and (hopefully) cheaper electricity without risking our energy security.

AEMO has four key things to tell us — and the politicians.

1. From here on, almost all electricity investment will be in renewables — mainly solar, but also wind and hydro, including pumped storage and battery storage for the solar and wind plants (as will be required under the NEG). But it suggests that, to ensure energy security in future, New South Wales could use a second gas unit as well as the 300 MW station AGL is planning to build as part of its suite of new generation to replace Liddell.

2. To further ensure security while keeping prices down, owners of the newer existing coal-fired plants should plan to renovate them so they can keep running until they are fifty years old. As AEMO’s chief executive Audrey Zibelman puts it, it’s like refitting an old car because it’s cheaper than buying a new one.

3. We could save a lot of money by upgrading transmission links between the states and, when local electricity production falls short, importing surplus electricity from interstate rather than building expensive but rarely used power stations as backups. Links between all states in the grid would be expanded massively over the next twenty years.

4. Solar and wind energy will become the mainstay of Australia’s electricity generation, and to minimise transmission costs, suitable areas in each state should be defined as Renewable Energy Zones and their transmission links upgraded.

And coal? That issue has been dealt with already by the market. No coal-fired station has been built in New South Wales or Victoria this century, and none in Queensland for the past decade. No one is planning to build one. The professionals know that the world will have to reduce carbon emissions, and investing in coal would be a big financial and environmental risk. And while it might be cheap to keep an old coal station going as long as you can, building a new one is another matter.

The AEMO report does the sums, and comes up with the same conclusion: “The least-cost transition plan is to retain existing resources for as long as they can be economically relied on,” it says. “The delivered cost of energy from wind and solar in combination with storage from pumped hydro and batteries is anticipated to be lower than generation based on new coal or natural gas when the existing coal generators retire.”

It goes on: “The analysis projects the lowest cost replacement… will be a portfolio of resources including solar (28 GW), wind (10.5 GW), and storage (17 GW and 90 GWh, or gigawatt hours), complemented by 500 MW of flexible gas plant and transmission investment. This portfolio in total can produce 90 TWh [terawatt hours] net of energy per annum, more than offsetting the energy lost from retiring coal-fired generation.”

In the next twenty years, the market operator sees the capacity of coal-fired generators in the grid shrinking from 23 GW to 9 GW, as most of the old stations reach the end of their working lives. In New South Wales, Eraring, Bayswater and Vales Point would follow Liddell into retirement. In Victoria, Yallourn would follow Hazelwood out, while Queensland would farewell Gladstone, Tarong and Callide B. Even by 2030, and without further policy shifts, coal would produce less than half the power in the grid.

It’s a measure of Audrey Zibelman’s political skills that she has produced a report that seems to have compromised nothing important yet has been greeted warmly by everyone from the coal-huggers to the Greens. Just sample the headings on these press releases:

Josh Frydenberg: “AEMO Backs Turnbull Government’s Energy Plan.”

His opposition counterpart Mark Butler: “AEMO Integrated System Plan Backs Labor’s Energy Vision.”

The Greens’ Adam Bandt: “AEMO Report Shows Only 6 Coal-fired Power Stations Will Be Left.”

Ms Zibelman clearly has a talent for politics. If she ever gets bored with the AEMO, perhaps she should move into politics herself and become our peacemaker. But then, she’s American, and there is that small problem of section 44(i).

If Zibelman is a diplomat, Rod Sims is the tough cop on the beat. The chair of the Australian Competition and Consumer Commission probably has the biggest workload of any job in Australia, as the frontline executive making decisions on a wide range of corporate policy issues, crimes and misdemeanours on many fronts. The job of governor of the Reserve Bank is a breeze by contrast.

It’s a good thing that Sims has a deep-seated faith in markets, because a lot of us lose that faith when confronted with evidence of failure as serious as that of our National Electricity Market. Sims has not lost faith: his 398-page report is a searing analysis of why the market failed, but also offers fifty-six recommendations on how it can be put right.

Its assessment of what went wrong is not novel: that ground has been well-tracked already. But the ACCC does a thorough job of marshalling the evidence — although it fails to ask why it is that the NEM, dominated by privatised firms competing in an elaborate market, has done so much worse by its customers than the government monopoly that both sides of politics have preserved in Western Australia.

The report is dense and full of information and opinions — albeit within significant, self-imposed limitations. A reader can hardly be unimpressed by its thoroughness, its focus on the interests of electricity consumers and, in some areas, the boldness of its proposed reforms.

The ACCC’s own assessment is that those reforms would rapidly and significantly roll back the stratospheric price rises of the past decade, within three years saving the average east coast household between $291 and $419 a year, depending on which state you’re in. For comparison, that’s about the size of the tax cut the government is promising most voters.

Its key recommendations are to:

1. Instil more competition into the oligopoly of electricity generation. Sims doesn’t propose to force the big three — AGL, Origin, and Energy Australia — to divest any of their generators, but he wants to ban them from taking over other generators where they already have 20 per cent of the state market, and to expand the regulators’ powers to tackle market manipulation.

2. Offer a government guarantee for ten years to improve the bankability of “appropriate new generation projects which meet certain criteria”: they must be new players, have some big customers signed up, and be able to provide a reliable product (solar and wind projects must have backup generation, that is).

3. Require government-owned transmission networks to write down the value of their assets, which are seen as excessive, thereby reducing the return the regulator allows them and reducing prices by at least $100 a year. It is not clear why the same obligation was not proposed for the privately owned networks in Victoria and South Australia, where electricity prices have risen fastest of all.

4. Encourage the rollout of “smart meters,” and ensure that the regulatory framework allows consumers to use them to shift their electricity consumption to times when it’s cheap.

5. Abolish subsidies for rooftop solar energy by 2021, on the grounds that retail prices have fallen substantially. We’ll come back to that.

6. Require electricity retailers to adopt a default price to be set by the Australian Energy Regulator (an arm of the ACCC), and then offer consumers discounts from that price alone. They could still compete on price, but consumers would no longer be bamboozled by being offered discounts from an incomprehensible “standing offer.”

Most of the response to the report has focused on its plan for a government guarantee to generators — which, as mentioned earlier, does not specify either coal or “baseload” (twenty-four-hour) generators. Sims himself says he doubts that it will ever be needed. Possibly that’s because the conditions the ACCC sets are so tight that only a small field of applicants could qualify — and then the proposed guarantee of $45–$50 per megawatt hour would not be enough to make it worthwhile.

The default price may be a more significant change, and many of us would welcome it with relief. It comes with other proposals designed to restore to consumers the power to make their own sensible decisions — which is impossible at the moment, because the retailers’ various discounts from so-called standing prices have become an unnavigable labyrinth.

The ACCC is convinced that government-owned power companies, especially in Queensland, have been the main sinners in manipulating the market to push up prices. But that is contradicted by the evidence in our earlier chart, which shows that the biggest price rises since the NEM began in December 1998 have been in Melbourne and Adelaide — in the two states that fully privatised their power networks — while the smallest have been in Perth and Darwin, which are not in the NEM, and where electricity is still supplied by government.

John Quiggin, who has written extensively on environmental economics and privatisation, as well as being a former member of the Climate Change Authority under governments of both sides, has delivered a scathing verdict in the Guardian on the ACCC’s apparent ideological bias. It would be useful for public debate if he could give us a more detailed argument — and if Sims addressed those issues in response.

The ACCC forecasts that if its recommendations are implemented, power prices would fall by roughly 25 per cent. Others are deeply sceptical about this, and about earlier claims by the government’s Energy Security Board that its reform blueprint could cut $400 a year from household power bills. I hope it’s true, but I confess I’m with the sceptics.

One problem is that the report focuses solely on cutting electricity prices. By contrast, the earlier reports by chief scientist Alan Finkel and the Energy Security Board had a broader perspective. They aimed to meet three goals simultaneously: lower electricity prices, greater security of supply, and lower emissions. The ACCC focuses on the first goal, gives a nod to the second, but ignores the third.

Given the government’s destruction of the carbon tax/emissions trading scheme, the little progress Australia has made towards reducing electricity emissions has come mostly from the renewable energy target. It is still the only federal policy driver for lower emissions. Yet the ACCC report, after a one-sided examination of the costs of the scheme but not its benefits, proposes ending the RET nine years early, by 2021 — without any examination of the potential impact.

It also proposes that state governments shift the cost of their solar feed-in tariffs to the state budget so they are paid by taxpayers rather than electricity consumers. But consumers are taxpayers, so what’s the benefit in that?

Its figures imply that the RET subsidy for rooftop solar costs consumers on average $17.50 a year — about 1 per cent of their electricity bill — and that will wind down to very little as we approach the scheme’s end date of 2030. The subsidy is now small, will become tiny, and then will disappear. For consumers, it’s barely noticeable.

But for those installing rooftop solar, it’s a vital incentive. The report quotes a recent estimate by consultants Green Energy Markets that the subsidy in 2020 will pay almost a third of the cost of buying a typical 5 kW rooftop solar power system. Think about that.

If that’s right, then removing the subsidy would lift the effective cost of solar power systems by almost 50 per cent. That is one hell of a cost increase to be proposing in a report that aims to make electricity cheaper. And bear in mind: the highest concentration of solar panels is not where wealthy people live, but in the bush and in the new outer suburbs, where battlers live, and dollars matter.

In an otherwise good report, this is an odd exception: sloppy policy analysis that ignores the impact of its own proposal.

Politically, both reports have been greeted warmly. The main criticism has been of the ACCC report by the Greens and environmentalists. Amid the bipartisan canter towards the National Energy Guarantee, their main concern is that the government’s target for reduced emissions from electricity generation — almost a third of the nation’s emissions — is only 26 per cent by 2030, the same target it has adopted for our total emissions.

That is a surrender in the fight to reach the Paris target. We simply can’t cut emissions significantly in agriculture, and it is relatively expensive to cut them in transport and industry. Electricity is where emissions can be cut meaningfully at low cost. We can close down an old polluting power station like Hazelwood or Liddell and replace it with zero-emissions wind and solar, backed up by batteries, pumped storage and demand response.

When Treasury modelled the emissions trading scheme, it estimated that 60 per cent of the emissions reductions would be in electricity, because that is where it is cheapest to reduce them. Where is the Turnbull government proposing to reduce them instead?

The answer is that it isn’t. It knows it won’t still be in power in 2030 to answer for its actions, so it is upholding our Paris commitment on paper while abandoning it in practice. Its plan B is to hope that other countries do more than they have to, so we can buy the rights to some of their surplus achievements and present them as ours. Every previous government ruled that out.

Australia still generates the biggest greenhouse gas emissions per head of any country outside the Middle East oilfields. Those emissions continue to rise, along with electricity prices. We are being asked to believe that under the NEG, and guided by these reports, both will soon start falling.

That’s a lot to ask us to believe. ●

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The first thought to spring to mind might echo The Castle’s Darryl Kerrigan: Clean India? They’re dreaming! But the second thought ought to be that we might learn from India’s experience of three years of costly, multi-pronged attempts to make the country cleaner.

Perhaps the most germane lesson for Australia right now relates to incineration of waste to generate electricity, known as Waste to Energy, or W2E. Japan, Singapore and countries in northern Europe have burned waste for years using high-combustion incinerators. Waste is reduced to about one-tenth of its original bulk, the ash can be used for industrial purposes, and electricity can be generated in the process.

In Singapore, a totally urban, densely populated island, high-combustion incinerators at the city’s extremities burn up to 8000 tonnes of waste a day. The ash gets taken by barge to a foreshore where it’s used to reclaim land from the sea and expand Semakau Island. The main purpose of the incinerators is to keep Singapore clean and tidy.

But complete-combustion incinerators are expensive. The largest, at Tuas South on the west of the island, cost S$890 million in 2000 (about A$700 million in those days). Incinerating up to 3000 tonnes of suitable waste a day, it is capable of producing eighty megawatts of power, 20 per cent of which runs the plant; the rest — enough to serve as many as 65,000 households — is sold into the grid.

These big, expensive plants also need a regular supply of dry, high-calorie fuel. A plant like Tuas South is the magnet for up to 300 ten-tonne truck journeys each day. That’s a lot of noise, fuel, and wear and tear on roads.

Perth looks like having Australia’s first W2E plant, estimated to cost $400 million and start operating in mid 2021. It will handle about 1000 tonnes of waste a day to produce forty megawatts of electricity. At the end of May, Australian Paper proposed to build a $600 million W2E incinerator next to its paper mill in the Latrobe Valley. The target would be a whopping 225 megawatts of electricity.

In certain conditions, complete-combustion incinerators have a place. But they are not the magic wand that pressured politicians, whether in India or Australia, would like to believe they are.

Here, the lessons from India’s clean-up campaign are relevant and cautionary. When large sums of money began to be directed into public sanitation, various operators with bright ideas came forward. In the most unhappy circumstances, local governments were sold quick fixes that did not work. One council contracted for a “moving incinerator,” hitched to the back of a truck, that burned more fuel than it did garbage and was abandoned within months.

Incineration works well in Singapore (and Japan and northern Europe), and it looked a tempting option for India. But as well as being expensive, high-combustion incinerators are fussy, and not just about their diet. If their temperature falls below 850°C, it has to be built up with external fuel, usually diesel. Combustion below 850°C releases toxic dioxin molecules into the air. But if material is burned above 850°C, the molecules break down into their constituent atoms (carbon, chlorine, oxygen and hydrogen), which can be captured and neutralised. The downside is that high-combustion incinerators need relentless maintenance.

A lot of waste gets burned in India, largely through unregulated street-level and farmyard burning, and it pollutes the air. The idea of high-combustion burning appealed to Indian policy-makers, as it does to Australians, because it looks like a way of fixing waste problems and making electricity in the process.

But India’s most recent experiment, the plant at Okhla in the jam-packed National Capital Territory of Delhi, has revealed how dicey high-combustion incineration can be. Its owners blame its failures on the poor quality waste — unsorted, wet, low-calorie and unreliably supplied. Critics say the technology was not up to world standards, the location is too close to densely packed dwellings and the maintenance is inadequate to prevent health-impairing air pollution.

But Delhi is desperate. It has a population of eighteen million in an area of 1500 square kilometres, one-seventh the size of greater Melbourne. A second W2E plant, costing around A$66 million, has been on the drawing board for some time.

Perhaps the clearest legacy of the Clean India campaign is a growing awareness that decentralised waste management works best. That’s not easy. It requires local involvement, motivated people and governments prepared to risk slow, relentless culture-building.

It’s possible, for example, to make both energy and good compost at the same time. Biomethanation stations require a small plot of land to collect wet waste from a neighbourhood. The technique has been around for more than a hundred years — it was invented at the Matunga Leper Asylum in Mumbai in the 1890s — but modern materials make it more flexible. Wet waste is allowed to ferment to release gas that drives a turbine and feeds electricity into the grid; the benign, leftover sediment makes excellent compost.

Stations like these need regular management. In India, labour costs are not the problem. In Australia, they might be.

But the general lesson is that decentralised waste management works. It limits transport costs, road congestion and pollution. New processes hold promise to be able to remake plastics and metals in clean mini-factories that don’t need much more space than a double garage. Such technologies are being trialled by a team under Professor Veena Sahajwalla at the University of New South Wales.

Decentralisation is possible and effective, but it’s hard to begin. And it doesn’t provide the quick fix that worried authorities are desperate for. But quick fixes, as we’ve seen time and again, can turn into prolonged fiascos. •

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Outwardly, at least, Gupta himself has adopted some of this casual culture. Speaking in his Sydney office, he wears a white shirt, dark blue trousers, a light blue jacket and R.M. Williams riding boots. Since he bought the failed Whyalla steelworks company Arrium out of administration six months ago, his family has moved to Australia. They live in Sydney’s eastern suburbs, where his children attend private schools. “In a short space of time, it has become home,” he says. “We have had a very accepting reception.”

But Gupta’s business trajectory in Australia has been anything but casual. A month after buying the steelworks through his company GFG Alliance, he acquired a majority stake in Zen Energy, an Australian solar energy and battery storage company, then chaired by the economist Ross Garnaut. Through the renamed company, Simec Zen, Gupta plans to cut the steelworks’ energy costs by installing solar and battery technology that will feed into the national energy grid as well. “The energy investment is a key aspect,” he says.

He is also embarking on a pumped-hydro storage project, to be built in a disused pit in the adjacent Middleback Ranges among iron ore mines that came with the steelworks sale. And less than four months after he acquired Zen, he bought from resources company Glencore a mine in New South Wales producing coking coal, another steelmaking ingredient.

“I’ve seen more time lost in political conflict in Australia than in Britain,” says Gupta.

Integration like this is the name of Gupta’s game. He aims to increase the Whyalla steelworks’ output by about a third over the next couple of years, and to integrate sales with those from other steel businesses he has rescued, including in Britain. “It’s a tall order,” he says. “So far, so good. With the right integration with plants outside Australia, it will stack up.”

The pace of Gupta’s operations is almost matched by those of other foreign companies that have flocked to underwrite renewable energy projects in South Australia over the past year. Last March Jay Weatherill, the Labor premier, launched a plan for South Australia to “take charge” of its own energy strategy. His government backed it with $550 million. The trigger was the statewide blackout in September 2016, after a freak storm separated South Australia from the national electricity grid; more blackouts followed in early 2017.

South Australia closed its last coal-fired power station in 2016. Weatherill’s plan encourages investment instead in solar and wind renewable energy sources, a new government-built gas-fired plant and battery storage to stabilise the power system. The plan drew Elon Musk, a Silicon Valley entrepreneur, to install the world’s biggest lithium-ion battery outside Jamestown, north of Adelaide, through his company Tesla. It came on stream in December. Neoen, a French renewables company, now owns and runs the battery in conjunction with its adjacent ninety-nine-turbine wind farm.

Tesla is also building a “virtual power plant” in South Australia to link 50,000 homes with solar panels and batteries. Solar Reserve, an American company, is embarking on a solar thermal plant at Port Augusta, which purportedly will produce enough energy by 2020 to meet all the SA government’s own needs. And Neoen is planning a solar and wind-powered plant at Crystal Brook to produce hydrogen energy for export.

Already, almost half of South Australia’s electricity comes from wind and solar power, the rest mainly from gas. This puts South Australia closer to countries like Iceland, Sweden, Norway and New Zealand in its use of renewables than to Australia as a whole. During the current state election campaign, Weatherill announced an even higher renewables target: 75 per cent by 2025. The Turnbull government has attacked his renewables strategy, blaming it for high electricity prices and unreliable supplies.

