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Solving Climate Change without Pain
Posted by Big Gav on September 24, 2008 - 6:42am in The Oil Drum: Australia/New Zealand
This is a guest post from Garry Glazebrook of UTS (the University of Technology, Sydney).
After listening to Al Gore, Nicholas Stern, Ross Garnaut and Tim Flannery, it is now obvious to most thinking people that we have to address climate change, and soon. It is becoming equally clear that the fall in oil prices over the last few months is only a temporary respite, brought on by a faltering world economy, and that oil prices will likely surge again as soon as the economy recovers. The implication is a need for massive investment in renewable energy, energy efficiency and sustainable transport. But how to fund such investment without sacrificing our economy, jobs or lifestyles?
One option worth considering would be for the Federal Government to identify approved classes of sustainable investment (e.g. renewable energy, carbon capture and storage, public transport, cycleways, rail freight infrastructure) which would then be eligible to receive preferential investment from our super funds. With the other regulatory hand, the government would decree that all super funds had to invest a minimum percentage of their assets in such approved investments, with the percentage rising steadily each year. The actual physical investments could be undertaken either by government agencies or by the private sector – both would be eligible.
Such an arrangement might fractionally reduce the short term earnings of the funds but any reduction would be small and containable. In the long term, however, by reducing the cost of investing in the infrastructure and industries we need to combat climate change and peak oil, it will benefit us all. The pill could be sweetened by removing the 15% taxation on these investments at the input stage for contributors. Given our multi-billion dollar Federal surpluses, this is hardly a show stopper.
The private sector could do the hard work of evaluating all the various sustainable investment opportunities, and making the investments as they saw fit. The government would be in charge of deciding eligibility for particular investment opportunities. It would do this by evaluating whether such investments would help combat climate change and/or reduce our future energy needs, especially for oil, or whether they would do the reverse. This would not be difficult. For example urban public transport systems would be eligible, but motorways would not. Similarly geothermal power stations would qualify while coal fired stations (without carbon capture and storage) would not.
Given the huge need to re-jig our energy and transport infrastructures, and depending on the percentage allocation for super funds, it is likely that available funds would be less than the potential eligible opportunities. This means a rational selection process for these cheaper funds would occur, maximising the economic as well as the environmental payoff from the investment.
Such an investment-side scheme would reinforce and operate in conjunction with carbon trading, whose main role will be to alter price signals for end products, such as kilowatts of electricity from different sources. But the investment-side incentive will reduce the load to be carried by the consumer pricing mechanism, thereby enhancing the political feasibility of making the scale of changes needed.
It would also avoid the angst associated with other countries “free loading” on Australia’s efforts to combat climate change. Any government subsidies involved, together with any contributions by the citizenry in the form of reduced earnings on their superannuation contribution, would be quarantined to investment within our borders and will help make the Australian economy more sustainable, and less vulnerable to future oil-related shocks.
It is by now blindingly obvious that we have been under-investing in Australia for decades on essential infrastructure, and over-indulging ourselves at the K-Mart and the Mall. As a country, we have established a huge and well-resourced superannuation industry. But as the recent financial turmoil demonstrates, there is no guarantee that pure market forces will shift our superannuation investment dollars in the right directions quickly enough to genuinely secure Australia’s longer term future, and that of our children and grand children. As Washington catches the mood for a greater role for government in our affairs, it is time for some bold leadership from our politicians.
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- anz at theoildrum dot com
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Sorry Gazza but your article has really brassed me off.
I am always confused that this is even a question.
When they cut a coal mine, or build a coal-fired station, we are told it will boost our economy, create jobs, and thus improve our lifestyles. But for some reason if we build a wind turbine factory, or build a solar thermal plant, it will depress our economy, lose jobs and ruin our lifestyles.
Either building lots of stuff boosts the economy and creates jobs, or it doesn't - whether the stuff is "green" or not can't affect that.
Likewise, I am confused at the question "how do we fund renewable investment?" We'll fund it the same way we fund non-renewable investment: with public money. The dirtiest coal-fired station, the widest highway, these all require public funds. Why should tidal power plants and railways be any different?
