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A lot can happen in 30 years, which makes it pretty safe territory for anyone making promises for 2050, particularly if they’re unlikely to even be around then.
For all the hot air and emissions produced in Glasgow last week, Australia appeared to be a frontrunner, despite the Prime Minister’s road-to-Damascus conversion to producing net zero carbon emissions by the century’s midpoint.
As dramatic as that conversion may appear — given the Prime Minister’s recent musings on everything from the shortcoming of electric vehicles to the need for a gas-led recovery from the COVID-induced recession — he’s copped a great of deal of flak for his noticeable lack of detail on just how we will achieve the target.
That’s not surprising. For it will be a mammoth task that will involve a great deal of pain and dislocation for regional communities that rely upon coal mining — and that is never a great selling point in an election.
However, the pathway to net zero emissions will not come through governments throwing money into unproven technology such as clean coal or carbon capture and storage. It will be achieved on financial markets via a price on carbon.
Coal may be a cheap source of energy, but only if you exclude the cost of the environmental damage it causes.
Ironically, given his attitude to climate change, former Prime Minister Tony Abbott inadvertently created the framework for a carbon price when he axed Julia Gillard’s carbon tax. And that price, ultimately, will determine our energy and emissions future. More on that later.
Australia is one of the world’s biggest exporters of fossil fuels.
We are the second-biggest coal exporter, after Indonesia, and we are neck and neck with Qatar for global domination in liquefied natural gas shipments, potentially leaving us horribly exposed to a sudden shift away from fossil fuel.
Coal exports last year netted almost $55 billion, with gas delivering $36 billion. And that was during a global recession.
This year will be far higher, particularly given the energy shortage currently wreaking havoc across the globe.
That’s a great deal of money which, unsurprisingly, attracts quite a bit of political pressure from those with a vested interest in maintaining the status quo.
We are the champions
We may not be anywhere near the biggest carbon emitter — that distinction goes to China, which churns out more than a quarter of the globe’s annual emissions — but, given our exporter status, we provide the fuel to everyone else.
And when it comes to personal use, we certainly punch well above our weight.
Australians pump out more carbon, on a per capita basis, than almost everyone else.
At 15.5 metric tonnes each, our per capita emissions are about double those of China and beaten only by the oil-rich countries of the Middle East, according to World Bank statistics.
Much of it comes from burning coal to generate electricity. While that has been in decline in recent years, as renewables and gas have replaced ageing generators, our petroleum use has remained relatively steady while gas has grown.
On a per capita basis, our emissions have dropped sharply from our 2007 peak of 18.5 metric tonnes, which sounds like progress.
Remember, though, that Australia has run one of the biggest immigration programs in the developed world, so we now are dividing those emissions among a greater number of people.
What is difficult to ignore is the spectacular rise in annual emissions since the post-war era.
That will be extraordinarily difficult to unwind by 2050 without radical action of some kind.
Coal-fired power already on way out
The world may have gone digital but when it comes to gazing into the future, we are up to our armpits in analogue.
Everything, it seems, requires a road map with imagery of bridges, chasms and a destination.
The road to net zero right now may be clouded in fog but the markers are obvious.
For a start, every single, coal-fired generator will need to be shut well ahead of schedule for any chance of success. Almost a third have shut since 2012.
It already is a given that there will never be another built in Australia, at least not with private capital.
Banks won’t finance them and, even without a carbon price, they are uncompetitive, particularly when the construction costs are factored in.
Even before the federal government’s conversion to net zero, the Australian Energy Market Operator had just one plant scheduled to still be in operation by 2050, Victoria’s giant Loy Yang A.
Generator shutdown schedule
This schedule already is outdated. Energy Australia recently announced it would retire Mount Piper two years earlier than planned and other operators are likely to follow suit.
With the recent change in policy, most now would be reassured they would not face the political storm that erupted after AGL’s announced shutdown of the obsolete Liddell plant in the New South Wales Hunter Valley.
Why carbon pricing is inevitable
Given the vicious debate that ensued after Julia Gillard introduced a carbon tax — which economists almost universally love but which are electoral poison — it went virtually unnoticed that Tony Abbott later introduced a system that put a price on carbon.
Mr Abbott’s Emissions Reduction Fund initially distributed billions of dollars to big polluters via a system that created Australian Carbon Credit Units.
However, in 2018, a handful of the biggest polluters were forced to buy units on the open market for failing to meet minimum standards.
They paid around $15 per tonne, well below the $23 per tonne tax under the Gillard government.
But now the tables have turned and, last week, after the first week of the Glasgow summit, those units hit a record $36 per tonne.
Even at that price, Australian credits are cheap by global standards, largely because of our lax regulation to emissions, a situation likely to change soon, given the net zero emissions pledge.
While there is no global price on carbon — with Europe and many other countries going it alone under different schemes — financial markets are preparing for what is likely to be a huge new trading regime.
During the past week in Glasgow, the world’s 20 biggest energy companies committed to offsetting their carbon emissions by buying carbon credits.
Those who draw carbon out of the atmosphere earn credits. Those who pump carbon into the atmosphere will need to buy these credits to offset their emissions.
The reason the price for these credits is soaring — with some jumping by a factor of 10 in the past 12 months — is that the biggest emitters suddenly realised they will need to buy huge amounts if they want any chance at offsetting their carbon emissions.
That’s created a massive shortage.
The higher the price goes, the more expensive it becomes to produce and use dirty fuels and the quicker industry will shift towards newer and cleaner technology.
And the market already exists here.
Rather than taxpayers footing the bill for experiments in radical new technology, it would be far more efficient for Australia to link with global carbon markets, provide targets and allow industry to make rational decisions on how best to achieve them.
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