But Weatherill hopes the strategy will play well when South Australians vote this Saturday. A recent Newspoll showed that Weatherill’s renewables commitment made 32 per cent of people “more likely to vote Labor” and 22 per cent less likely. (Thirty-four per cent said it would not influence their vote.) Steven Marshall, the Liberal opposition leader, wants to scrap the renewables target and spend money on more connections linking South Australia to the eastern states within the National Electricity Market, where coal-fired power still dominates. The impact of the vote for Nick Xenophon’s new party, SA-BEST, is hard to predict; it is standing candidates in thirty-six of forty-seven lower house seats. But, after sixteen years in power, Labor faces a tight contest.

Whyalla could be a testing ground. When I visited the city two years ago Arrium, the company that then owned the steelworks, had recently gone into administration. After producing steel for sixty-nine years, Whyalla was facing an uncertain future. South Australia’s car factories were also shedding jobs as the last of them prepared to close in 2017. It seemed as if the state’s old manufacturing industries were tottering before the forces of globalisation.

Gupta’s investment has restored a sense of confidence in Whyalla, at least. He supports more energy interconnectors to the National Electricity Market (“Without more, South Australia has a limited role”). But he’s also a champion of the state’s renewables strategy. He has made renewable and low-carbon energy a focus of his manufacturing businesses globally.

His plan to build pumped-hydro power for the Whyalla steelworks has even captured federal attention. The Australian Renewable Energy Agency, the federal body that invests in renewables projects, has offered $500,000 for a pre-feasibility study on this one. (After Julia Gillard’s Labor government set up the agency, Tony Abbott as Liberal prime minister tried to abolish it. Malcolm Turnbull, Abbott’s successor, has kept it going with a reduced budget.)

“Renewable energy is a given for Australia,” says Gupta. “It’s only a matter of time. The next generation will expect it. The country has abundant natural resources of wind and sun. It’s where the world is heading. I think South Australia can become a hub of energy-intensive industries. That will encourage, in turn, more investment in renewables industries.”

He is equally certain that coal, Australia’s second-biggest export industry after iron ore, is in decline. “It may have a future, but not in the generation of power,” he says. “We’re past the turning point for coal. China can’t continue to grow the way it’s doing. Eventually it will plateau, and when that happens it won’t need iron ore and coal from Australia.

“That’s the problem I have with Australia’s resource export model. You could argue that twenty-six years without a recession in Australia means it must be doing something right. That works as long as resources are needed. But all countries have to work hard to innovate. A good thing about Australia is that there’s a lot of innovation at the base, in universities. But it often doesn’t get the commercial support it needs.”

That leads Gupta to offer his observations on what he thinks is holding Australia back. The egalitarian shorts-and-coffee culture encourages him: “You need industry and government to work together when you want to make things happen.” But the political caterwauling between federal and state governments, of the type that has plagued energy policy for years, dismays him. “It doesn’t work. A lot of time is lost in these conflicts. I’ve seen more time lost in political conflict in Australia than in Britain.”

Gupta speaks positively about the state that is now the focus of his Australian investments. “South Australia has too often felt like a poor cousin. Yet Adelaide has all the attributes to be a great city: universities, beaches, culture and great properties. If we can solve energy in South Australia, the state can lead in bringing down Australia’s energy costs, which will attract more industries to invest.” His own investments in Whyalla do not stop at steel. He wants to redevelop its waterfront with a fairground, restaurants and an upmarket hotel.

Gupta is pleased to be investing in Australia at a time when we are forging closer ties with the country of his birth. India is now Australia’s biggest source of immigrants, driven partly by a rise in the number of students from India. “Too many economic opportunities between Australia and India have been missed,” he says. “For Australia, China is today, India is tomorrow.” ●

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But the move wasn’t without its risks. It placed other parts of the treaty in jeopardy, including a guaranteed 50 per cent share of royalties from the untapped Greater Sunrise field. Timor-Leste claimed that Greater Sunrise was substantially (if not completely) in its sovereign waters, and therefore it aimed to get a higher revenue share through new negotiations. Nonetheless, some Australian academics told a Senate committee last year that Timor-Leste had potentially become “the architect of its own demise” by renouncing CMATS and pursuing a permanent maritime boundary.

Their assessment was no doubt made in good faith: the risks of this bold legal strategy were real enough for Timor-Leste. What was more disturbing was how the Senate committee chair embraced the phrase, describing it as “tremendous… most enlightening. ‘The architect of their own demise’ is my favourite statement of the day.” It was an extraordinary remark, given that the Australian government was in fact the architect of the quandary Timor-Leste found itself in. It was unable to pursue a binding maritime boundary decision though the international courts, because Australia had abandoned those jurisdictions weeks before East Timorese independence in 2002. The young nation was instead forced to trigger a non-binding but compulsory conciliation process under the UN Convention on the Law of the Sea, or UNCLOS. This was the first time this mechanism had been used.

It is clear now that the gamble paid off. Timor-Leste has secured a median-line boundary in the Timor Gap, creating a permanent maritime boundary for the first time. This places 100 per cent of the present Joint Petroleum Development Area in Timor-Leste’s sovereign waters, where the prior treaty divides the revenue from existing fields, such as Bayu-Undan, 90–10 in its favour. But with these fields nearing the end of their lives, the as-yet-untapped Greater Sunrise field, worth in excess of $40 billion, has far more significance. Timor-Leste has also achieved a major increase in royalties from this field, up from 50 per cent under CMATS to 70 or 80 per cent, depending on whether the pipeline goes to Timor or Darwin, respectively. While government revenues are only one component of the value, this potentially represents $8 billion to $10 billion in future revenue to Timor-Leste.

Until recently, most Australian foreign policy commentators assumed Australia would forever limit its negotiations to revenue-sharing arrangements, ruling out negotiations over permanent maritime boundaries. Yet this ground shifted rapidly. What caused the turnaround?

There were several factors. One was Labor’s change of policy in early 2016, which committed a future government to renewed boundary negotiations and, if they failed, binding third-party dispute resolution. Though the Coalition government stuck to its determination not to revisit the boundary question, the opposition’s position had an impact behind the scenes, shifting a previously bipartisan consensus.

The next factor was a product of Timor-Leste’s bold legal strategy. When Timor triggered the compulsory conciliation, Australia was forced into an opening gambit to defend the CMATS treaty and its purported fifty-year moratorium on negotiations. This effort failed spectacularly; the five-judge panel (including judges appointed by Australia) found that Australia’s obligation under international law to negotiate a maritime boundary in good faith had survived the treaties with East Timor.

Once the boundary moratorium was found to be ineffective, Australia had no further use for CMATS and acceded to its termination. This dealt a fatal blow to the decades of Australian foreign policy that had sought to delay maritime boundaries until the oil and gas reserves were depleted, because Australia knew its favoured “continental shelf” position, reflected in the 1972 border with Indonesia, was now out of favour under international law.

Australia therefore faced the prospect of an UNCLOS conciliation report that was not binding, but was likely to be highly critical of its position under international law. Australia could have attempted to tough this out, as it had in the past, but other international realities were changing the calculus. In particular, the Australian government’s calls for China to abide by the umpire’s decision in the South China Sea dispute were becoming increasingly difficult to reconcile with its own refusal to negotiate maritime boundaries with Timor-Leste.

This turned the Timor Sea dispute into a major diplomatic liability, not least as Australia attempted to defend allegations of espionage. Pressure then came from the United States in the form of the US House Armed Services Committee’s National Defense Authorization Act, which was specifically amended to encourage resolution of the boundary dispute. The compulsory conciliation process also saw confidence-building measures adopted by both sides, with Australia relieved to see the separate espionage case dropped. Negotiations then proceeded in good faith and in a timely fashion.

Though the final location of downstream processing of oil and gas is yet to be resolved, the outcome represents a major victory for Timor-Leste’s strategy of using the UNCLOS compulsory conciliation mechanism, and a vindication of the role of international law in resolving disputes. The treaty text revealed yesterday brought relatively few surprises, with the  new maritime boundary placing much of Greater Sunrise (roughly equivalent to the country’s 70 or 80 per cent revenue share) in East Timorese sovereign waters. Some lateral or side boundary segments are provisional, pending the location of future laterals established between Indonesia and Timor-Leste in their sovereign waters north of the renegotiated area; but these can only be altered after oil and gas deposits are depleted.

At the moment of victory, however, there is a strong sense that the dispute will continue in another form, with chief negotiator Xanana Gusmão unhappy at the failure to secure a pipeline to the Timorese coast, a development vision he has championed for years. While this vision of a south-coast oil and gas processing hub doesn’t unite East Timorese in the same way as the campaign for permanent maritime boundaries has, Gusmão remains a hugely powerful figure and his words will influence many. Despite this, the treaty represents a major victory for international law in our region and marks the end of a key stumbling block in the Australia–Timor-Leste relationship. •

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But a closer look reveals a lot more good news than bad, with two major developments standing out. The first is an emerging global consensus, encompassing national governments, financial institutions and civil society, that the era of coal-fired electricity generation must end, and soon.

Typifying this trend is the new Powering Past Coal Alliance, made up of national and provincial governments pledged to phase out coal-fired electricity generation by 2030. Launched with twenty members in November 2017, the Alliance expanded rapidly to include major businesses, and now has nearly sixty members. Its government members include Britain, Canada, New Zealand and a number of other developed countries, middle-income countries such as Mexico and Costa Rica, and developing countries such as Angola and Ethiopia. Not surprisingly, Pacific Island nations, endangered by sea-level rise, are well represented.

This consensus is not yet universal. Along with the United States and Australia, a number of national governments (notably Japan, Turkey and Poland) are still trying to keep coal-fired power alive. Strikingly, most of the recalcitrant governments are led by right-wing demagogues (Australia is the obvious exception, but our policy is arguably being driven by Tony Abbott and the Liberal right rather than our notional PM), and it’s reasonable to hope that their departure will see a reversal of their countries’ positions.

The financial sector has seen the writing on the wall. After a decade-long campaign by environmental organisations to end financial support for fossil fuel investments, the tide seems to have turned in 2017. The National Australia Bank’s recent announcement that it will no longer finance new thermal coal-mining projects is part of a broader global trend. It follows the adoption of similar policies by global banks including Citi, Deutsche Bank and BNP Paribas. Until very recently, many of these banks were big lenders to the fossil fuel sector.

More broadly, most of the leading European insurance companies have broken their links with coal or are about to do so. Pension funds are following suit. Government export financing corporations have mostly abandoned coal, with Australia’s Export Finance and Insurance Corporation a notable exception.

The second factor, technological progress, has been crucial here. Not only has the cost of solar photovoltaic and wind generation continued its steady decline, but battery storage has become a realistic option, both for large-scale grid management and for individual consumers. Tesla’s 100MW/129MWh battery in South Australia, installed in a matter of months, is already playing a vital role in the Australian grid.

The combination of technological change and political consensus means that a feasible path is now open to a rapid phase-out of coal-fired power and a fully decarbonised electricity supply system over the next couple of decades.

Developments in road transport have been equally significant, and perhaps even more surprising. Only a few years ago, electric and hybrid vehicles seemed likely to remain as a niche option for many years to come. During the course of 2017, Britain, France and India all announced plans to end the sale of petrol and diesel vehicles and replace them with electric cars. China has not yet made a formal commitment of this kind, but it has made clear its intention to dominate the market for electric cars, and has offered substantial tax rebates to promote this goal. Established car-makers in the United States, Europe and Japan have responded to the challenge, shifting investment away from internal combustion models and producing a full range of electric vehicles.

Once again, the process involves an interaction between technological and social change. On the technological front, substantial progress has been made in allaying the main concerns about electric vehicles: limited range and high cost. Not only can new models travel up to 500 kilometres on a single charge, but the network of charging stations in the United States and Europe is also comprehensive enough that the risk of being stranded on a long journey has effectively disappeared.

As has often been pointed out, electrification of motor transport is useful only if electricity is generated from a renewable source. What has attracted less notice is that electric vehicles constitute a vast potential for energy storage. If vehicles are charged during the early afternoon, when solar PV generation is at its peak and relatively few cars are on the road, the economic viability of solar-plus-storage systems large enough to meet the demand peak in the late afternoon and early evening can be greatly improved.

Most of the world’s leading industrial countries are now on a path to decarbonising electricity supply and electrifying transport. China and India have signalled their intention to follow the same path, although it will take them longer to change direction and they will still be using energy at a rapidly growing rate. At this point, the only question is whether the world will change course fast enough.

Few if any of these developments have been covered by Australia’s mainstream media, which is primarily focused on the Turnbull government’s internal struggles — struggles primarily driven, in turn, by the politics of the culture wars rather than by any rational position. The euphoria with which the eight-page sketch of a National Energy Guarantee was greeted by much of the press reflected the desire for a political solution to these struggles rather than any assessment of whether the policy was internally coherent, let alone consistent with the need for a decarbonised economy.

Regardless of media coverage or the lack of it, technological and political realities have begun to bite. After cynically exploiting the blackouts caused by storms in South Australia last year, the Turnbull government has been faced with the embarrassing reality that Australia’s ageing coal-fired power stations are not the reliable source of energy presented in the mythology of the coal lobby. Rather, the South Australian Tesla battery they derided has come to the rescue when coal-fired plants have failed (ironically, they are particularly prone to do this during heatwaves), attracting international attention in the process.

Meanwhile, the central political objective of the National Energy Guarantee — forestalling the closure of coal-fired power plants — has been a failure. Despite immense pressure from the Turnbull government, AGL has announced that it will proceed with the retirement of the Liddell power plant and its replacement by a large investment in renewables, backed up by peaking gas plants.

Even more striking has been the apparent demise of proposals to develop the massive, though low-grade, coal resources of the Galilee Basin in Queensland. The leading candidate, on which the others depend, has been the Adani Group proposal for a mine at the Carmichael site and a rail line linking the mine to the Adani-owned port at Abbot Point. The project would require billions in loan finance in addition to the $3 billion or so Adani has already sunk into the acquisition of the site and the development of the port.

Over the course of 2017, it became apparent that this finance was not going to be available. Following the lead of most of the main global banks, the big four Australian banks announced they would not fund the project. The coup de grâce was the announcement that major Chinese banks, now the leaders among the few remaining international lenders to coal projects, would not support the project. It is unclear if this outcome reflects a broader shift away from coal, the poor financial prospects of the Adani project, or some combination of the two.

The company’s last remaining hope was that the Australian government would finance the construction of the rail line through its Northern Australia Infrastructure Facility, or NAIF. Despite the longstanding popular appeal of developmentalism, it became evident in the first days of the Queensland election campaign that public opinion was strongly opposed to public financing of the project. Labor reversed its previous supportive stance and announced that, if re-elected, it would veto the NAIF loan.

It was expected that such a shift, while protecting Labor’s position in the urban southeast, would cost the party votes in regional areas — particularly in Townsville and Rockhampton, where Adani had promised to base its fly-in, fly-out workforce. The first part of this expectation proved correct but the second did not. Despite a modest swing, Labor held on to Rockhampton and Townsville, and it gained enough seats in the southeast to secure an absolute majority.

Shortly after the implementation of Labor’s commitment to veto the NAIF funding, the project’s demise came a step closer with the announcement that Adani had parted ways with Downer EDI, with which it had a $2 billion agreement to operate the mine.

Despite the efforts of Trump, Turnbull and others, it all adds up to a good year for the global climate. Until recently, the idea that we could eliminate energy-related greenhouse gases seemed hopelessly utopian. Now the world has a clear path to this goal, at least in the core areas of electricity and transport, while still maintaining and improving living standards. Let’s hope that 2018 will see further progress. ●

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It is the Bataan nuclear power plant, an expensive and contentious US$2.3 billion investment by the energy-hungry Philippines. Begun more than four decades ago, it was finally paid off in 2007, having for many years drained funds from the national budget of a country whose per capita income is just US$9400. Yet, although the country’s power prices are among the highest in the region and act as a major disincentive for much-needed foreign investment, the plant has never generated a single commercial watt of electricity. Speculation continues about a possible activation of what has become a textbook, analogue-era white elephant.

Now, the plant has taken on new symbolic significance with the growing drive to rehabilitate Ferdinand Marcos’s reputation. The late dictator’s declaration of martial law in 1972 plunged the Philippines into an era of murderous repression, massive civil rights violation and unbridled corruption, as the kleptocratic president and his circle bled the country dry. Marcos supporters claim the plant is a tribute to his farsightedness; his detractors portray it as a folly of the highest order that has left the people with nothing but debt.

The Bataan nuclear plant was initiated by the Marcos administration in response to the 1973 oil crisis, and was designed to reduce the Philippines’s dependence on imported oil. Construction of the 620-megawatt nuclear plant commenced in 1975 and was completed in 1984, at an inflated cost of US$2.3 billion, more than four times the initial bid of US$500 million. A brief test run on 28 May 1984 — the only time the plant has operated — generated 5 megawatts of power for a few minutes.

After Marcos was driven from power in February 1986, and in the wake of the Soviet Union’s Chernobyl nuclear accident two months later, the administration of Corazon Aquino decided not to bring the plant into operation, on safety grounds. Earlier, in 1979, construction work had briefly been suspended following the Three Mile Island nuclear accident in Pennsylvania, and a subsequent survey had highlighted numerous defects in the Bataan plant, along with concerns about its earthquake-prone location.

After Aquino pledged to honour the debts incurred by the Marcos regime, successive governments struggled to pay off the plant. Payments peaked at 4.36 per cent of total government spending in 1988, and the debt was only retired in 2007. On average, from 1987 to 2007, the Philippine government paid US$246,000 a day for the project. Sporadic attempts to upgrade the plant, or to convert it to a gas-fired operation, were eventually abandoned. The current word in Manila is that there is Russian interest in activating the project.

Marcos supporters claim the plant sits idle simply because it is identified with the late dictator. The most fervent advocate for the plant’s reopening, former Congress member Marcos “Mark” Cojuangco, told me this was a ridiculous situation. “Look, you don’t avoid using roads that Marcos built, nor do you boycott his hospitals, so why is this sitting unused when we have the most expensive electricity in the region?”

Cojuangco, a member of one of the wealthiest families in the Philippines, was educated at Sydney’s exclusive Saint Ignatius’ College Riverview. He turned up unannounced at the plant when I was visiting with a large group of graduate students enrolled in my anti-corruption course. His slick sales pitch — which he insisted was driven only by his passion — extolled the virtues of nuclear power, the quality of the workmanship in the plant and, of course, the vision of Ferdinand Marcos. He also showed a video in which he swam in the cooling pond of a Swiss nuclear reactor to demonstrate how safe it was.

Bataan is tainted not just by the Marcos name, but also by the dubious contract awarded to the giant US corporation Westinghouse over the only other contender, General Electric. Negotiations were handled by a golfing partner of Marcos, Herminio Disini, whose wife was a first cousin of First Lady Imelda Marcos.