It seems that we have double standards. It's not enough that renewables and mass transit are cleaner and more energy-efficient than the stuff we already have: they have to fund themselves, too.
"We want to build some wind turbines."
"Oh my god? Are you asking the public for money? LET THE MARKET DECIDE!"
"We'd like to dig a bloody great hole in the ground, dig out hundreds of millions of tonnes of coal and burn it."
"Here, have $1,000,000,000."
Let's have some consistent standards here.
Free-loading? I think the words you were looking for are "export opportunities for Australia." One-third of all land-based wind turbines in the world are produced in Denmark. It makes the country billions. But inventing things, manufacturing them for export, employing people and making lots of money? That's not the Aussie way!
For example, this guy came to Australia, got citizenship, invented a new kind of solar cell which his Aussie employers couldn't be bothered producing; they sold the patents to a German company... who now exports the PV cells to Australia. He returned to China, designed a new solar cell, got $6 million seed money and seven years later owns a $6 billion company producing PV cells.
Will it cost us money and jobs and quality of life to pump up renewable energy? It'll cost us money and jobs and quality of life to not do it.
Once you realise that, then all this stuff about using people's super funds for investment is shown to be so much nonsense. Sorry Gazza.
Kiashu - you are right that the naysayers seem to think that there is something different about creating jobs through mining coal or though building solar cells.
The issue, I think, is that these people have a very simplistic view of what constitutes job-creation. This is because they have always seen the issue through the narrow Australian perspective of commodities rather than manufacturing. Paul Keating got it half right when he said that we were in danger of becoming a banana republic. He should have said coal republic and he would have been spot on.
The arguments of the 'destroying-the-economy' people become stranger still when all they can do is bleat about destroying the aluminium manufacturing industry through an ETS but can't imagine an economy based upon exporting and capitalising on an ETS.
In the space of two years this country has created a world's best practice in water recycling with the Bundamba Advanced Water Treatment Plant at Ipswich Qld. It was the largest plant of its type in the world. At the height of its construction it would have employed close to 1000 people in engineering and construction roles. In operation it will employ 30. Australia also has the Gippsland Water Factory almost finished construction and half a dozen desalination and water recycling plants in the design and construction phases.
We have have essentially become a world leader in renewable water practices. This shouldn't be considered an unusual event as we were perfectly placed to do such a thing as we are the driest habitable continent. Similarly we are the continent with the greatest number of hours of sunshine, we have a stable techtonic plate, and we are surrounded by ocean. As such with our engineering and construction expertise there is no reason that we can't be a leader in solar pv/solar thermal, geothermal and tidal power.
The majority of power stations currently existing in Australia will have to be replaced by 2050. Most of the coal stations will be gone by 2030 as they would have well and truly exceed their design lives and been depreciated down to zero by their financial controllers. there is absolutely no good reason why any of these stations need to be replaced by further polluters.
Is there any difference between "public money" that has been confiscated as tax and "private money" that has been confiscated and placed into superannuation? If you want more "public" investment it means that people have to pay more tax which is always going to politically unpopular.
Not necessarily. The federal government runs a $20 billion or so surplus fairly regularly, and the state governments up to $10 billion each. Let's say half the federal surplus and half as much again from the states, that'd give us $15 billion to play with.
An example emissions reduction budget would be,
- $7.1 billion for building renewables. Australia consumes about 240 billion kWh annually, equivalent to 27GW, so that 1GW annually could make us 100% renewable in 30 years, allowing for a slight increase in population combined with efficiency and thus a decline in per capita use. The 1GW delivered might consist of,
You can fiddle with the proportions a bit if you like, add in stuff that isn't commercially proven like wave power, or stuff that nobody really wants like nuclear, but the basic picture remains the same - to build up electricity generation from sources which don't require burning fossil fuels is not a big deal financially at the national level.
The biomass, geothermal and solar thermal would provide 60% of the total, thus a good baseload amount. The cost are the high average of present costs; while renewable proponents often say that when the things are built en masse they'll get cheaper, we can as easily say that higher demand will lead to a rise in price - which is what we've seen for wind turbines in the past few years, and the same appears to be happening with purified silicon for PV. So on balance we can expect it to be around the same.