General Electric submitted a proposal containing detailed specifications and a cost estimate of US$700 million. Westinghouse submitted a lower cost estimate, US$500 million, but without any detail or specification. A presidential committee tasked to oversee the project preferred General Electric’s proposal, but was overruled in June 1974 by Marcos, who signed a letter of intent awarding the project to Westinghouse. It was later revealed that the company had paid Disini a US$60 million bribe. He was also awarded the contract to build the plant, even though he had no prior business experience in such projects.

By March 1975, with little explanation, Westinghouse’s cost estimate had ballooned to US$1.2 billion. It later emerged that Westinghouse sold similar technology to other countries for only a fraction of the amount it billed the Philippines. Westinghouse claimed, however, that the increase in cost reflected project risks (volcanic and seismic activity, for instance) and the cost of facilities to house the plant’s workers — but it didn’t disclose that it had no doubt factored the Disini bribe into its calculations.

With the debt burden mounting in 1988, the Aquino administration launched legal action against Westinghouse, alleging it had paid bribes to Marcos, who had since fled the Philippines. Charges of corruption were also laid against Disini, but were dismissed by the ombudsman. Disini fled to Liechtenstein, where he lived a regal existence, purchasing both a castle and a noble title. A settlement was finally reached with Westinghouse in 1995, involving a package of US$40 million in cash and the construction of two 160-megawatt turbines valued at US$60 million.

Disini quietly returned to the Philippines in 2001, and criminal charges were filed against him. In 2012, the Sandiganbayan (a special court with jurisdiction over cases of graft and corruption) ordered that he return more than US$50 million in commissions from the Bataan deal. It dismissed charges against Marcos, who had died in 1989, ruling that while a close relationship was established between the two, “there is insufficient evidence to prove that [Marcos] actually obtained part of the commission.” Disini died in 2014 without having paid over the money.

Three years later, in Rodrigo Duterte’s Philippines, the pro-Marcos drumbeat is getting louder by the day. (A prominent cheerleader is the former dictator’s son, Ferdinand “Bongbong” Marcos Jr., who is also an advocate for Bataan.) The hulking monolith sits idle, an attraction for tourists and the merely curious, its obsolete technology looking like a museum piece — but still costing the government an annual US$1 million to maintain.

Apart from its association with Marcos, its legacy is a deep-seated public aversion to debt. The Duterte administration, trumpeting its “Build, Build, Build” policy, could have a hard time convincing a sceptical public of the need to “Borrow, Borrow, Borrow” to make the necessary investments in the future of this country. ●

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In itself, it’s a good idea. Energy security is a real issue. As more aged coal-fired generators like Hazelwood close, and with gas increasingly priced out of the market, the only power stations being built are wind and solar. They provide power when the wind blows and the sun shines, but not when the wind drops and/or the sun goes down. Without other sources of power, we risk blackouts.

At first sight, the guarantee is a good way of reducing that risk. Energy retailers would be made responsible for lining up enough power from other sources to ensure they have the supply to ride out the storm. It’s the same mechanism used for the renewable energy target, which requires retailers to buy a set share of their output from hydro, wind or solar generators.

That’s the real point. Energy policy has three goals — energy security, lower prices, and lower emissions — and this tackles the first of them. But it’s just a concept — not a plan. There are no numbers, no detail.

It’s a good first step, and should have been presented as that. Instead, the prime minister is trying to sell it as the all-encompassing solution to our energy problems that will open the way for bipartisanship on energy policy, unlock investment in new power stations, reduce electricity prices, and reduce greenhouse gas emissions.

No. It won’t bring bipartisanship on energy policy: Turnbull himself introduced it in a way intended to preclude bipartisanship and ensure that the climate wars continue. Labor will probably accept the concept, but with no agreement on emissions targets.

And depending on how the idea is implemented, there is no certainty that it will reduce either prices or emissions. It could increase them both.

The concept seems good in theory, but without detail or numbers, it is impossible to say what its effect will be. The board’s claim that it will reduce household bills over the decade from 2020 by roughly $100 to $115 a year on average — a total ten-year saving of $1000 to $1150 — is nowhere substantiated in the documentation it has produced.

The concept’s originator, former NSW Treasury secretary John Pierce, who now chairs the Australian Energy Market Commission, said the “savings” number came from some earlier hypothetical modelling done by his staff. The assumption is that the proposal will remove policy uncertainty, which will unblock investment, and hence increase supply, and drive down prices. Maybe, but given the energy companies’ proven skill in defending their interests, I suggest you don’t spend too much time on planning how you’ll spend that $1000.

The board also has a proposal about how to implement emissions reduction targets. It suggests the government specify a target for a particular year, with retailers responsible for reflecting it in the energy they sell. This would take effect at the start of 2021, after the existing renewable energy target has been met. If the government decides that the electricity sector’s emissions should be cut in 2021 by 1 per cent, for example, then retailers could be required to ensure that that is matched in the energy they buy.

Leaving aside the issue of what happens when a retailer’s market share rises or falls — they are in competition, after all — that too may prove a good mechanism for implementing emission reductions. But if implemented in the way depicted yesterday by Turnbull and the board’s chair, Dr Kerry Schott, it would ensure that Australia could not meet the targets the government signed up to in Paris in 2015.

The “emissions guarantee,” too, is just a concept; it will be meaningful only when the numbers are keyed in. Schott has spent a lifetime in management for government and business — including a stint at the one-time investment bank, Whitlam Turnbull — and she must be used to keeping a straight face while saying the most implausible things. But to suggest yesterday that the electricity sector would be doing its “fair share” if its emissions fell in line with Australia’s target — a reduction of 26 to 28 per cent from 2005 levels by 2030 — stretched plausibility to breaking point.

When Treasury was modelling the impact of an emissions trading scheme — remember, the one that was designed to minimise the economic cost to Australians rather than the political cost to the government? — it estimated that electricity generation would see about 60 per cent of emissions reductions, almost twice its share of emissions. Why? Because that is where emissions can be cut most cheaply.

Look at what has happened since 2005:

Between 2005 and 2013, total emissions fell by 78.4 million tonnes, but all of that and more was the result of stopping land clearing. That was a one-off gain that can’t be repeated. Electricity sector emissions also fell by 14.3 million tonnes with the carbon tax and the renewable energy target, but emissions from all other sectors grew by 19.6 million tonnes. And, since 2013, emissions excluding land clearing have climbed more sharply still, to a record 550.3 million tonnes.

Fugitive emissions from mining, meanwhile, have grown by 22 per cent since 2005. Emissions from direct industrial energy use have swelled 21 per cent, and from transport, 17 per cent. Emissions from agriculture have remained flat.

If the Turnbull/Schott approach is applied to these sectors, they too would have to cut their emissions by 2030 to 26 to 28 per cent below 2005 levels. That is farfetched, to say the least. Yes, there are some low-hanging fruits that can be picked in some areas, but emissions reduction on that scale would have a massive economic cost: closing down dozens of mines, shutting factories, grounding trucks, slashing cattle herds. It’s not going to happen.

By contrast, as Treasury pointed out all those years ago, emissions from electricity generation can be reduced sharply at relatively low cost. We have the technology to generate electricity cheaply with no emissions, using the wind, water and sun. On current trends, we should soon be able to store the excess power they generate relatively cheaply in batteries, or via pump storage schemes like the PM’s cherished Snowy 2.0.

The cheapest path to meeting Australia’s emissions reduction target would be to reduce emissions from electricity generation in 2030 by something like 50 per cent. This would not impose costs on other sectors that they could not meet.

Nor would it expose us to what the Turnbull government now appears to have in mind — buying “emissions reductions” from developing countries. This bright idea would expose us to the kind of dodgy deals we saw when the European Union allowed its firms to buy phoney “emissions reduction” certificates from China and other developing countries. All Australian governments, whatever their views on climate policy, have been united in ruling that out.

Even if the detail and the numbers are missing, the energy regulators have sketched out in broad terms how their plan would work.

We don’t know some critical things. The actual levels the reliability guarantee would require retailers to contract for are yet to be decided. The board’s backgrounder implies that this will be set as a percentage of anticipated peak demand for each state, but gives no indication what that percentage might be.

Interestingly, it envisages a split-level system, with separate minimum levels being set for slow-starting generation (presumably coal) and fast-starting (presumably gas, hydro, pump storage and battery storage). That division would ensure that coal must be part of the mix, contradicting the PM’s claim that it would be technology-neutral. Not entirely, it won’t.

Different reliability levels would be set for different states. South Australia, so well endowed with sun and wind, would presumably require the highest level of contracted backup to offset their variability. Tasmania, except in times of drought, would require relatively little, as would Victoria and New South Wales.

One strength of the scheme is that its security mechanism would apply to existing generators, rather than simply to new ones, as proposed in the Finkel report. But it will also have to confront the reality that in the supply crises of recent months in South Australia and New South Wales, unexpected breakdowns of existing coal-fired and gas-fired units played a crucial part. They too can be unreliable; the mechanism will need to plan for that.

The board envisages that renewable energy would generate between 28 and 36 per cent of Australia’s electricity in 2030, compared with 16 per cent in 2016. Wind and solar between them would generate 18 to 24 per cent (excluding power stored in batteries), up from 8 per cent now.

That implies business as usual. The Finkel report, along with the main industry players, assumed that no one will be building coal-fired or gas-fired plants in future. The reliability guarantee ticks the boxes as good policy, but it will inevitably make it more expensive for retailers to sign up to wind and solar generation in future — and that is more or less the only generation likely to be built. The board’s proposal will improve energy security, but to suggest that it will do so while lowering costs to consumers is decidedly hopeful.

Labor is not persuaded. Shadow treasurer Chris Bowen highlighted the lack of detail, lack of numbers and lack of modelling; he said Labor would not be rushed, and would reach its position when the government comes up with a real plan, with real numbers. That’s sensible, given that the government secretly ran the proposal past Tony Abbott and numerous interest groups before releasing it, but did not brief the opposition. Had it done so, its calls for bipartisanship would not ring so hollow.

The obvious response for Labor is to accept the proposed mechanisms, assuming they survive scrutiny in daylight, while maintaining its commitment to a bigger emissions reduction — given that the Turnbull government’s pledge would leave Australia with Saudi Arabia as the biggest polluters per head in the G20 — and a heightened renewable energy target.

But Labor also needs to revisit some of its policy platform.

As the board’s paper reminds us, state-based targets are useless when we have a national emissions target; the national target is what matters, and if one state does more, it simply allows other states to do less. The states can play a lot of useful roles in tackling climate change, but maintaining state-based targets is not one of them. Bill Shorten should secure the support of his state colleagues for dropping their targets once a federal Labor government revises the national target.

But how much should its target be? At last year’s election, Labor proposed a 45 per cent reduction from 2005 levels by 2030. That was heroic then, and quite impossible now. Even the Turnbull government’s target implies a 50 per cent reduction in per capita emissions from 2005 levels. Labor needs to revisit this one — and promise something that a government could realistically deliver, not just something that sounds good.

And, long before then, Shorten should use every favour he can call up to get Daniel Andrews to scrap his government’s moratorium on conventional gas exploration in Victoria. It was a cynical play for Green votes, and could lead to gas-intensive Victorian factories shutting down because supplies of affordable gas have run out. If your goal is to make energy supplies secure and cheap, and with low emissions, it was a shocker. It should go tomorrow. ●

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While full details remain confidential until a further announcement next month, the agreement will create permanent maritime boundaries and revised resource-sharing arrangements in the yet-to-be-developed Greater Sunrise oil and gas field. This is a major step forward for the resolution of the long-running dispute between two neighbours.

Most importantly, it seems highly probable that Timor-Leste has secured a median-line boundary in the Timor Gap, creating a permanent maritime boundary for the first time. While many in Australian foreign policy circles have assumed that Australia would limit its negotiations to revenue sharing, and wouldn’t countenance permanent maritime boundaries or depart from its older claim for the “natural prolongation” continental shelf boundary, the ground appears to have shifted.

If this proves to be the case, it will represent a major victory for the small nation and a clear endorsement of the UNCLOS Compulsory Conciliation process. A median-line boundary will place 100 per cent of the present Joint Petroleum Development Area in Timor-Leste’s sovereign waters, where current treaties divide the revenue from existing fields, such as Bayu-Undan, 90–10 in its favour. This is an important outcome for Timor-Leste’s sovereignty, and will be hailed as a major victory in Dili, but it’s important to remember that these fields are nearing the end of their life.

Far more financially significant is the as-yet-untapped Greater Sunrise field, worth in excess of $40 billion. While Timor-Leste has respectable legal opinion suggesting that the entire Greater Sunrise field could be in its maritime waters under UNCLOS, this was always a trickier proposition, as the field straddles the eastern lateral (or side) boundary of the Joint Petroleum Development Area. Unlike the relatively straightforward and media-friendly median-line principles governing the east–west boundary, the north–south laterals involve far more complex technical considerations, with competing options for baselines and offsets. While Timor-Leste was clearly entitled to more of Greater Sunrise than current treaties allowed for, the lateral boundaries question could have opened up a minefield of differing interpretations.

Importantly, shifting the laterals might also involve renegotiating aspects of the previously settled 1972 Australia–Indonesia boundary, an outcome Australia has sought to avoid at all costs. Despite Timor-Leste’s opening bargaining position, therefore, compromise in this area was always a strong possibility, in favour of a bigger win represented by a median-line boundary and increased upstream revenues. Such revenues from Greater Sunrise will be especially critical to Timor-Leste’s future.

Earlier treaties placed 20 per cent of Greater Sunrise in the Joint Petroleum Development Area, giving Timor-Leste just 18 per cent of future revenues under the 90–10 split. The subsequent and now defunct Treaty on Certain Maritime Arrangements in the Timor Sea, or CMATS, increased Timor-Leste’s share to 50 per cent, but delayed permanent maritime boundary negotiations for fifty years. Though Timor-Leste acceded to CMATS, it had no option for an adjudicated settlement as Australia had withdrawn from international dispute resolution jurisdictions, putting the issue firmly in the realm of power politics.

With the 2006 treaty process marred by damaging spying allegations against Australia, Timor-Leste opted for the final avenue open to it: a compulsory (but non-binding) conciliation process, which has never previously been employed under the UNCLOS treaty. In January this year, the country announced it would terminate CMATS, and Australia agreed not to challenge that move. It was a win for Timor-Leste, but it was also a high-stakes gamble, reverting the young state’s guaranteed share of Greater Sunrise revenues to 20 per cent pending a new negotiation.

The gamble appears to have paid off. It is highly likely that the renegotiated agreement will see a substantial increase in Timor-Leste’s share of the future Greater Sunrise revenues from the 50–50 offered under CMATS, while allowing for joint development of the field under a special regime for Greater Sunrise. The final agreement will also determine the contested issue of where the pipeline from Greater Sunrise will land for downstream processing — in Australia or Timor-Leste — or whether it will be a floating platform, as preferred by the commercial partner Woodside.

From Australia’s perspective, the fact the agreement appears to retain the current “trilateral” endpoint markers of the Timor Gap will also be considered a win, as it means the 1972 boundary with Indonesia will not need to be revisited. This was Australia’s baseline position. While some critics might see the outcome as a retreat from Timor-Leste’s opening gambit, no one should doubt the strength of Australia’s earlier resolve to delay maritime negotiations indefinitely or, failing that, to stick to its longstanding continental shelf claims. Australia was defending the existing arrangements as recently as last year, and even now many in the Department of Foreign Affairs and Trade remain convinced of the merits of that position. The agreement therefore represents a major shift for Australia. Labor’s change of policy in early 2016 clearly had an impact behind the scenes, shifting a previously bipartisan consensus. Recent pressure from the United States for a resolution of the maritime boundary dispute, with the South China Sea controversy in the background, provided further incentive for Canberra to reach an agreement.

The resolution of this long-running dispute opens the way for a major improvement in relations between the two neighbours, which have been at a low point in recent years. As Kim McGrath’s timely new book, Crossing the Line: Australia’s Secret History in the Timor Sea, shows, Australia’s role in the Timor Gap has been a sorry one since the 1960s, when Australian authorities issued exploration permits north of the median line in the 1960s with no clear legal basis — an act that was challenged by the colonial power, Portugal, but later accepted by Indonesia in return for concessions on East Timorese self-determination and support for Indonesia’s controversial “archipelagic principle.” As McGrath makes clear, our foreign policy was unduly determined by the desire to close the Timor Gap along the same favourable lines determined in 1972 with Indonesia.

Saturday’s outcome is a major achievement for the East Timorese negotiating team, led by former PM Xanana Gusmão and minister of state Agio Pereira, backed by the Maritime Boundary Office and its legal team. While Fretilin narrowly won the 22 July election, and will lead a new cross-party government, it is understood that there has been no interference from the incoming government, which has been at pains to respect Gusmão’s stewardship of the well-advanced process.

The maritime frontiers strategy was firmly in place before the election, with September’s session in Copenhagen always likely to be the make or break. In the end, the breakthrough became evident when Gusmão finally revealed the sort of outcomes acceptable to Timor-Leste. The Conciliation Commission itself is to be congratulated on producing a workable compromise from potentially heated negotiations.

While many following the issue will reserve judgement until the final parameters of the deal are known, the East Timorese maritime boundary team returns to Dili today, no doubt to a substantial popular welcome. A new government is expected to be announced early this week and formed later in the month, with a few major surprises likely. •

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The history of the Summer project exemplifies the pattern. Its two Westinghouse AP1000 reactors were expected to cost US$9.8 billion and go online in 2017 and 2018. A series of delays and contractual disputes saw the price blow out to more than US$14 billion and the estimated completion date deferred to the 2020s.

The final blow came when Westinghouse, the firm responsible for design and construction, was forced into bankruptcy by its owner Toshiba, which is itself threatened with bankruptcy because of Westinghouse’s losses. To get out of the Summer project, Toshiba offered the owners, SCANA and Santee Cooper, an unconditional payment of US$2.2 billion. Rather than use the funds to finish the project, SCANA and Santee Cooper have decided to cut their losses and move on.

The Westinghouse bankruptcy has also threatened the only other nuclear reactors currently under construction in the United States, at the Vogtle plant in Georgia. The owner, Southern Nuclear, has taken over the project from Westinghouse and is pushing on, at least for the moment.

Whether or not Vogtle is ultimately completed, the US nuclear renaissance is clearly over. The dozens of proposals put forward in the early 2000s have been either abandoned or put on hold indefinitely. Almost certainly, there will never be another conventional nuclear power plant built in the United States.

None of the usual excuses for the failure of nuclear power apply here. The Summer project had the benefit of tax subsidies and a favourable regulatory environment. Environmentalists may have been unenthusiastic, but with their attention focused on coal they didn’t campaign against new reactors with any vigour. The only significant protests against the Summer plant came from electricity consumers angry at having to pay for a project they correctly believed was not needed and might never be built.

The big enemy was simple economics. While the cost of gas has fallen, and that of solar photovoltaics has plummeted, nuclear power plants have become increasingly expensive. Crucially, concerns about the variability of renewable electricity supplies have abated. A combination of larger and more sophisticated electricity grids, innovative pricing and advances in storage has made variations in output much easier to manage, putting an end to the perceived need for the “baseload” supply provided by coal or nuclear plants.

The one remaining hope for nuclear power is the idea of small nuclear reactors, which would be manufactured in large numbers in factories, shipped to sites, and assembled to create a power plant. The leading proposal is the NuScale Small Modular Reactor, or SMR, currently under review by the Nuclear Regulatory Commission.

The SMR has plenty of promise. But it is still in the early prototype stage, with no guarantee that costs will fall to a level that will make it competitive with renewables. Even if everything goes to plan, the SMR won’t be deployed at the scale needed to make a difference until the 2030s, at the earliest.

Every country’s electricity supply is different, but all are subject to common trends. Some countries, like Germany, have hastened the end of nuclear power by shutting down plants that still have years of life left. Others, like Britain, have done their best to keep the nuclear dream alive. Almost everywhere, however, the vision of safe, cheap nuclear power has proved unattainable.

The one historical success story, still told and retold by nuclear power advocates, is that of France in the 1970s. From a standing start, the country built fifty-eight nuclear reactors and secured its energy independence for decades. Sadly, the success has not continued. The only reactor currently under construction in France, at Flamanville, is far behind schedule and way over budget, just like its US counterparts.

The reasons for the rise and fall of French nuclear power are still being debated. Almost certainly, a strong centralised state, with a clear commitment to a nuclear strategy and a willingness to provide low-cost finance for high-risk projects, played a critical role. As these conditions changed, construction costs rose steadily.

The only place where anything like these conditions exists today is China. With twenty-one plants under construction and more planned, China is the last remaining hope for a nuclear renaissance. Even there, though, the prospects are limited. While nuclear plans have been scaled back over time, investment in solar photovoltaics has soared. And given the variability of Chinese construction standards, it’s hard to ignore the risk that a nuclear accident will derail the program once and for all.

But the dream dies hard. Despite decades of evidence to the contrary, the idea that nuclear fission offers a cheap, safe and reliable source of electricity, obstructed only by the irrational fears of environmentalists, remains strong. What the shareholders of Toshiba, Westinghouse and SCANA, and the electricity consumers of South Carolina have learned, like others before them, is that this is a costly illusion. •

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But the other risk is that the Coalition, and Labor, will accept it as it is, and saddle Australia with a second-best solution – a solution that will be expensive and contentious to change once it becomes clear that the targets it’s designed to achieve are inadequate.

Finkel’s plan has been sold to us as the cheapest solution, and the one that could at last bring the two sides of politics together. But it is only the cheapest solution if the assumptions under which it was modelled turn out to be correct. That is highly unlikely.

And it will only enable our politicians to bury their differences on climate change if it does deliver lower power prices, energy security, and much lower emissions beyond 2030 – and doing that will probably demand faster change than the gentle pace of emissions reduction assumed in the report’s modelling.

The press gallery, as always, is focused on the politics of the issue, and infighting within the Coalition has given it lots to feed on. But we need to focus on the Finkel report itself, and the blueprint it sets down for our energy and emissions future.

In December, Alan Finkel and his colleagues on the review implicitly recommended an emissions intensity scheme, or EIS. The prime minister promptly ruled it out. So now, instead, the Finkel team has proposed a clean energy target, or CET. Is their second preference as good a way as their first to meet the report’s three targets: lower prices, greater energy security, and lower emissions? If it isn’t, what might be the consequences for us?

We need to walk into this with open eyes and informed minds. So far, the electricity industry and environmental groups have greeted Finkel’s report with relief. Sure, no participants or informed observers apart from Finkel and the government he serves seem to think the CET is the best way forward. Industry and environmentalists alike would prefer the EIS that Finkel and his colleagues implicitly recommended in their preliminary report last December. Environmentalists have made a number of criticisms of the CET, the report’s detailed modelling, its implausibly low assumptions on emissions reduction after 2030, and its clunky and expensive solution to the need to provide back-up storage. We’ll elaborate on them in a moment.

Essentially, though, environmentalists and the electricity industry alike just want to end the debate. They want agreement on a scheme that will work, under rules that both sides of politics will accept. This would remove the political uncertainty that is seen as having blocked the investment we need in new generators (or storage systems) to replace the coal and gas plants closing down.

I share that view, as I’ve argued here several times. It is important to close this long, fruitless debate and move on. But it’s also important that we move on in a vehicle that will take us where we want to go: to lower prices (ideally, much lower prices), greater security of supply, and lower emissions (and that means much lower emissions).

We know from experience that if the CET is adopted and fails to meet one or more of these three goals, we will have to reopen the debate all over again – and it could be politically and financially very difficult to abandon it for a better option. It’s better to get it right first time.

So far, with a few exceptions that have attracted far less attention than they deserve, criticism of the CET has come mostly from the Abbotteer right of the Liberal and National parties. A minority of Coalition MPs want to keep building coal-fired power stations, no matter what their economics, their emissions, or their future viability.

As I’ve noted before, no generator has built a new coal-fired station anywhere in eastern Australia for a decade. The last one in New South Wales opened twenty-four years ago, the last one in Victoria twenty-one years ago. The modelling for the Finkel report concluded that – regardless of whether the government adopts an EIS, a CET, or does nothing at all – no further coal-fired or gas-fired stations will be built within the national electricity market.

Only an ideologically driven government would contemplate adding – or guaranteeing – a new coal-fired station now. The three big electricity firms (AGL, EnergyAustralia and Origin) have made it clear they won’t build one. But to placate the Abbotteer minority in its ranks, Malcolm Turnbull and Josh Frydenberg are now considering offering taxpayers’ money to guarantee the finances of a coal-fired power station, if anyone will build it.

No doubt they’re expecting that it will be a hollow offer, because no firm will take it up. And they’re probably right. But Turnbull and Frydenberg are caught in a wedge of Abbott’s making. If they don’t offer some significant concession to the climate denialist fringe, the Coalition will be split on this issue, with political risks that Turnbull cannot ignore. Yet if they bow to that pressure, it will surely rule out the bipartisanship they are trying to achieve.

Labor, too, has political constraints it can’t ignore. It is far more likely to lose lower house seats to the Greens than the Coalition is to lose them to One Nation. No one could seriously expect it to agree to put taxpayers’ money behind a new coal-fired station.

Indeed, with the Essential poll showing that only 18 per cent of Australians want our future power stations to burn coal rather than use renewable energy, it’s hard to see how it would get through the Senate. It shouldn’t even get through the joint party room. The poll found only 26 per cent of Coalition voters want more coal-fired plants, whereas 57 per cent prefer our future power system to be based on renewables.

The other message that comes out strongly from the Essential poll is how crucial it is that the new blueprint doesn’t add to electricity prices. The poll found 75 per cent of voters would support a clean energy target if it didn’t increase their power bills. But only 41 per cent would support it if it raised prices 5 per cent, and just 21 per cent would support it if it raised prices by 10 per cent.

That is a red line to the government: there is no voter support for a scheme that will raise power prices. And it’s perfectly understandable when electricity and gas will soon cost over three times more than at the start of the century, just seventeen and a half years ago.

As energy specialists Bob Lim and David Headberry argued last week in a terse letter to the Financial Review, the Finkel report made things harder for itself by failing to examine why this catastrophe has happened, and how those price rises could be unwound. Frydenberg took one crucial step this week by terminating the transmission networks’ right to appeal to the all-too-friendly Australian Competition Tribunal against price decisions by the Australian Energy Regulator. He told journalists the Tribunal’s decisions on appeal have already cost consumers $6.5 billion. Good on him, but this is shutting the gate after the horse has bolted. We need a mechanism to wind network prices back – and fast.

The Finkel report’s second weakness in relation to costs has been pointed out by many people. This is the proposal to require new renewable energy plants to arrange their own energy backup for when the wind doesn’t blow or the sun doesn’t shine. This is a cumbersome, expensive way to solve a problem that could be resolved more cheaply and effectively by setting up a national energy storage market.

At the National Press Club this week, Finkel argued that he envisaged the government making renewable energy generators arrange security only for 10 per cent of their output. But that only emphasises the limitations of his plan; we need solutions that provide backup for existing plants – coal, gas and renewables – as well as new ones. This way of doing it adds considerably to the cost of new renewable plants, which are the only ones being built. That can only push electricity prices up.

The problems caused by the intermittent output of renewables are real, but this is the wrong solution. Frydenberg should head it off by commissioning his department to look for solutions that will be cheaper and cover the whole electricity market.

But the biggest weakness of the report is that, as Giles Parkinson argued last week in Inside Story, it is clearly aimed at a political end. When his preferred solution of an EIS was swept off the table in a moment of prime ministerial weakness, Finkel and his team then set about making the case for the second-best solution, a CET, and depicting it as if it were really the best option after all.

It isn’t. The shortcomings of the modelling – carried out by the respected Jacobs group, but under instructions from the Finkel team – were well demonstrated in Monday’s Australian by Adelaide economics professor Paul Kerin. Jacobs was commissioned to model only a single, implausibly mild set of assumptions about future emissions targets, and to ignore any consumer response to price rises. Many critical assumptions were not spelt out in the modelling report.

Crucially, the modelling assumes that Australia’s emissions reductions are spread evenly across all sectors, even though the cost of abatement varies hugely from one sector to another. The biggest contributor to Australia’s greenhouse gas emissions is burning coal; we now have cheap ways to replace that. But we don’t have any way to stop cows and sheep burping and farting methane, which is the second-biggest contributor. It is simply not plausible to demand that farmers cut their cows’ emissions by the 28 per cent reduction that is Australia’s target for 2030 – let alone the 60 per cent reduction in emissions the modelling assumes for 2050.

I can’t believe that a Coalition government would try to impose the same emissions reductions on each sector, regardless of cost or feasibility. If it did, it would further increase the costs of meeting Australia’s greenhouse gas commitments, costs that would have to be borne one way or other by households. A sensible government would demand more emissions reduction from sectors in which the abatement costs are cheapest, as in electricity, to protect those sectors (and sub-sectors) where abatement is either expensive or impossible.

Why does this issue matter so much? Because, as Kerin points out, the Finkel report failed to disclose that its modelling found very different abatement costs for the two schemes. With an EIT, it found, greenhouse gas emissions could be reduced for $7.50 a tonne (a mere fraction of the price we expected a decade ago). But to reduce emissions via a CET would cost $10.50 a tonne – 40 per cent more. The gap in resource costs was similar.

Then how did Jacobs find that the CET would be slightly cheaper for consumers than an EIS? The answer is not spelt out in its report, but it appears to assume that the CET creates no pressure to close Victoria’s brown coal stations, which it assumes remain the cheapest coal stations to operate – even after the Andrews government trebled the price they pay for coal. The modelling appears to assume that in 2050 both Loy Yang A and Loy Yang B will still be operating, even though the first by then will be more than sixty years old, and the second well into its fifties.

I don’t understand how anyone in their right mind could take that seriously. Yet the Finkel panel did. If it hadn’t, it would have had to report, yet again, that the cheapest way forward is to adopt an EIS.

The panel’s findings also depend on its assumption of a low level of ambition for Australia’s emissions reductions after 2030. Its modelling appears to assume that Australia will adopt a target for 2050 of emitting about 215 million tonnes a year of greenhouse gases, roughly half as much as in 2030, and a 65 per cent reduction from 2005 levels.

The national electricity market, which generates about three-quarters of our electricity, would still be emitting sixty-three million tonnes of those gases. Under the modelling assumptions, the national electricity market will take until about 2040 to reach the same emissions intensity (that is, average greenhouse gas emissions per megawatt hour of electricity sent out) as the United States and Canada have today. By 2050 it will finally have caught up with the intensity levels of Europe today.

How can anyone accept these assumptions? Or the results they generate, which form the basis of the Finkel report’s recommendations?

I suspect that by 2050 net greenhouse gas emissions from the national electricity grid will be close to zero. The Jacobs modelling itself concludes that the only new plants added to the grid in that time will be renewables – and on current trends, they will be so cheap, and so well supported by storage systems (if needed), that the last coal and gas plants will have long closed their doors.

As Finkel acknowledged this week at the National Press Club, the price of renewables is falling so fast it is almost impossible for decision-makers to keep up. One example: his report’s modelling assumed that electricity from wind power stations opening in 2020 would cost on average $92 per megawatt hour, or MWh.

No, it won’t. Last month, Origin Energy signed up to buy electricity from the proposed Stockyard Hill project near Ballarat for less than $60 per MWh. In real terms, the ACT government will pay a similar price over the next twenty years for electricity from the next expansion of the Hornsdale wind farm, 200 kilometres north of Adelaide. AGL’s ballpark assumptions now are $65 per MWh for wind and $75 per MWh for a large-scale solar project like the 200 MW solar plant the NSW government has just finalised for Balranald, the largest facility of its kind in the southern hemisphere.

No coal plant built now could supply power at that price. That’s why the power companies now focus solely on renewable energy plants. The technical issues that caused last year’s South Australian blackout all have solutions that simply need to be applied. And for twenty-four-hour power security, the costs of large-scale battery storage are plunging, and at this rate it will soon provide the affordable solution to the sceptics’ question: what do we do when the sun goes down and the wind stops blowing?

The technology is progressing so fast that it could sweep the whole debate into irrelevance. But it would help if we adopted the scheme that promises to reduce emissions at least cost, and that can be most easily scaled up to meet bigger targets. That is an emissions intensity scheme. •

The post The devils in Finkel’s detail appeared first on Inside Story.

We were in the midst of an unstoppable energy transition, he said, one based on cheap renewables, storage and smart software. And the technologies to address the reliability and security issues were at hand, though they were not being encouraged by the design of the market.

The energy system, Finkel went on, would need to shift dramatically from a centralised model (aka coal plants) to a decentralised model (aka rooftop solar and storage). The power, quite literally would return to the people. It was all rather exciting.

Fast forward to 9 June, and Finkel’s delivery of his final report to Council of Australian Governments leaders in Hobart, and many people are wondering what happened in between. Blame the full moon or Dark MOFO happening in the same city, but Finkel’s view of the energy future didn’t look much different to the one we’ve got now.

What’s going on? Put simply, the chief scientist chose to deliver a political document rather than a scientific one. Sure, there is a lot of sound analysis, and Finkel has properly identified the regulatory holes, lack of planning, distorted market rules, the need for storage and the lazy and lax policy making that has made the Australian energy market the basket case it is.

But the big picture was missing. For reasons that can probably be guessed, Finkel chose to frame his energy future, and the security and reliability and cost issues, in the image of the current government’s less than ambitious climate policies.

He does, at least, show a path to get to a 28 per cent cut by 2030 using a clean emissions target, or CET, which he says is preferable to an emissions intensity scheme (though only because an EIS looks to the Coalition too much like a carbon price). Apparently he modelled no other scenarios, such as a higher renewable energy target.

Don’t tell the Coalition backbench, but the CET is effectively a carbon price too, though it includes carrots without any sticks. Low emissions technologies get credits, depending on how far below they are from a nominated benchmark, but there is no penalty to high emitters. Effectively, we are told, it should work like a renewable energy target with no technology barred, although its bite will depend on how ambitious the climate policies are.

The anticipated outcome caused dismay among environmental groups. Based on the Coalition’s current policies, it showed that large scale renewables would grow only moderately from 2020 to 2030, and account for just one third of all generation, or 42 per cent if you add in rooftop solar.

In 2050, the modelling suggested, brown coal-fired generators would still be operating, even some brown coal plants in the Latrobe Valley – in fact, more than in the business as usual scenario. Finkel reasoned that having coal plants last longer was more effective – cheaper and with less emissions – than building new plant, such as gas-fired plants designed to fire up during peak periods.

Effectively, though, he was writing off the idea of gas-fired generation as a transition fuel, agreeing with the likes of AGL and the renewables industry that solar and wind combined with storage beats baseload gas by a handy margin and peaking gas by a country mile.

But what about the science? Since when did the chief scientist become the policy fixer in chief for a Coalition split by a leader who everyone hopes would like to act on climate change, and a conservative rump that refuses to do anything at all.

Most (including me) saw the report as a disaster. “Finkel fail,” sniffed Solar Citizens. “Big coal and gas are licking their lips,” said Greens’ climate spokesman Adam Bandt. But Bloomberg New Energy Finance chief analyst Kobad Bhavnagri has another take.

Bhavnagri describes the plan as a “canny job of plugging holes in the country’s manifestly inadequate climate and energy policy framework.” The CET, he says, could solidify long-term investment in renewable energy, and help renew Australia’s decaying fleet.

But the weakness is the failure to assess its own plan against the 2ºC climate scenario, because that is the one that most businesses will want to work on. You can draw a line from One National senator Malcolm Roberts to former prime minister Tony Abbott, but no one this side of reality believes that the current government policy is in any way adequate.

“A 2 degree, net zero by 2050, emissions reduction pathway… is the core sensitivity that smart businesses around the world are assessing their resilience against,” Bhavnagri says. “Developing a ‘blueprint for the future’ means the plan has to be resilient against how the world could change. There is little in the Finkel review to indicate that his plan is future proof – it tackles today’s challenges, not tomorrow’s.”

But it may be that Finkel – normally the smartest person in the room – has deliberately withheld the modelling. We don’t know that he has done a 2C stress test, but based on his assumption about the cost of wind and solar, and the fact that storage is “arriving like a freight train,” it is difficult to imagine that this could allow any room for coal, or any other fossil fuels, by 2050. The Coalition doesn’t want to be told this, so Finkel hasn’t told them.

There are other concerns. Finkel’s solution to the problem of storage is to ascribe responsibility to individual wind and solar plants, rather than think of system-wide solutions. The renewables industry accepts the need for storage, but says there must be smart ways than this, and wonders why no such rules are applied to coal- and gas-fired generators that have shown a worrying tendency to fail just when they are needed most – in the middle of a heatwave.

But his other conclusions are broadly right. More planning is needed, the regulator needs to be kicked up the backside and instructed to keep up with technology, and more emphasis is needed on “demand side” initiatives that mean we don’t need to build new peaking-gas plants, the fuel guzzlers that are about as generous to consumers as credit card interest rates.