- $1.9 billion for an extended electrical grid, since the above facilities would likely be distributed widely compared to today's coal-fired stations
- $1 billion for research into better renewables and energy efficiency - say $100 million for each of the above, $100 million for batteries, $100 million for heating and cooling, and so on.
- $3 billion for railways and trams. We currently have 38,500km of lines across the country, about 2,000km of which are in the cities. The world average for urban and suburban railways is about $15 million per kilometre, for tracks, engines, carriages, and stations. It's much cheaper across the countryside but 85% of the population is in the capital cities so let's be pessimistic about the cost.
Those 2,000km of urban railways and tramways take about 10% of all trips (compared to 80% taken by car). Spending $3 billion to add 200km annually and/or improve services would thus let us divert 1% of all trips to trains and trams each year. So that by 2050 we could have 50% of all trips by rail, which measure would take car use from 80% to 40% - halving emissions due to transport (since the trains and trams would be electric powered by the renewables above, they'd be low, though not zero, emissions).
- $2 billion for subsidies for various retrofits of homes and businesses to reduce their energy use. Insulation or something, I dunno. I mean hey, solar hot water systems are only $3,000, you could fit 666,000 homes annually with $2 billion, in twelve years every home would have a system. But probably if you made the biomass systems in the electricity generation system also hot water generators - as the Swedes and Finns already do - then you could forget about the rooftop systems.
So I mean, we already have these big surpluses. Traditionally governments save them up for electorate bribes just before election time, and for unwinnable foreign wars and overpriced military equipment that doesn't work. But we could put them to more productive use. What I outlined up there is just off the top of my head, and using only about a third of all state and federal surpluses. And it'd at least halve our emissions by 2050 even if we continue just digging shit up and selling it overseas as the base for our economy.
But there are heaps of export opportunities. There are about 3 billion people living in poverty who, if given the chance, want to lift themselves out of it. And those people want electricity. As we've seen with China, they'll take electricity any way they can get it - coal, nuclear, hydro, solar, they don't give a damn so long as it gives them electricity. Indonesia, Malaysia, Thailand, Kenya, South Africa, all these places want to follow that.
We could be absolutely raking in cash from that over the next few decades. We've had decades of innovation in PV especially. But all the support goes to coal and mining, and renewables are actively discouraged both at government and corporate level. Stupid.
Kiashu,
Babcock and Brown Wind partners 2008 annual report gives load factors for wind power projects in Australia from 33-47%. Its only European land based farms that have load factors in 20-25% range.
Europe is less windy than Australia? Only in a corporate puff piece.
Basically, what happens is that the first few spots they put wind turbines in are really good, around 40% load factor. But then as those get used up, you start having to use non-ideal sites, and start running in local planning problems, councils and residents and competition with other uses, and the load factor of those is pretty low. So that if wind makes up 10+% of your total electricity sources by kWh, the load factor is 20-25% for the system overall.
Anyway, like I said, you can quibble or fiddle with the figures a bit, but the basic picture remains the same: we can do a hell of a lot with a substantial portion of the federal and state budget surpluses we currently have. We don't need to raise taxes to fund renewables and mass transit and efficiency and so on, our current revenue is more than enough.
I mean, with our current revenue we couldn't covert the whole economy over in a few years, but even with zillions in money we couldn't do that because we'd be limited by technical skills and so on.
We don't need new technology (though it would certainly help), new revenue or anything like that. We just need to make the decision to do it. And we do it by one of two ways: either fund renewables to match fossil fuel funding, or else remove the subsidies for fossil fuels so that renewables get to compete on a level playing field.
I'm in favour of the second way, but apparently the world is full of fricking communist CEOs these days who think it's the public's job to fund everything they do, they shouldn't have to compete on the basis of normal market stuff. I don't really care how it gets done so long as it gets done.
Kiashu,thanks for doing a competent demolition job on that article.There seem to be so many ways of talking around the fundamental problem - creating a sustainable society and economic system.
Clever accounting schemes don't build renewable energy infrastructure and bury the coal incubus.