The final vote, however, will go to the consumer. Finkel promises that a CET will keep prices below business as usual, but not by much. Which surely makes one wonder. If SA Power Networks, the grid owner in South Australia, is predicting that solar and storage will cost just 15c/kWh by 2020, less than half of the cost of grid power, then how many consumers are going to remain connected in thirty years’ time, when solar and storage have fallen even further and the grid is still ridiculously costly?

Ultimately, it will be this that brings sense to the policy-makers. The possibility of climate catastrophe doesn’t seem to do it. •

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Of course, in the grand scheme of things, what Australia does or doesn’t do counts for little. That’s not a justification for doing nothing or doing the wrong thing – with a couple of exceptions, no single country counts for much. The biggest exception to this rule is the United States, of course, followed by China and India. So the real concern is that the Trump administration is adopting a similarly retrograde position.

The good news is that it’s almost certainly too late for Trump and Turnbull to derail the progress that’s being made towards a decarbonised and sustainable global economy. They are engaged in gesture politics designed to appeal to culture warriors on the right, not a serious strategy to revive coal and nuclear power.

The case of nuclear power is the clearest. The only hope for nuclear power is the adoption of a single low-cost design that can be built in large numbers, thereby achieving economies of scale. France managed this in the 1970s, but no one (including France) has managed to repeat the trick.

Until quite recently, it seemed that the best hope for a modern, safe “Generation III+” design was the Westinghouse AP1000. But over the past couple of months, it’s become apparent that the AP1000 is dead in the water. 

Toshiba, which bought Westinghouse largely for its nuclear power division, is writing off billions of dollars, and seems unlikely to stay in the nuclear business after the remaining projects (all overdue and overtime) are completed. The other candidates in developed countries, including the EPR and CANDU reactors, are in an even worse state.

So the nuclear faithful have turned their attention elsewhere and found a project that is on time and possibly even on budget. It’s being built in the United Arab Emirates by Korean company KEPCO, and consists of four plants using KEPCO’s APR-1400 design. That’s been the basis for some new optimism.

A quick look at Wikipedia’s APR-1400 article suggests this optimism may be misplaced. This is Gen III design, dating back to the 1990s, hasn’t yet been certified as safe in the United States, and may not be. While the UAE project appears to have gone well, projects in South Korea have been subject to delays and cost overruns. The UAE deal was signed in 2009; there hasn’t been another export deal since then. And although more plants were planned for South Korea, they appear to have been shelved. There hasn’t been a new APR-1400 plant started there since 2013.

Programs in China and India are also faltering. It seems highly unlikely that China will achieve its official target of 58 gigawatts of nuclear power by 2020, and India’s flagship program, a fast-breeder reactor at Kalpakkam originally planned for 2010, has been delayed again and again.

In summary, it’s highly unlikely that the construction of new nuclear reactors will keep pace with the retirement of old ones, let alone make a significant contribution to replacing fossil fuels. About the best hope is that Japan might restart some of the reactors closed since Fukushima.

In relation to coal, we see the same yawning gap between global reality and the rhetoric of Australian and American politicians. Large-scale cancellations in China and elsewhere have greatly reduced the number of proposed coal-fired power plants, and global coal consumption has already peaked. Yet Turnbull and Trump continue to hold out the false hope that jobs in coal can be preserved indefinitely, and even that jobs already lost can be restored.

Turnbull’s claims have been boosted, at least for the moment, by the Adani Group’s proposal to build a huge Carmichael coalmine in the Galilee Basin, along with a rail line connecting the mine (and other proposed mines) to the Abbot Point coal terminal.

Back in December last year, CEO Gautam Adani came to Queensland and gave a very positive view of the proposed Carmichael mine. Things went pretty quiet for a while after that, though it appeared that a final announcement on the project would be made in April. Now, premier Annastacia Palaszczuk and a number of lesser dignitaries have been to India and brought back the news that the project will shortly be approved by the Adani board, at least if Mr Adani has his way, which seems guaranteed.

That came as a surprise to those of us who have long argued that the project is hopelessly uneconomic, even on the optimistic view that the current uptick in the coal price will be sustained. But it turns out that there’s an asterisk. The approval will be subject to finance.

Anyone who’s ever sold a house knows that this means nothing is guaranteed. In Adani’s case, the initial stages of the project will need $2.5 billion in bank finance, as well as a concessional loan of up to $1 billion from the federal government’s Northern Australia slush fund. You might think that at least the second of these is a safe bet. But Aurizon (the former Queensland Rail) has come up with a competing proposal that doesn’t have the problems associated with Adani’s opaque (to put it mildly) financial structure.

The real problem, though, is with the banks. Of the big Australian banks, Westpac is the only one not to have ruled itself out. But it will presumably want only a small share of the risk, as part of an international consortium, and there are no obvious candidates. Moreover, given the combination of reputational and project risk associated with a massive coalmine at a time when coal is clearly on the way out, any sane lender would demand a hefty rate of interest and lots of security. It’s hard to see Adani coming up with either.

So, it seems likely that Adani is still playing for time. We’ll probably see a very big announcement with a very small asterisk. Crunch time won’t come until June, when they need to come up with real money.

Why would Gautam Adani do this? One possibility is that he has pursued the process in the hope that governments or courts will block it, raising the prospect of a compensation claim. If so, he looks to be out of luck. Whether feigned or real, the public enthusiasm of the Queensland Labor government, along with that of Turnbull and the Coalition, will make it very hard to find a political scapegoat.

Another possibility is that the project is being kept alive to avoid the need to write off the mine, which is currently valued in Adani’s books at nearly $1 billion. A write-off might lead, in turn, to a credit downgrade or even a breach of debt covenants, though the opacity of Adani’s structure makes it impossible to tell for sure. Regardless, most of Adani’s attention is now focused on renewables, where the prospects look a lot brighter.

In making that shift, Adani is emulating the world as a whole. The rise of renewable energy has not only transformed future prospects but is already having a major impact. For the third year in a row, global carbon dioxide emissions from the energy sector have remained nearly stable, despite continued economic growth. 

A lot more needs to happen, but with the cost of renewables steadily falling and awareness of the health and climate costs spreading, there’s every reason to hope that the decarbonisation of electricity supply will happen more rapidly than anyone expected. After that, the big challenge is to electrify transport. The technology is there, so this is mostly a matter of renewed political will.

Meanwhile, Trump’s failure on Obamacare suggests he will have a much tougher time reversing Obama’s climate policies than he expected; the same has been true for Abbott and Turnbull in Australia. Despite the policy shifts, coal-fired power plants keep closing and there is no likelihood of new ones.

The only contribution made by the prime minister and his predecessor has been to create enough uncertainty to choke investment in renewables, thereby reducing the security and coherence of an electricity supply system already in a mess thanks to two decades of misconceived market reforms. Turnbull’s Snowy Hydro proposal, even if it’s only a thought bubble, totally undercuts the free-market and anti-renewables line he and his government have been pushing ever since he capitulated to the denialists to get the top job.

In a few years’ time, Donald Trump and Malcolm Turnbull will almost certainly be consigned to history. They will be remembered for their efforts to destroy the global climate in the service of culture war politics. More importantly, it seems likely that those efforts will be remembered as a failure in a world that has left fossil fuels and nuclear power behind. •

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The oldest units of the Hazelwood power station, which closes this week, are more than fifty years old; the newest are forty-two. It was built with the expectation that it would last for thirty years. Lest we forget, Hazelwood has also been one of the most polluting power stations in the world. With every megawatt hour of electricity it generated, it emitted 1.4 tonnes of greenhouse gases – three-and-a-half times the waste produced by a modern gas-fired plant generating the same power.

When the Australian discovered recently that a number of coal-fired power stations have closed since 2012, it attributed the trend to the pernicious influence of renewable energy subsidies. It failed to mention that all of them were between thirty and sixty years old.

It’s normal for old power stations to close down. What isn’t normal – indeed, it’s seriously alarming – is that Hazelwood is shutting down when no equivalent generating capacity has been built to replace it. It could mean our electricity system is heading for disaster.

If the Kennett government had left the State Electricity Commission as Victoria’s publicly owned electricity monopoly, then Hazelwood might have given way a decade ago to a modern coal-fired plant producing lower emissions, as John Brumby, premier at the time, had hoped. But no one volunteered to build one, and now that time is past.

The station’s French owner, Engie (formerly known as GDF Suez), has a policy of getting out of coal in developed countries – it’s also trying to sell Victoria’s most modern coal plant, Loy Yang B – but its chief executive Alex Keisser made it clear last week that Hazelwood is also unsafe and commercially unviable. Engie executives told a recent Senate committee hearing that no other firm had expressed interest in buying it.

In the twenty years since private companies were given responsibility for Victoria’s power supplies, they have built just one small gas-fired plant between them, and none using coal. Since the national electricity market started up in 1998, no coal-fired stations have been built in eastern Australia outside Queensland.

The Australian Energy Market Operator estimates that we still have enough spare capacity in our power system to cope without Hazelwood, assuming all goes well. But it concedes there could be shortfalls in Victoria’s power supply reserves on up to seventy-two days over the next two years – that’s one day in ten. And even if blackouts are rare, the cost increases facing business are so huge – $120 per megawatt hour for future supply contracts, up from $40 two years ago – that some energy-intensive firms could be forced out of business.

Would we be in this crisis now if our electricity system were still run by state government monopolies? That is a real question. Nothing like this happened when it was. Most of the time, markets work well. But when they don’t – and the Australian electricity market is mostly made up of monopolies running the network, and a small oligopoly of generators-cum-retailers running the rest – the costs can be devastating. No one warned us that the market might fail like this.

With hindsight, those who privatised essential monopolies were naive about how capitalism works when firms have the effective power to set prices. Electricity and gas prices alike have almost trebled in this century; the privatisers assumed that regulators could keep prices under control. They privatised even the highways of energy trade – electricity transmission and gas pipelines, which can only be monopolies. Did they forget that it is normal for business to maximise profits?

Australia’s electricity crisis has three dimensions. The first is long-term: no new baseload plants, which generate round-the-clock power, have been built for years, and none are planned. Most of the plants closing are baseload plants; all of the new capacity being built is wind and solar, neither of which can generate around the clock.

This reflects the policy failure that began when Tony Abbott as Liberal leader ended the bipartisan push to reduce greenhouse gas emissions. The energy industry’s virtually unanimous view is that we need a bipartisan policy based on an emissions intensity scheme that sets a timetable for emission reductions. Only then can firms have the confidence to make long-term investments.

But Malcolm Turnbull has ruled that out. His government’s latest effort, a discussion paper on future climate change policies released last Friday, is a bland catalogue that fails to mention such a scheme, even though it has been the key recommendation of the electricity industry, of business groups – and of reports by the government’s own Climate Change Authority, in September, and the COAG review team, headed by chief scientist Alan Finkel, in December. There is no sense of direction, and no urgency about defining one.

The second dimension, as I discussed earlier this month, is the impact of the nation’s gas crisis on electricity prices and availability. Until recently, 22 per cent of Australia’s electricity was produced by gas-fired power stations, and that share was rising rapidly and expected to keep doing so. But soaring gas prices and limited availability have forced gas to the sidelines. No new gas-fired stations have been added to the grid since 2012, all plans to build them have been shelved, and by 2015–16 South Australia’s Pelican Point plant and Victoria’s Newport power station were both operating at just 7 per cent of their capacity.

The third, and most urgent, fact is that the crunch has already happened. We see it in the massive hikes in electricity prices for business, and the first of what could be many large-scale power outages. The Financial Review reports that the electricity price demanded for future contracts has trebled since 2015. Brickworks, one of the nation’s biggest brick producers, has revealed that it has started to import bricks from Spain, and is now looking at shifting local production to Malaysia or New Zealand.

Importing bricks! We are now in an extraordinary situation. You can paste that one up with AGL’s proposal to set up a liquefied natural gas import terminal in Australia (which is about to become the world’s largest LNG exporter), because Australian gas is now far cheaper in Asia than it is in Australia – and shipping it here is cheaper than paying for it to be sent interstate in our monopoly-owned pipelines.

A real risk exists that key plants will close in key sectors of the economy. Tens of thousands of workers could lose their jobs, and the closures could do serious, permanent damage to Australia’s industrial capacity.

That threat could be averted if federal and state governments, and energy market operators, regulators and producers do all they can to reduce not only the pressure on supplies, but also the pressure on prices. But there’s no sign of that. Turnbull held one meeting with gas producers, which produced reassuring words but little change in the realities on the ground.

Take the longer-term issue first. As I have reported, the only firm commitments in the pipeline are for a few wind and solar plants, with a total capacity of 634 megawatts, or MW. Commercial plans for new gas-fired plant have been shelved, because none of them is feasible with gas prices where they are. And no one has a serious plan to build new coal-fired plant.

Yet some 5453 MW of old coal- and gas-fired plant has either closed in the past year or is slated for closure. As a result, the capacity of the national electricity grid (responsible for three-quarters of Australia’s electricity) will shrink from 49,872 MW to 45,053 MW – almost a tenth of the capacity of a network that recently had to shut down supplies to parts of South Australia and New South Wales.

Gas was meant to be the transition fuel that would gradually replace coal as the main source of electricity, until producing and storing renewable energy had become viable. Instead, as Professor Ross Garnaut noted ruefully to the Senate committee on electricity infrastructure, since he wrote his climate change report in 2008, “the cost of solar PV has fallen by 85 per cent… at a time when there has been a trebling or more of domestic gas prices in Australia.”

At a time when new coal-fired stations are no longer seen as environmentally viable, the sharp change in relative costs has shifted gas off the table. And while some advocates claim that renewable energy with battery storage is now cheap enough to fill the gap, most analysts are unconvinced.

What’s wrong with building new coal-fired plant? It would lock in high emissions far into a future in which rising carbon prices would make such plants financially unviable. Power stations are thirty-year investments, and companies will not build a station that might be uneconomic in fifteen years’ time.

Yes, new coal plants are cleaner than old ones, but not much. The average black coal plant in NSW and Queensland emits 900 kg of greenhouse gases for each megawatt hour of electricity it produces. Our newest coal-fired plant, Kogan Creek in Queensland, uses supercritical technology and emits 840 kg. The Minerals Council estimates that a new ultra-supercritical coal-fired plant would emit about 770 kg, and an advanced ultra-supercritical plant – the state of the art now, and seriously expensive – about 700 kg of greenhouse gases per megawatt hour.

But new gas-fired plants on average emit 400 kg per megawatt hour. Even a new ultra-supercritical coal plant would produce almost twice the greenhouse emissions of a plant using gas. (A coal-fired station with carbon capture and storage would be a very different story, but it would require big subsidies to pay its way. Only Clive Palmer has put up his hand to build one.)

The future options for round-the-clock power are gas, or renewables-plus-storage. But new gas-fired plants have been priced out because their potential gas supplies are now being exported to Asia.

The last gas unit to join the grid, in 2012, was Origin’s 550 MW-per-hour station near Mortlake in western Victoria. It was meant to be the first of six gas-fired units to be built in the region by Origin, Santos and AGL. They would have added 3000 MW of generating capacity in Victoria, enough to replace not only Hazelwood (1600 MW) but also its neighbour Yallourn (1450 MW). Yallourn is also well past its use-by date, and will replace Hazelwood as Australia’s most emissions-intensive power station (1.32 tonnes per megawatt hour).

But the surge in gas prices ended the dream of a smooth baton change from coal to gas. Santos instead signed contracts to export more gas from its new Gladstone LNG terminal than it could produce. It shelved its plans to build gas power stations in Victoria so it could instead sell the gas to companies planning to build them in Asia – and then had to go out buying up domestic gas supplies so it could meet its contracts to sell it to Asia.

In the short term, what can be done to undo the savage hikes in gas and electricity prices for industry, and ensure security of supply? The government can’t force power station owners to keep uneconomic plants open. And even if the proposals by the South Australian and federal governments to build their own power plants made economic sense, which is unlikely, they couldn’t be built for years. We need short-term fixes too.

First, the good news. As the Australian Energy Market Operator points out, the system has a cushion. The network has long had more capacity than it needed, and demand for electricity has been flat for years. The closure of Hazelwood creates opportunities for underused plant – such as the gas-fired stations at Pelican Point, Mortlake and Newport – to spring back to life.

But that assumes they can buy enough gas, and at prices that will make them competitive in the market. That assumption might not be realistic without government intervention to force domestic gas supplies up, and prices down.

Moreover, the blackouts of recent months happened when the system was supposedly awash with spare capacity. Hazelwood’s closure will increase the risk of this happening – and without some protection of domestic gas supplies, any gas reallocated to power stations would come at the expense of other domestic users.

Second, the debate within the industry since South Australia’s blackout last September has identified technical and operational problems that could be fixed by rule changes. Wind-generated power can be made compatible with the rest of the system. The market needn’t allow producers to bid in power for five-minute periods yet receive a price averaged over half-hour periods. The players have worked out how to game this system, and consumers are paying.

Problems like these could be fixed in time to make the system more secure next summer. But rule changes in this industry tend to be very slow in coming. Environment and energy minister Josh Frydenberg needs to keep kicking bums to make it happen.

Third, we could make better use of the 1.5 million homes and other buildings that generate electricity from the sun. If they all had batteries, if the market paid time-of-use pricing for sales to the grid, smart software such as that developed by Reposit Power could give operators instantaneous access to a sizeable array of reserve power.

As Tesla and its local competitors have all pointed out, we could also build new large-scale battery storage much more quickly (and possibly more cheaply) than we could build a new gas or pump hydro station. It would certainly offer a more flexible supply that can be fine-tuned to meet the demand of the moment.

A fourth option is demand management. We’re already doing that, as we saw last month when blackouts in New South Wales were averted because some big users agreed, for a fee, to have their power switched off. There is scope to expand this.

All these options are cheaper than building a $2 billion power station, and can deliver their impact far more quickly. Malcolm Turnbull’s Snowy 2.0 announcement was really a stunt. We need serious, cost-effective, quick-acting policies.

To fix the gas crisis and turn around the lack of electricity investment, we need, above all, a different way of doing politics. We are in a crisis, and governments, state and federal, Liberal, National and Labor, need to work together to get us out of it.

We need to set a timetable to reduce emissions from electricity generation, which now contributes a third of Australia’s greenhouse gases – and, by and large, the third that will be easiest and cheapest to reduce. We need price mechanisms to drive it.

And we need the federal government to step into the gas market and stop domestic supplies being sent overseas. It has the power to put a moratorium on sales to overseas spot markets until the domestic crisis is fixed – and to tell Santos and its partners that if they don’t produce enough gas to meet their contracts, they can buy more overseas. We can’t let Australia’s energy-intensive manufacturing die because of policy mistakes.

It could be the making of Malcolm Turnbull as prime minister if he takes the lead in fixing these crises. It could be the breaking of him if he doesn’t. •

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That advantage has gone now, destroyed by naive policy idealists with good intentions who didn’t see the implications of the changes they were making. The consequences for industries lured here by cheap energy are disastrous. Companies that make things, in a range of industries, are experiencing outlandish price increases that will make it impossible for some of them to stay in business.

Wednesday’s handshake agreement between prime minister Malcolm Turnbull and two gas companies to ensure that gas will be available to domestic users, including gas-fired power stations, didn’t deal with the issue of price. It couldn’t, because policy-makers are wedged in by the implications of earlier decisions they can’t change.

Most of those choices were made long ago, at both levels of government and on both sides of politics. The Gladstone liquid natural gas, or LNG, plants that have wrecked the domestic gas market were approved under the governments of Kevin Rudd and Anna Bligh. Recent decisions by state governments, especially in Victoria, have poured more fuel on the fire, but their worst impact is still ahead of us.

In the seventeen years since the turn of the century, consumer prices have risen 59 per cent across the board. But gas prices have shot up 175 per cent – three times the overall inflation rate – and electricity prices have soared 187 per cent. The privatisation and deregulation of gas and electricity has failed consumers.

But the failure for business is far worse. A chilling Australian Industry Group report shows that over just three years the gas prices asked of manufacturers have soared from $4 per gigajoule to, at best, $10, and in some cases up to $20. Australians now pay “the highest gas prices in the developed world,” says the group’s chief executive, Innes Willox. “Even Japanese customers are able to buy gas on spot markets for well below the prices being offered to Australian customers today.”

In Australian dollars, says Willox, spot prices in the market are $4 in the United States, $8.40 in Europe, and $11 in Japan. But in eastern Australia, “that gas is being offered for new contracts at $16–22/GJ in the short term, and $12.50+ for three years. Prices seem to be headed up from here. This is economically unsustainable and will drive investment and jobs offshore. Immediate action is needed.”

But don’t just listen to the industry group. ACCC chairman Rod Sims isn’t known for any special empathy for manufacturers, nor for emotive, imprecise language. This week, though, he warned that the gas market is now in a crisis that could lead to plants closing and jobs being lost. “Australia often makes it hard to be involved in manufacturing,” Sims said. “We are now making it extremely difficult if not impossible for some… Many large gas users are going to find it extremely difficult to sustain their business.”

This is policy failure on a grand scale. It will probably have disastrous consequences for some firms and for many workers. The prime minister’s agreement this week is no solution. Not all the gas producers signed up, and there was no suggestion that any of them would reduce the prices that have skyrocketed since Australia began exporting LNG from Gladstone.

I see no sign that the federal government recognises just how serious the situation is for manufacturers. Some of them are the only local suppliers of basic materials relied on by downstream producers. The implications for Australia if they close could be serious. It is within the powers of government to make the changes that would keep this kind of production viable in Australia. But the Turnbull government is playing to the gallery, and in Victoria the Andrews government is playing to green voters. Both are neglecting their responsibilities.

The gas crisis has spilled over into, and widened, the electricity crisis. We used to assume that gas would be the transition fuel that would lower emissions from power generation and form a bridge between the age of coal and the age of renewables. Not at these prices, it won’t. The last gas-fired power station opened in 2014. None are being built now, and no one has committed to building another one.

How did we get ourselves into this situation? It’s a complex story involving so many governments, regulators and companies that everyone can always find someone else to blame. Let’s go back to where it began.

In the 1960s, Esso and BHP discovered abundant natural gas in Bass Strait. Victorian premier Henry Bolte insisted that all their gas would be sold to the state-owned Gas and Fuel Corporation, at well below world prices, to benefit manufacturers, households and, later, electricity users. That agreement saw Victoria expand jobs and output in petrochemicals, food processing and many other industries; it also cut the cost of living for Victorians, who relied on gas for cooking, water heating and heating the home.

That approach to energy policy was widely shared by Australian governments, not least the long-running Playford government in South Australia. Their policy fundamentals were threefold. Prices should be set below world parity to give a comparative advantage to Australian users, not to swell the profits of energy companies. Government should play the central role as energy purchasers, producers, distributors and retailers. And gas exports would be allowed only when the economics of the project depended on them, as in the massive North West Shelf gasfield, but Australians should retain a first claim on any gas produced.

That was a protectionist policy. Like many (though not all) protectionist policies, it mostly worked well. State electricity authorities sometimes allowed their forecasts of future demand to be set by wishful thinking; power stations were overstaffed and strangely prone to breakdowns. But gas and electricity were cheap, and reliable. The market was often oversupplied with electricity, but in the cities it hardly ever ran short – unless some union was on strike.

When the free marketeers won control of the policy levers, they sold off state energy companies, and allowed prices to be set by the market, at world parity levels. Not because the public was demanding that; quite the opposite. Australian voters, then and now, wanted their power and gas supplies to be under public ownership.

The electricity and gas sectors are now mostly privatised, and are dominated by monopolies and oligopolies which – even while formally regulated, or competing in open markets – have the means to effectively set their own domestic prices. And we consumers and downstream businesses are paying dearly for it.

The new policy rules put their faith in regulation. But when gas and electricity prices have almost trebled in just seventeen years, it is clear that regulation has failed to protect the public.

The regulators have been easy meat for the sharp legal and accounting brains working for the energy companies. These guys know how to make the rules work in their favour, and have become adept and ruthless at doing so. If the role of business is simply to maximise profits, it shouldn’t surprise us if that’s what they’re doing. In a dog-eat-dog world, the dogs with sharp lawyers will find a way to eat the dog who’s doing an honest day’s work.

We need gas and electricity prices to come down. And we need gas supplies to be guaranteed by law, rather than by a handshake.

Labor accepts that. While it made the original mistake of waving the Gladstone LNG plants through without safeguards for domestic users, it has since recognised that mistake, and pledged to reserve part of Australia’s massive gas production for domestic business and households. The Barnett government in WA had already done that, reserving 15 per cent of new gas production for the domestic market.

By rejecting any quantity controls and failing to tackle the price issues, Turnbull also runs the serious risk of failing to resolve the crisis. If so, the damage could be heavy.

How did Queensland’s LNG plants wreck the domestic gas market? Essentially, they overreached. They built capacity for gas they didn’t have, and committed to contracts to supply it.

They ignored the opposition from farmers and the public to fracking, their often destructive way of unearthing coal seam gas. They assumed that fracking would be given carte blanche to expand, which meant Australia would have lots of gas to export (and Gladstone could be the hub to export it from). That was a serious error of judgement.

They made contracts to supply Asian energy companies with more LNG than they could produce themselves. When governments in New South Wales, Victoria, Tasmania and the Northern Territory in turn imposed moratoriums on fracking, the LNG producers were caught short. At the same time, a steep fall in oil prices made them write down their assets and cut back gas exploration.

To fulfil their contracts, they (and particularly Gladstone LNG) began raiding domestic supplies – buying up gas on the domestic market, piping it to Gladstone, and shipping it out to places like Japan and Korea. Even AGL sold some of its gas output to the LNG producers – leaving itself caught short as the market grew ever tighter and prices soared.

But the LNG plants are not only buying up domestic gas to fulfil their contracts. They are also buying it to sell into spot markets overseas, which they have no obligation to supply. If the Turnbull government is to get serious about trying to keep energy-intensive manufacturing in Australia, its first step should be to use its export powers to ban sales to overseas spot markets until the domestic crisis is sorted out.

The bans on gas exploration by state governments – in Victoria’s case, even a ban on exploration for conventional gas production – are another policy misjudgement with serious consequences, particularly in the future. Rod Sims put it well in his speech on Tuesday:

Undoubtedly there are important environmental and social consequences underpinning [Victoria’s] policy decision. The ban comes, however, at a time when there is a critical need for more gas supply in the east coast, particularly in the south. Without this supply it is clear that gas prices must increase, which will damage [business] users and increase household energy bills…

We feel that policy-makers need to consider the costs or benefits of projects on a case-by-case basis. It is easy to accept that some projects will fail on environmental grounds; it is, however, difficult to accept that they all do.

Victoria is the epicentre of the industries most affected. It is astonishing that in the middle of a life-and-death crisis for some of them, the state’s Labor government could ban conventional gas exploration. You could not remotely imagine John Cain, Steve Bracks or John Brumby legislating to outlaw gas exploration at a time when Victorian industry is being strangled by high gas prices.

This is a very different Labor government from its predecessors. The gas ban is another example of what Sunday Age columnist Farrah Tomazin has termed Daniel Andrews’s “remarkable capacity to commit political self-harm.” It is starting to look like a one-term government.

Then there is the contribution the gas shortage has made to South Australia’s series of power shortfalls. The Australian Energy Market Operator and power companies have told the Senate inquiry into the resilience of electricity infrastructure that at least one of the blackouts in South Australia could have been averted if power station operators had had access to adequate gas supplies. With all its coal-fired plants now closed – by private owners, not by the Weatherill government – the state relies heavily on two gas-fired plants in Adelaide: Torrens Island, a fifty-year-old plant which AGL executives described as ready for the retirement home, and Pelican Point, a much newer, cleaner plant, which is struggling to find enough fuel.

It is tragic for good energy policy that the Turnbull government keeps trying to bash up South Australia’s Labor government, blaming its 50 per cent renewable energy target for every tornado, Victorian transmission failure or gas generator failure that causes a temporary blackout in the state. These claims are untrue, and they get us nowhere.

The power operators, regulators and experts giving evidence to the Senate committee were unanimous on two things. First, South Australia’s wind power stations were built because of the federal government’s renewable energy target – not because of any state policies or incentives. Power companies that had to comply with the RET located an outsize share of wind generators in South Australia because it has a lot of wind, and not much else.

Second, wind power stations played a role in only one of the recent blackouts, in September when the tornadoes brought down transmission towers, and the network’s settings were then unable to cope with the non-synchronous power of the wind plants. The draft Finkel report on energy security noted that this problem was identified and fixed years ago in Europe, the United States and China, where most of the world’s wind energy is located. Lest we forget, the rest of the world generates one hundred times as much wind power as Australia. Wind does work.

That said, let’s be realistic. Power outages are annoying, but they are rarely life and death matters. South Australia and Queensland get more than their share of them, because they are at either end of the grid, which makes sudden power shortfalls harder to cover. That happens if you are at the end of the line. The remote eastern Victorian town of Mallacoota has so many power outages that it now has an established formula to calculate the rebate paid to consumers each year as compensation. That’s a practical way of dealing with the problems.

What is not practical is what the Weatherill and Turnbull governments are offering us now: noble projects pledging energy security, which will cost a lot, but deliver very little.

Jay Weatherill plans to spend $360 million of taxpayers’ money to get someone to build a 250 MW gas-fired plant somewhere, which will be switched on only when South Australia has a power crisis. Yes, the closure of Hazelwood makes it critical that South Australia boosts its own energy sources, but this would be an insurance policy whose cost is out of all proportion to the benefit it provides. South Australia needs a new gas station, to replace the elderly Torrens Island, but that would be a 500 or 1000 MW station to be operated 24/7, not just a backup for the odd emergency.

Now Malcolm Turnbull tells us he wants to spend “billions of dollars” of our money to build new pump storage tunnels with a 2000 MW capacity within the existing Snowy Mountains scheme. That sounds like a big expansion of our generation system, but it’s not. Pump storage is a way of meeting peak load or sudden demands on the power system; it’s not a 24/7 operation either. When power is plentiful, operators pump water uphill, from a lower storage to a higher one, so it’s there when you need it. When the critical moment comes, the water is released, rushes down, sends the hydro turbines spinning, and bingo! you’ve suddenly got electricity to spare.

But the system is expensive to build, which is why Victorian premier Dick Hamer finally rejected it in the 1970s after a brief infatuation like Turnbull’s. Power has to be taken out of the system to pump the water up. It’s not the only way to cope with a crisis, and pretty well every other solution will be cheaper.

I would plead one thing with the prime minister: promise us that this project will be built only if it passes an independent cost–benefit analysis by Infrastructure Australia. It too would be a very expensive insurance policy, and it would be years before it could be fully operational. The appeal to the romance of the Snowy project of old, the fact that this plan has come out of the blue, and from politicians rather than power experts… frankly, it smells like a political stunt.

The electricity industry is waiting for the government to produce an energy policy that explains how it will meet its commitment to drive down greenhouse gas emissions by 2030 to 26 to 28 per cent below 2005 levels. The government says it is waiting on the final report of the Finkel review before announcing its policy.

There is an overwhelming consensus that the centrepiece should be an emissions intensity scheme, as proposed by the draft Finkel report, by the government’s handpicked Climate Change Authority, and by electricity generators and big users alike. This would give the energy industry a clear, bipartisan timetable to reduce emissions, enabling it to plan and invest with confidence.

Turnbull’s Snowy Mountains announcement and his bullying of South Australia are alarming signs that the government may ignore the industry and continue to treat energy policy as a field of partisan conflict and stop-start policy. If it is going to change tack, it had better start soon. •

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The only information we have now is from the Australian Energy Market Operator, which publishes a simple graph and table of future projects on its website. It shows committed investment amounting to just 634 megawatts of new electricity generation – 583 MW of wind and 51 MW of solar – within the national electricity grid. Proposals exist for gas-fired stations, but none are definite. And there’s not a single plan for another coal-fired station.

To put that in perspective, the extra wind and solar generation would add a little over 1 per cent to the capacity of the national grid – if the gain wasn’t dwarfed by the 1618 MW of coal- and gas-fired power stations that have recently closed, and the further 3835 MW, overwhelmingly coal-fired, slated for closure. (The closures include Australia’s biggest polluter, the fifty-year-old Hazelwood power station, near Morwell.)

The net effect is that the capacity of the national electricity grid (which supplies about 75 per cent of Australia’s electricity) will shrink from 49,872 MW to 45,053 MW. That’s a reduction of almost 10 per cent in the capacity of a network that had to shut down supplies to parts of South Australia and New South Wales last week because of a lack of operational capacity. And this is happening under a government that boasts its energy policy will deliver energy security. Wonders never cease. 

Power stations are long-term investments, typically planned to last thirty years or more. So an investor today has to plan for the station to be viable until 2050 – under whatever pricing regimes may emerge between now and then. It doesn’t matter how many lumps of coal silly ministers wave around in parliament, or how many times the PM makes silly appeals for companies to invest in new coal-fired stations, company directors can’t choose to do stupid things with investors’ money. If energy security is our goal, then we need a credible bipartisan framework for energy policy.

Exactly that plea was directed to the government this week by an extraordinarily broad coalition of interests. Not just environmental groups, but also the energy-intensive aluminium, concrete and steel industries, the electricity generators, the transmission companies and the big energy consumers. And not only the ACTU and the Australian Industry Group but also the Business Council. (It is worth noting which hard-right business groups didn’t sign the statement: the Australian Chamber of Commerce and Industry, the Minerals Council, and the National Farmers’ Federation – even though the farmers it represents are the biggest victims of climate change.)

The joint statement is short, and worth reading:

No room for partisan politics in energy

Representatives of Australian communities, including civil society, households, workers, investors, business energy users and energy suppliers today challenged all political leaders to stop partisan antics and work together to reform Australia’s energy systems and markets to deliver the reliable, affordable and clean energy that is critical to wellbeing, employment and prosperity.

There is simply no room for partisan politics when the reliability, affordability and sustainability of Australia’s energy system is at stake.

The status quo of policy uncertainty, lack of coordination and unreformed markets is increasing costs, undermining investment and worsening reliability risks. This impacts all Australians, including vulnerable low-income households, workers, regional communities and trade-exposed industries.

The finger pointing will not solve our energy challenges. More than a decade of this has made most energy investments impossibly risky. This has pushed prices higher while hindering transformational change of our energy system. The result is enduring dysfunction in the electricity sector.

We need mature, considered debate. Market reform can’t happen unless the Commonwealth and States agree, and policies can’t last and motivate investment without broad cross-party support. Politicians from all sides of politics and all levels of government need to come together to work through the necessary solutions to our energy market challenges. COAG has already established a strong policy process for this – the Finkel Review. Politicians need to back it and work with it…

As the preliminary report of the Finkel Review correctly notes, many of the technological, economic and consumer trends transforming our energy systems are irreversible. Policy and market designs need to evolve if investors are to deliver the energy services Australians require at a price they can afford. A raft of reforms are needed to encourage and support flexibility throughout the system. The next stage of the Finkel Review should be an opportunity to explore these possibilities and develop a comprehensive and integrated suite of reforms. Policy should be implemented promptly with broad-based political support.

There is broad agreement across Australia’s energy users and suppliers on the urgency of fixing the situation. All sides of politics and all levels of government share responsibility for the current state of our energy systems – and for taking action with the energy industry and its customers to improve it. A collective failure to act would come at a cost to all Australians.

For the business groups involved, it was a courageous statement. It gave Turnbull political cover to change tack, drop the partisan mudslinging, and lead a bipartisan push for a credible, lasting policy that would drive down emissions and give electricity generators the certainty needed for their thirty-year investments. It was another opportunity for Turnbull and Barnaby Joyce to end the point-scoring games and focus on an issue that matters.

But no. Once again, Turnbull and Joyce backed away from mature leadership and went back to bashing Labor up in the schoolyard of Question Time. Treasurer Scott Morrison, equally juvenile, waved around a lump of coal. Forget the gold pass for retired MPs; the real scandal is that we are paying these guys to run the country.

Remember where we are coming from. Australia remains, by some way, the largest per-capita emitter of greenhouse gases in the Western world, and those emissions are growing. While the government claims we are on track to meet our commitment to reduce emissions by 5 per cent by 2020, its own figures show them rising again: from 527 million tonnes in 2013–14 (the last year of the carbon tax) to 537 million tonnes in 2015–16.

Since the carbon tax was dropped, our emissions have grown by roughly 1 per cent a year, mostly from electricity generation. With no carbon tax, coal-fired emissions increased; high gas prices caused gas-fired stations to close, or reduce loads; and a drought in Tasmania meant less hydro generation. In two years, emissions from electricity generation swelled by 4.6 per cent, from 180.7 million tonnes to 189.1 million.

The real disaster over those years was the abolition of the carbon tax (or rather, the emissions trading scheme it was set to morph into). The rest of the Abbott government’s performance on climate change was not as bad as we had feared. Against the odds, Greg Hunt as environment minister and Julie Bishop as foreign minister got the government to agree to a target of reducing Australia’s emissions in 2030 by 26–28 per cent from their 2005 levels; it might not sound much, but it equates to a 50 per cent fall in emissions per capita, in just twenty-five years.