I think you have both been a bit unfair to Garry who has tried to work out some of the blockages to getting investment in renewables up. I ahve argued before that money is really an entitlement to spend some energy on whatever you think is good at the time. The super funds have basically run out of things to invest in which return good yields which is why the "financial" industry has invented all this ohter crap to soak up the large flows of cash. It seems to be an eminently sensible idea to force the public inot doing something that is good for them.
Medicare is the perfect analogy for this. Nobody would pay it if it was optional but we all like to use the service when we need it. Forcing ordinary Australians to actually invest in the future energy harvesting infrastructure and transport infrastructure is not that far off track.
Far better to do that than invest in more US shopping malls to try to eke out your 7.72% return. I'd rather have electricity and a viable train system in my old age than buckets of worthless dollars in my super.
Termoil- With regard to the super funds - I suspect that a lot of them have been investing in some very questionable areas.Now that TSHHF we are going to see a lot of very pissed off people when they realize that their fund is not only not making them money but their principal is disappearing as well.
The current privately operated super schemes are a Hawke/Keating invention - the sort of rubbish one would expect from a Tory government - Tweedle Dee,Tweedle Dum,Tweedle Dumber.
In the first place,a single national super scheme should have been set up and been required to invest in Australian industry and infrastructure.It is not too late for that to happen.That wouldn't please the financial community of course but,what the f'ing hell do we owe them anyway.
I am not a socialist by any means but it seems to me that when natural monopolies are privatized (eg Telstra)and vital infrastructure is sold off to merchant banks then the Australian community is being set up for a monumental ripoff.At least with government ownership there is some chance of accountability through the parliament.
To recap what I said in the previous post - We do not need fancy accounting schemes with their associated hangers on.We do not need complicated carbon trading schemes with all their loopholes and opportunity for ripoffs.We need a public recognition by all goverments that they are going to have to act very promtly in a targeted way to turn Australia from an environmental basket case into something resembling a nation with a future.And none of this is dependent on what China or the USA or whoever are doing.We also need to QUIT right now exporting our manufacturing jobs overseas.If this means protection then so be it.Australia comes first and last for Australians.If we don't look after ourselves then nobody else will and the world is not going to get any more friendly.
End of pissed off rant.
Can't support you on the natioanl monopolized super sorry. If there is one group of people I trust less than the bankers with my money it's the politicians. besides that if you really want to you can set up a self managed fund and then invest it in whatever you like, renewables or whatever.
As far as manufacturing jobs goes, they are antithetical to a low energy post consumer society. Mass manufacturing is a never ending chore to squeeze out more units of production at ever decreasing costs and then selling the goods cheaper than you did yesterday to tak up the expanded volume. It has a limited life anyway. Waht we do need to start doing is training everyone to have a journeyman trade and to own their own tools of trade and not be dependent on a large employer to have full control over their fate. I know it must sound like paradise for some manufacturing nobs to stand at a machine all day and press the red button when the green light goes on, only to return to his castle each night to be enthralled by the magic plasma mirror on the wall, rinse, and repeat ad infinitum. But most of waht is manufactured these days is unecessary crap that used to be produced in industrious homes in quantities no greater than waht is truly required. How many varities of shampoo do we really need? Why do I need a choice of 75 different biros that take up 6 metres of air conditioned shelf space at Officeworks? No manufacturing generally is no panacae unless there is a purpose to it.
I have argued that Australians should have three areas of technical engineering endevour that we should concentrate on and forget everything else. They are long distance transport systems, long distance communications and energy harvesting and distribution. (Water could be another area that might make my list but I'm pissed off with what I see happening there at the moment with Brumby and his band of thieves from Melbourne, raiding the Goulburn River. Another reason I don't trust politicians.) Within those three areas are some pretty big opportunites for the engineering community to get stuck into ut it requires focused leadership from governemtn and business to seize those opportunities.
Garry,
Your post has put forward one possible mechanism to encourage investment in new infrastructure needed to reduce our CO2e. I am aware of some super fund investments in wind energy, but also in shopping malls. Do you have any figures of what proportion of the $1000Billion super investments are going into various infrastructure classes?.Investing in energy efficient commercial office space can make a major contribution to reducing CO2e.
I would like to see you expand on some of the points you raised.