Hunt also secured a Climate Change Authority review to advise how the reduction should be achieved. He preserved the Renewable Energy Target as the main driver of emissions reductions. And his design for the Direct Action policy included a “safeguards” clause allowing the government to order future reductions in emissions in specific sectors – such as electricity. Hunt didn’t get many plaudits from the media for his three years as environment minister, but winning some of those battles in the Abbott government can’t have been easy. He deserved better reviews.

Turnbull was once prepared to lose the party leadership over his support for a bipartisan policy to reduce emissions. Sure, he had promised the Nationals this time around that he would not bring back an emissions trading scheme, but that doesn’t rule out introducing an emissions intensity scheme, or EIS, to drive down emissions from the electricity sector, using the safeguards clause in the government’s own Direct Action policy.

With the election over, and with Labor having moved towards a policy resembling an EIS, the time was right for Turnbull to step up to the plate and bring Joyce, the Nationals and a critical mass of the Liberals to support a “mature, considered debate” leading to reforms that both sides could endorse. (The Greens and One Nation would oppose it, of course, for opposite reasons, but getting a Labor–Liberal–National agreement is what matters.) Labor’s environment spokesman, Mark Butler, has made no secret that this is what he wants, and Turnbull had made an inspired choice in appointing Josh Frydenberg, a bright, ambitious potential party leader, as environment and energy minister.

More support came from the Climate Change Authority, now led by former National Farmers’ Federation chief executive Wendy Craik, with former Coalition heavyweights John Sharp (Nationals) and Kate Carnell (Liberal) as board members. In an admirable report on how to meet the 2030 target, the authority urged the government to adopt an EIS as the central means of switching electricity generation from coal to renewables or other low-emission options. The EIS would require generators to reduce their emissions each year, on a straight line towards zero emissions from the electricity sector by 2050. The operators’ options would include closing units, retrofitting cleaner technology, or buying excess reductions from other generators. And, of course, any new plant would have low or zero emissions.

The report avoided the politically charged subject of state government renewable energy targets, but it did argue that there should be no further extension of the federal Renewable Energy Target, which would lapse in 2030, and the EIS should gradually take over the job of driving emission reductions. This also implies there should be no new state renewables targets.

This is essentially the compromise package that business, unions and environmentalists are now urging, almost pleading for. Please, stop the partisan games and give us a realistic policy. The Coalition should drop its opposition to an EIS; Labor should drop its state-based targets. Let’s have policy set at one level of government, and endorsed by both sides.

With no support from government, the Climate Change Authority’s report sank. In December, it was the turn of chief scientist Dr Alan Finkel and his colleagues to put their view, in a preliminary report on their inquiry into the future security of the national electricity market, set up in the wake of South Australia’s brief power blackout in September 2016. Rather than play the blame game, the review looked to the future:

The transition to a lower-emissions economy is under way and cannot be reversed. Ensuring that the transition is smooth will require major investments in assets with long life spans. Policy stability and predictability is necessary to ensure that investors have confidence to build the assets that will deliver the required stability and reliability of electricity supply.

It, too, endorsed an EIS as the central element – hardly surprising, since Finkel was a member of the Craik review a few months earlier. Frydenberg responded with some sensible, encouraging words of support, but he was immediately slapped down by Turnbull, who proceeded to rule it out. In so doing, he ruled out another opportunity to solve one of Australia’s problems rather than try to exploit it for political ends.

It was the same this week when the business groups tried to offer the government a way out, which it rejected. Instead, the leader who told us in 2015 he wanted to lead adult discussions has tried to imply that South Australia’s renewable energy policies are responsible for 100 kph winds knocking over transmission towers last September, for breakdowns in the Victorian transmission system in December, and now for a series of brief but untimely breakdowns at gas-fired plants that combined with low winds and extreme heat to force another brief interruption to SA’s power supply last week.

Weak leaders can choose to play an issue for short-term political advantage, as Malcolm Turnbull is doing now to shore up his support in the party room. A strong leader, such as Turnbull had hoped to be when he took office, would focus on delivering what is in Australia’s long-term interests, winning political and community support for policy.

Turnbull and the Coalition would win far more kudos by tackling and solving the problems of energy security and reducing emissions than they will by trying to use them as issues with which to thump Labor over the head. They should not be deluded by rave reviews for such tactics from backbenchers and the Murdoch press. Voters elected them to fix the problems, not to blame Labor for them.

This is a test of leadership: both for Turnbull, who is wasting his opportunities, and for Joyce, the man who more than anyone can now make the Turnbull government work, or send the Coalition back into opposition. •

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Great. But what exactly is the Coalition doing about them? On the evidence to date, not a whole lot, apart from blaming renewables for soaring wholesale electricity costs and promoting something called “clean coal,” despite all the evidence pointing to the fact that coal generation is not very clean, and not cheap. They are chasing the wrong target. Australia has experienced some extraordinarily high wholesale electricity prices this summer, and most of these price surges have come in states with little large-scale wind or solar.

It is the activities of the fossil fuel generators that are to blame. This is about competition, or the lack of it, and the fossil fuel generators have been going to extraordinary lengths to get rid of competition.

The Australian Energy Regulator, or AER, has been investigating more than half a dozen “high priced” events, as it is required to do when prices jump above $5,000/MWh. Some of the reports it has already completed make astonishing reading.

Take the events of last 18 November in New South Wales, when the spot price of electricity jumped to more than $11,700/MWh in the mid afternoon, and bids of more than $13,700 were recorded over seven different trading intervals during the course of the afternoon.

These are the sort of levels that have caused conservatives in politics and many in the media to hyperventilate about the level of renewable energy in South Australia, and the proposed state-based renewable energy targets in Victoria, Queensland and even the Northern Territory.

But here’s the irony. So far this year, as the table shows, high-priced events are forty (yes, forty) times more common in Queensland than in renewables-strong South Australia. Did we hear a peep of protest from the Coalition about this? No.

The importance of the November pricing event in New South Wales is that – like so many other similar events – it shouldn’t have happened; but it did, because two players in the market, Origin Energy and Snowy Hydro, without breaking the rules, were able to game the market and eradicate competition.

This is how they did it. According to the AER, a network constraint was imposed on the border between New South Wales and Victoria. These constraints are imposed when there is a risk of a network overload, and the way they work means that the generators in NSW act as sort of “gatekeepers.” If they increase generation, then it forces the Victorian generators out of the market, reducing competition.

This is exactly what Origin and Snowy Hydro did. According to the AER report, they bid 3,000MW of capacity to the price floor, flooding the market. That forced the Victorian generators, and most competition, out of the NSW market. It also put some caps on the output of some wind farms.

At the same time, according to the AER, Origin and Snowy “rebid the ramp rates” of their generators down to the minimum allowable by the rules. That ensured that the Victorian generators were kept out of the markets for as long as possible.

And what happened in the interim? Well, the NSW generators had a party. The lack of competition meant they could force prices up to their maximum level over seven consecutive bidding periods. “The price exceeded $13,600/MWh for seven dispatch intervals from 2.40 pm to 3.30 pm, inclusive,” the AER notes.

This was not an isolated incident. An unplanned outage on the interconnector linking Victoria to South Australia on 1 December created a similar constraint on that link. This was a few hours after a network fault in Victoria caused a widespread blackout in South Australia, leading the government and many in the media to blame renewable energy once again.

According to the AER, Origin Energy unexpectedly fired up its Mortlake gas power generator at 10am, when the link was still under constraint, forcing imports from Victoria out of the market and allowing the South Australian generators to have another pricing party, unencumbered by competition from interstate. According to the AER, Origin Energy’s actions helped force the market price up to the cap, and the price for the thirty-minute interval to $9175/MWh.

The party didn’t last long, though. The Australian Energy Market Operator instructed Origin to switch Mortlake off, because it was causing grid stability issues. Prices then dropped sharply. (You can read more about that in the AER’s report.) This lack of competition was the very same factor that drove prices sky-high in South Australia in July, when the interconnector was restricted for planned upgrades. And it is this similar lack of competition that has underpinned the extraordinary price rises – higher and longer-lasting than in South Australia – in Queensland these past few months.

See that table above again, absorb the fact that prices in Queensland this year have been as high as they were in South Australia last July when the link to Victoria was being upgraded, and wonder about the absence of conservative outrage.

The AER is currently investigating around half a dozen high-priced events. Even though the average of late afternoon spot prices has been more than $1000/MWh in Queensland, a price event is not investigated by the regulator until it gets above $5000/MWh. The market players know this and bid accordingly.

But the data goes to a fundamental point in the debate about electricity prices. This has nothing – nothing – to do with renewable energy, its costs or its variability. It is solely about the pricing power of the fossil fuel generators, most of them owned by the retailers who insist they are acting at all times in the best interests of their consumers.

South Australia and Queensland have typically been the markets with the least amount of competition. But the proliferation of wind energy in South Australia has changed that, and the fossil fuel generators have only been able to party – like they used to a decade ago, when such high-priced events were nearly a daily occurrence – when there are network problems.

Queensland, though, has little large-scale renewable energy capacity, although the construction of half a dozen large-scale solar plants in the next few months may change the market dynamics this year. Maybe that is why the government-owned generators have been so keen to profit while they can.

More renewables, and more competition, will undoubtedly reduce that pricing power. That is a given. But the Coalition and many in the mainstream media simply don’t want to know. They have barely reported on the high-priced events in Queensland and New South Wales, or on the real cause of those events in South Australia. Politics and ideology are at play. •

This article first appeared in RenewEconomy.

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Aside from provisions for sharing the proceeds of under-sea resources, the key feature of the 2006 agreement – known as CMATS – was a fifty-year moratorium on negotiations to determine the boundary between Australia and Timor-Leste. Instead, the two countries negotiated a series of revenue-sharing agreements, known as “provisional arrangements” under the UN Convention on the Law of the Sea, or UNCLOS.

Monday’s announcement is especially significant because it is the first time since the restoration of East Timorese independence in 2002 that Australia has publicly committed to negotiating permanent maritime boundaries. Malcolm Turnbull and foreign minister Julie Bishop had consistently rejected calls for boundary talks and were voicing their support for CMATS as recently as late last year, so the turnaround is a significant step.

Several factors help explain the change in Australia’s position. For one, the 2006 treaty had been tarnished by allegations that Australia had spied on the East Timorese negotiating team in 2004. The reported evidence of a former ASIS agent, “Witness K,” provided grounds for Timor-Leste to challenge the treaty, invoking the Vienna Convention’s principle that negotiations should take place in “good faith.” Monday’s joint announcement is, in effect, an acknowledgement that Australia wants that case to end.

Equally significantly, last April the government of Timor-Leste initiated compulsory conciliation proceedings under UNCLOS with the aim of concluding permanent maritime boundaries with Australia. Australia’s opening legal gambit – the claim that the CMATS treaty had already settled the border dispute – was roundly dismissed by the proceeding’s judges, who found that Australia’s obligation to settle the boundary survived the treaty, despite the purported moratorium. Having lost this argument, Australia had little further use for CMATS. Monday’s announcement demonstrates that the UN-auspiced conciliation process is working, and highlights the importance of the principles and institutions of law in these disputes.

The third factor was the dispute between China and its neighbours in the South China Sea, which raised the regional profile of law in boundary disputes. In that case, Australia urged China to follow the rule of law, as represented by the decision of the tribunal formed under UNCLOS. The contrast with Canberra’s own behaviour – its refusal to discuss a boundary in the Timor Sea and its withdrawal from the dispute-settlement provisions of UNCLOS shortly before East Timorese independence in 2002 – has created something of a public relations problem for Australia.

While Australia’s new commitment to negotiating a permanent maritime boundary is overdue and welcome, this doesn’t mean that negotiations will be conclusive or rapid. The two sides are likely to start from very different positions on where a boundary should be settled. While Australia may find it difficult to maintain its “natural prolongation” continental-shelf argument given the increasingly strong presumption of a median-line boundary in law, the process of negotiating frontier and lateral boundaries, and the consequent revenue arrangements, could be lengthy or deliberately drawn out.

It is also notable that the government’s pledge to negotiate a boundary does not go as far as Labor’s policy, which commits to ly binding dispute resolution if bilateral negotiation fails. In other words, Canberra hasn’t committed to the settlement of the dispute in accordance with law. Nonetheless, this week’s announcement is a positive step, and a clear endorsement of the UNCLOS conciliation process initiated by Timor-Leste. For its part, Timor-Leste is likely to drop the espionage case against Australia.

The key issue ahead is the division of royalties from the Timor Sea. Setting the boundary at a median point between the two countries would certainly lift Timor-Leste’s revenue from existing fields in the Joint Petroleum Development Area, which stands to rise from 90 per cent to 100 per cent. But these fields are heading towards the end of their lifespans, and the larger and as-yet-undeveloped Greater Sunrise field, which straddles the eastern lateral of the Joint Petroleum Development Area, is a trickier question. CMATS divided future rents over this field on a fifty–fifty basis, but the earlier Timor Sea Treaty, which prevails until the coming negotiations are concluded, gives just 20 per cent to Timor-Leste.

Though these are merely numbers on a page while the field remains undeveloped, and would be superseded by any fresh negotiations, they highlight how critical the final revenue details will be for Timor-Leste. The future placement of the eastern lateral boundary will therefore be of prime relevance. The East Timorese government has formal legal opinions suggesting it should receive a larger share of that field when the boundary is finalised. Herein lies clear potential for disagreement between the parties.

Of potential relevance to this question is Timor-Leste’s current maritime boundary negotiations with Indonesia. While these talks will start off on the north coast, it is the south coast determination that could have a wider impact – not least where the lateral boundary is set within their territorial waters, which could potentially influence its extension further south in any new division between Australia and Timor-Leste. Canberra also remains concerned that a median-line boundary, favoured by law since UNCLOS, could open up a challenge to the 1972 “continental shelf” border with Indonesia. This possibility can’t be ruled out, though it is fair to say that the political risks exceed the legal exposure, as there remains a very substantial difference between a border settled and observed for forty-five years and one that was never negotiated.

Less often posed are questions over the western lateral boundary of the Joint Petroleum Development Area. Longstanding fields like Corallina, Laminaria and Buffalo lie just outside it, but potentially within the future Exclusive Economic Zone of Timor-Leste. Timor-Leste has received no royalties from these fields, which have returned rents to Australia. Will a settlement of boundaries include compensation for lost royalties? These issues could arise in negotiations, and suggest that Timor-Leste will have cards to play in terms of trading off potential claims. Though understandings exist between the two governments relating to these matters, they could come back into play in fresh negotiations.

The coming negotiations won’t necessarily be conclusive; nor are they guaranteed to meet all of Timor-Leste’s aspirations. But this is a significant turning point in the dispute. It may also give pause to critics of the East Timorese government’s legal strategy.

Critics are less likely to resile from their critiques of the ambitious East Timorese plans for “downstream” processing of oil and gas on the country’s south coast, which remain out of favour with commercial partners like Woodside Petroleum. More broadly, the East Timorese government’s current approach to development, heavily focused on mega-projects and large-scale infrastructure spending, continues to attract criticism, as does the sustainability of the country’s sovereign wealth fund, given current rates of annual budget expenditure.

While these matters tend to attract attention in commentary on the boundary dispute, they are separate issues, subject to increasing debate within Timor-Leste’s lively civil society itself, and are likely to feature in this year’s elections. •

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In this part of Sarawak, not connected to the national electricity grid, small-scale solar electricity is proving successful where larger projects have failed. For Ajan, the experiment is certainly paying off. “I only bought this a few months ago, but the cost was not that high. For one panel, including the battery, I pay around 300 ringgit. The smaller ones are only 250. This whole setup cost no more than 1000 ringgit.” At this price, two large panels with batteries and an inverter can pay for themselves within a month or two, depending on usage. This means that solar installations have become affordable even here, where most people have little income other than from cash crops and their children’s remittances.

Downriver, the community of Long San is also looking to small-scale solar, after years of failed projects by the Malaysian government and non-government organisations to bring electricity to the area. At present, Long San’s clinic, airport, and primary and secondary schools (which serve the whole region) all rely on diesel or petrol generators. Fuel has to be hauled in from the coast via logging roads, a drive of at least four hours in good weather.

Villages in this part of Sarawak are only accessible via logging road, like this one near Long Julan, Baram. Christine Horn

In 2009, the Malaysian government agreed to fund a mini-hydroelectric project in Long San, to provide electricity for the whole community. Cables were installed across the village and switches fitted in each house. But after a reported RM2.4 million (A$760,000) had been spent, the project was abruptly abandoned. It was part of a pattern of failure with mini- and micro-hydroelectric projects – sometimes including solar installations – in Sarawak’s rural communities.

Then, as part of the Sarawak state government’s project to build twelve hydroelectric “mega dams,” a dam on the Baram river was proposed, which would have seen Long San under one hundred metres of water by 2020 because of its location within the reservoir area. But after months of protests and blockades, the dam project was finally put on hold this year. People in Long San and the surrounding villages point out that the hydroelectric dam would not, in any case, have provided the area with electricity. The Bakun dam, a hydroelectric project in Sarawak completed in 2011, caused the resettlement of thousands of indigenous people, but in their new resettlement site people still rely on generators, with the electricity transmission lines from the dam looming overhead.

Over the past two years, Long San has begun to develop solar power options. At first, small solar-powered devices, like radios and LED lanterns, appeared around people’s houses. Then, people started using solar panels just larger than an A3 sheet of paper and connected to a battery with an integrated inverter smaller than a shoebox. These can power several LED light bulbs for a whole night. More recently, larger panels have become available, which can power other electrical devices as well.

What has made solar panels available at this price, and how has the technology become accessible to people in this remote region?

The answer lies a couple of kilometres south of Long San, in a place locally known as Kilometre Ten, or Kilo Ten, otherwise known as the Samling Baram Central Base Camp. It is the local headquarters of the biggest logging company operating in the area, Samling Timber Sdn Bhd. Kilo Ten is a village of its own, with accommodation for workers and their families, shops, canteens and several restaurants, a church, a nearby veneer factory, a helicopter pad, various mechanics workshops, and the company’s local offices. The size of the camp suggests the scope of Samling’s operations in the area. During the day, logging trucks laden with the relatively scrawny leftovers of decades of timber extraction make their way past the camp to the central log pond. Samling has been a feature of people’s lives here for years.

According to one estimate, 30 per cent of households in rural Sarawak have no access to grid electricity, and must run their own generators, like this one at Long Moh, Baram. Christine Horn

The source of the blossoming solar electrification in the area, however, is only loosely affiliated with the camp itself, and has in fact recently been banished from its previous location near the workshops. In a small cluster of shops, now in a shack outside the camp gates, a team of four or five Chinese shopkeepers display their stock for company employees and others passing through on the main logging road adjacent to the camp. These shops and their products have provided solar technology to the area for over two years.

The shops offer all the electrical goods that people in rural communities need, and more: from tinted headlamps for hunters to karaoke machines; from rechargeable fans to remote-controlled drones; and, yes, solar panels. The panels come in different sizes and are sold together with all the necessary parts, including the inverter, battery, cables, and four LED light bulbs with fittings. Several USB ports for charging phones are integrated in the battery case. One shopkeeper helpfully points out the technical details, and shows customers images on her smartphone of the products in use. She comes from a small town in China and goes back every Chinese New Year to see her children. Her husband also works in Kilo Ten, but she does not say how both of them came to be here. Every day, she and her colleagues sell solar equipment to the people passing by on their way to the villages.

Battery and inverter tucked away in a kitchen in Long Selaan, Baram. Christine Horn

The success of the solar technology sold at Kilo Ten can be attributed to the fact that it is cheap, easily installed and readily replaced if broken. Peter, a local from Long Mekaba, a village some way upriver from Long San, put it this way: “I bought the panel and the battery for my house, but I didn’t expect it to last long. The quality does not seem to be that good. But it has already lasted for two years. And even if the battery breaks, for example, I can just get a new one at the shop.” As for the cost, Peter said that it was not a big problem. “They are really cheap. If you buy this kind of thing in Marudi [a bigger town nearby] or in Miri [the main city in the area], you will pay at least twice what you pay at Kilo Ten.”

The supply strategies of the Kilo Ten shops probably leave a bit to be desired, which may well account for the competitive prices. In any case, these shops have been the key to the rapid uptake of solar technology in the region. They have made the technology available at a price people can afford, in a central location that is easy to access because the main road passes by the camp. The low prices allow local people to take the risk of investing in a new technology, even if they don’t know whether it will pay off. The different options available allow each family to buy a system that is tailored to their needs and budget.

Although these children in Long Loyang are watching a TV powered by a generator, the spread of solar could one day provide cheaper, more secure power. Christine Horn

The story of rural electrification in Long San and the surrounding area suggests that the technology is already a viable alternative for local people. For governments in developing countries, as well as non-government organisations and researchers in the field, this may mean that it is time to look beyond community-based options – which can suffer from a range of problems, such as misappropriation of funds, faulty planning and tricky maintenance – and instead focus on promoting cheap and readily available solar devices to encourage individual solutions. In this way, individuals are empowered to control each step, including investment, installation, maintenance and repair.

For Ajan, the investment in solar energy is going to pay off soon, but not everyone has caught on yet. Most people in rural Sarawak still use generators, but things could be changing. •

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The argument for carbon trading and other market mechanisms is that they are more efficient than simply requiring companies to use specific low-carbon technologies, or imposing legislative bans on high-carbon activities. Economists argue that market mechanisms provide “least cost” emissions reductions that won’t compromise economic growth.

In practice, though, they don’t match the picture of markets in economics textbooks. During twenty years of experimentation, carbon markets have been troubled by regulatory failures and flawed by a mistaken equivalence between different parts of the carbon cycle – between fossil fuel emissions and land-based emissions, for instance. Nor have carbon prices created anything more than marginal changes in the cost structure of production. In the context of complex governance failures in energy markets, including Australia’s National Electricity Market, they are relatively weak instruments.

Carbon trading is particularly weak when we consider the historical relationship between fossil fuels (the largest source of greenhouse gases) and global markets. The International Energy Agency, Oxford University researchers, and Carbon Tracker have all demonstrated that billions of dollars in fossil fuel assets and infrastructure will have to be written off if we are to stay within the 1.5–2°C range. We need much stronger government action to ensure a just transition to alternate energy sources.

The Paris Agreement aims to kept global temperature “well below” a 2°C increase on pre-industrial levels, and to “pursue efforts” towards 1.5°C. While the strengthened temperature goal is something to celebrate, the question of exactly how the world will stay within a 1.5°C limit is up in the air. Pre-conference country reports to the United Nations add up to more like 3–4°C warming, and although national pledges will be reviewed every five years there is no requirement for nations to follow through with tighter controls.

The agreement includes no explicit reference to carbon trading, offsets, or other forms of carbon pricing. But in its euphemistic language it does sketch out a new voluntary mechanism for carbon trading. Article 6 outlines a mechanism designed to “contribute to the mitigation of greenhouse gas emissions and support sustainable development” and obliquely describes carbon credit trading as “ly transferred mitigation outcomes.” The new mechanism will be a voluntary instrument, with different combinations of nations able to choose to create linked carbon-trading and offset schemes.

This is much more ambiguous phrasing than in previous UN agreements. The 1997 Kyoto Protocol, for instance, explicitly set out three “flexible mechanisms” in its text: emissions trading, the Clean Development Mechanism, and Joint Implementation (two offset schemes). The UN offset programs were one outcome of that agreement, as were the regional EU emissions trading scheme and the numerous other trading schemes across the world. The Paris Agreement will supersede the Kyoto Protocol in 2020, and existing UN offset programs will be folded into the mysterious new mechanism.

The agreement also notes that carbon trading should not be the only game in town. Article 6 refers to the importance of “integrated, holistic and balanced non-market approaches” to national efforts. A parallel debate has arisen on the question of a separate new mechanism for land carbon offsets, which was not agreed to in Paris. Although the Coalition for Rainforest Nations has been arguing in favour of a new forest offset scheme, Tuvalu and Brazil have opposed it. But land carbon offsets, like Australia’s “carbon farming” projects, may be included in the new market mechanism created by the Paris Agreement.

Article 4 of the agreement aims to “achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century.” This language opens up the possibility of forest offsets, as well as geoengineering techniques like carbon capture and storage or ocean fertilisation. Using land carbon offsets to create “carbon sinks” will not compensate for continued exploitation of fossil fuels, however, and conservation projects and unproven technologies like biochar could have unforeseen effects.

These worries aside, it is important to recognise that carbon trading is not the politically attractive option it used to be. Numerous countries and regions, including the European Union, Brazil and New Zealand, argued for carbon trading to be including in the Paris Agreement. They had support from big oil and coal, the World Bank, and the International Monetary Fund. But resistance from elsewhere has weakened the appetite for carbon trading ly.

A significant part of the reason why carbon trading is marginal in the Paris Agreement is the strident opposition from Venezuela and Bolivia to any mention of market mechanisms in the post-Kyoto agreement. They have opposed carbon trading because it shifts responsibility for emissions reduction towards developing countries.

Carbon trading has also encountered opposition in diverse local and national locations. Social movement groups and affected communities in developing countries have opposed carbon trading and offsetting. And, for entirely different reasons, conservatives have campaigned against carbon trading in Australia, the United States and Canada.

In Australia, conservatives oppose carbon trading because it (potentially) involves government action to limit fossil fuels. But the content of the debate has become more confused than a simple matter of energy preferences. In the long, bitter debate over carbon pricing in Australia, conservatives leveraged the contradictions and shortcomings of carbon trading in an attempt to delegitimise it. They targeted the risks associated with offsets, the failures of the EU carbon market and the regressive impact of carbon pricing. These are real distributive issues that warrant serious political discussion, but Australian political leaders preferred to exchange cynical half-truths.

The Paris Agreement will not deliver a carbon market that comes even close to the ideal trading regime economists have been after. What we are likely to see after Paris is a patchwork of emissions trading and offsets schemes that won’t reduce emissions on the scale necessary.

This is why policy-makers and others engaged in this debate should move beyond a fixation with carbon prices and stop making narrow political points about the potential reintroduction of emissions trading. No doubt the experiment in carbon trading will continue, and Australia looks interested once again in “cheap” offsets. But carbon pricing will become increasingly marginal to the debate as the case for energy market reform develops.

Meanwhile, interest in direct regulation is resurging. The Stockholm Environment Institute has been developing the case for “supply side” climate policy that involves governments in placing restrictions on fossil fuel developments. If successful, the Australia Institute’s campaign for a global moratorium on new coal mines would help keep the required volume of fossil fuels in the ground. Community groups are also seeking to democratise coal and gas licensing and planning processes, including insisting on their right to say no to companies. Public investment in renewable energies and reform of our broken electricity industry are also long overdue.

Energy market reform will undoubtedly create new contradictions and political trouble. But the urgency of climate change requires more than carbon pricing can deliver. •

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By 1990 or so, a well-developed literature on “free market environmentalism” was pushing the idea that environmental problems are the result of inadequate property rights, and that the solution was to create such rights: in this case, tradeable emissions permits. At the time, environmental organisations were generally hostile to the idea, preferring direct regulation, but most of them eventually came around to the view that a carbon price was essential to solving the problem.

Instead of claiming victory, the right opposed the idea ferociously and effectively, with the result that policies have involved much more intrusive regulation, and much less reliance on markets, than would have been optimal. The apparent oddity of a supposedly market-oriented government in Australia preferring “direct action” over price-based policies is by no means unusual.

Initially, the right’s campaign had significant support from fossil fuel interests (notably Exxon) through bodies like the Global Climate Coalition. But that dropped off quite early because most big corporations worked out they were better off changing their business models to incorporate renewables rather than fighting to save the old ways of doing things. For at least the past decade, the economic issues have been secondary – it’s all culture war all the time.

Has the campaign helped or harmed the right? The harm is obvious enough. The scientific and economic evidence on climate change is so clearcut that mounting a case against it requires a huge amount of willing gullibility (the fact that it is labelled “scepticism” is one of the smaller ironies of the story). The result has been a big contribution to the lowering of intellectual standards, which allows someone like Donald Trump to become a plausible candidate for the Republican nomination in the United States.

The intellectual damage has been particularly severe for libertarians, who have traditionally thought of themselves as the smart, logical types, deriving their policy positions from rigorous deduction. As the case of climate change has shown, you can get any answer you want if you make up your own facts. So, we have the sorry spectacle of self-described libertarians making the kinds of spurious claims, in relation to wind farms, that were once the province of the least credible environmentalists, and demanding the appointment of highly paid government regulators. At the turn of the century, libertarianism had a plausible case to be the way of the future. Now, as far as I can see, it has disappeared from view in the United States and survives in Australia only because of the vagaries of the Senate electoral system.

Against that, the struggle to save the planet from dangerous climate change has chewed up a huge amount of energy and effort on the left. Arguably, that has distracted attention from economic issues, and allowed the steady rise of the wealth of the 1 per cent to go unchallenged. That analysis fits with the widely held view that the culture wars are just a device to keep the right-wing base agitated enough to turn out, losing time after time but still providing the votes needed to keep pro-rich politicians in office.

One potential problem would be a Republican win in next year’s US presidential election. But the momentum is such that it would probably not make much difference. Even if a Republican administration weakened environmental standards, no one is going to build a new coal-fired power station in the United States knowing that it might have to shut down after the following election.

This is part of the reason why I’d argue that Annabel Crabb’s answer to the question of who will speak for the sceptics now – “Watch this space, because it won’t be empty for long” – relies on two dubious assumptions. The first is that the denialist position adopted in Australia under Tony Abbott reflected the “scepticism” of the party base, rather than vice versa. The great majority of “sceptics” are, in fact, credulous believers in what they are told by trusted authority figures, notably including conservative political leaders. Since most Coalition voters appear to be happy with the shift to Turnbull, it seems likely that they will adjust their opinions to fit with those of the government. The minority who are seriously unhappy have nowhere else to go.

The second assumption is that any view that is widely held in the general community will inevitably get some political representation. This simply isn’t true. To take a couple of examples, all the evidence I’ve seen suggests strong support (not from the same people, though I’m sure there’s overlap) for the reintroduction of capital punishment and for the renationalisation of the Commonwealth Bank. Those views aren’t represented in the political process and aren’t likely to be.

If we were going to see a significant backlash against Turnbull on this issue, there would be background leaks from senior ministers rather than snarky tweets from insignificant backbenchers. As far as I can tell, people like Andrew Robb, Josh Frydenberg and Peter Dutton, who presumably would prefer the Abbott line, have stayed quiet.

The one option for denialists is a minor party run for the Senate. That would create some nasty complications regarding preferences, but wouldn’t really change anything, any more than the election of a Liberal Democratic Party senator did last time around. •

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“You have to gavel,” suggested Christiana Figueres, the executive director of the UN Framework Convention on Climate Change, who picked up the wreckage of the process after the failure of Copenhagen and patiently and persistently put it back on the road to success.

“It’s a small gavel, but I think it can do a great job,” Fabius responded. And so, at 7.30pm local time on Saturday 12 December, Fabius brought down the gavel, signalling the beginning of the end of the fossil era. The gesture created a moment’s pause, and then an outpouring of celebrations on the conference floor and in nearby corridors. In the boardroom of Big Coal, the groan might have been audible.

The deal secured by 196 nations in the otherwise bleak terrain of a conference centre on the edges of the Le Bourget airport, north of Paris, goes beyond what anyone could have imagined six months ago, or even a fortnight ago when 150 government leaders turned up to the first day of talks in the biggest gathering of leaders ever seen.

The Paris Agreement calls for a target to keep average global warming to “well below” 2°C, and includes an aspirational target of 1.5°C – targets that mean that fossil fuels will need to be removed from the world’s energy systems by around 2050. To get there, the world is going to have to quickly scale up its actions. The Paris Agreement calls for a stocktake in 2018, followed by new pledges, and for this process to be repeated every five years until the target is met.

There is clearly much work to be done. The Paris Agreement is criticised by some for its fluffy language, but that reflects the nature of the UN beast and the need for compromise to get a deal done with such diverse interests at stake. Yet, while the document suggests at one point that emissions will need to peak “as soon as possible,” in other sections it is quite explicit.

It notes, for instance, that based on the pledges brought to Paris by 186 of the participating countries, the world is still heading to increase its annual emissions from fifty gigatonnes a year now to fifty-five gigatonnes in 2030. But article 17 makes clear that if the 2°C target is to be met, then those annual emissions will need to be cut to just forty gigatonnes a year by 2030, and to far less if the “well below 2°C” and the 1.5°C scenarios are to be met. That, says Malte Meinshausen from Potsdam University and the University of Melbourne, means emissions will need to peak by 2020. By 2050, the energy sector will need to be carbon neutral.

“We have witnessed something incredible today,” Climate Council chair Tim Flannery said. “Finally, we can feel hopeful that we are on a path to tackling climate change.” But how did this happen? How, in the space of a few short years, did disaster at Copenhagen translate into success at Paris?

The answer lies mostly in technology. The stunning decline in the cost of solar (a fall of more than 80 per cent since 2009) and wind energy means that the task of decarbonising the world’s energy system doesn’t look quite so hard. Indeed, it might even cost less in terms of outgoings, and save trillions in avoided health and climate costs.

This, and the growing evidence that 2°C would not be low enough to protect much of the world’s population, led to the creation of a new coalition of countries that ruptured the traditional negotiating blocs – the division between developed and developing nations – that have dominated and frustrated talks over the past two decades.

Australia, courtesy of its Abbott-era policies, found itself excluded two years ago from the loose grouping of progressive nations, known as the Cartagena Dialogue, it had helped to found. When a new “high ambition coalition” was revealed, Australia was also on the outer. Despite playing a constructive role at the talks, Australia’s policy settings and rhetoric didn’t change: the carbon price is dumped, the renewable target reduced, two key finance institutions remain on the chopping block, and emissions in the industrial sector are growing as fast as Australia can buy emissions elsewhere with its Emissions Reduction Fund.

In Paris, foreign minister Julie Bishop even found time to praise coal because it could cure “poverty and hunger.” It is one thing to make such remarks on the domestic stage, quite another in the heart of a climate conference trying to undo the damage that coal is causing to the climate, and to health.

Yet, seemingly embarrassed by its isolation after Brazil and then Canada joined the new coalition, Australia sought to join too. It finally did so, on the floor of the plenary when the process was all but over, but even then Australia didn’t quite get it.

Bishop downplayed its significance, saying, “This is not a negotiating coalition, this is a group of people who say we all share a view about an ambitious agreement.” But to most observers, the emergence of a bloc that brought together the world’s biggest economy, Europe, the poorest nations in Africa, the vulnerable island nations of the Pacific, and powerful emerging economies was one of the most significant developments in the history of the talks. In the end, it was able to diffuse the obstructionism of Saudi Arabia, India and China, and the 1.5°C target was thrust to centre stage.

Even after the talks were completed, Bishop remained equivocal about Australia’s policies. While other ministers talked of the need for decarbonisation and ambitious policies at home, Bishop talked now of having “the flexibility” to move, but not so far as to “damage” Australia’s economy. “We have to get that balance right between environmental and economic outcomes,” she told media.

Asked about the likely demise of fossil fuels, Bishop responded, “Nobody expects countries to destroy their own economies. That would be self-defeating.” But that’s exactly what Australia risks doing if it retains its attachment to coal.

Indeed, one of the reasons why the final deal ended up with such ambition is that governments are now playing catch-up to global businesses, which have already taken note of the huge slump in renewable energy costs since Copenhagen, and are now investing more in renewable energy than they are in conventional generation.

Howard Bamsey, the former Australian climate ambassador and head of delegation – a man who has been to nineteen of these conferences – was taken aback by the transformation in the business delegations. Once concerned only with maintaining the status quo, they were now, Bamsey said, turning the conference – away from the negotiating rooms – into a sort of giant trade show. It was a strong indication, he said, that what the governments do matters less, and the technology is now driving change.

Still, the Paris agreement will provide an enormous fillip to that change. Sean Kidney, an Australian who heads the Climate Bonds Initiative, says there could be $1 trillion a year of clean energy financing through bond markets by 2020. “The community has opened the way for institutional investors, regions and cities to now take the lead on climate finance solutions with confidence that governments have set the low carbon direction,” he said after the deal was sealed.

Clive Hamilton, a board member of the Climate Change Authority who has been at these talks for the full two weeks, wrote before the final deal, “The most surprising revelation here at the Paris climate conference has been the astonishing shift in the world of investors over the past twelve months.

“There is now unprecedented momentum towards participating in the transition to a low-carbon economy, and the view at the ‘big end’ of the conference is that a strong agreement will provide an extra shove. It’s unstoppable now.”

One person facing an unstoppable transition is Andrew Vesey, the American who now heads Australia’s AGL Energy. He, too, was at the talks, and says the impact of rooftop solar, battery storage and smart meters will be so great that he doesn’t know what his business model will turn out to be – apart from the fact that it will be very different.

And Vesey knows that coal is coming to an end. AGL owns the country’s biggest single emitter, the Loy Yang A power station. But it is also one of the cleanest (in terms of emissions per output), one of the cheapest and one of the youngest. Which means that Loy Yang A may be the last coal-fired power station operating in the Australian grid. And Vesey intends to close that down by 2048 at the latest. •

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