Five things we learned this week …..

Rivers deep, mountains high

The global fossil fuel giant Royal Dutch Shell set what is possibly a new benchmark in corporate doublespeak this week with the release of its energy vision into the future, “New Lens Scenarios”. It all seemed rather warm and cuddly, predicting that solar would emerge as the world’s dominant energy source by the end of the century – but only after the likes of Shell and other groups burned as much of their “unburnable” fossil fuel reserves as they possibly could.

Given the growing realisation of just how serious the climate change issue is, and how urgent the need for action, how did the Shell sustainability team imagine this could possibly happen? Mostly through obfuscation. Shell paints two scenarios which could only be imagined in a corporate board-room: “High Mountains”, where the benefits of an “elevated position are exercised and protected, and those who are currently influential hold on to power”; and “wide Oceans”, with “rising tides, strong currents, and a volatile churn of actors and events with an irregular accommodation of competing interests.” We think that’s long-hand for lobbyists.

Shell says – possibly thanks to the influence of these meddlesome carbon priests – that it would be “difficult” for the world to agree on climate change targets, at least until the link between Co2 emissions and climate change was “proven”. And Shell did not expect this to happen until  ….. 2050 – by which time the chief of the International Monetary Fund – who appears to believe that proof, or at least overwhelming evidence to act, is already at hand – has said that the world will be “roasted, toasted, fried and grilled.” As one analyst noted, the good folk at Shell appear to be deluded. “But it can’t be a comfortable delusion,” he noted.

Climate policy in a single burp

Screen Shot 2013-03-08 at 9.43.11 AMShell was not the only entity trying to cope with an uncomfortable delusion this week. Liberals numbers man (aspiring Treasurer) Joe Hockey was on ABC Radio earlier this week, having a discussion with Climate Change Minister Greg Combet about Australia’s high emissions per capita, and why it was important for Australia to act.

Let’s not get too carried away, said Hockey, chanelling Barnaby Joyce, Alan Jones, Gina Rinehart and Lord Monckton in a single breath, “that (high emissions per capita) is because we have cattle that belch.”

Yes, Joe, we do have a high level of CpC – cattle per capita. As this graph on the right shows, it’s possibly the highest in the world. But as the second graph below shows, it doesn’t rate high on the list of things that contribute to our high overall emissions per capita. (Explainer: Belching cattle are filed  under Agriculture).

 

 

Screen Shot 2013-03-08 at 9.43.30 AM

Climate policy in a single data set

Perhaps, Hockey’s party leader Tony Abbott would set a better example. Not likely.

Here’s his response to another radio interview about the Climate Commission’s new report that suggested that the influence of climate change is now clear. Did he agree with that essential conclusion?

Abbott: “Look, records are always being broken. That’s the nature of records. They’re just always being broken because as time goes by, there is a wider range of activity, wider range of things happening. But the fundamental point is that climate change is real. Humanity does make a contribution to it. It’s important to have strong and effective policies to deal with it. But the best way to deal with it is not by whacking our economy with a great big new tax that doesn’t actually reduce our emissions.”

The great big new tax that does reduce emissions 

This comes in the same four week period that new data showed that Australia’s 200 largest corporate polluters had reduced emissions by an average of 1.2 per cent a year over the last four years, simply by being required to report them under NGERS (National Greenhouse Energy Reporting Scheme) in anticipation of the carbon price, which in 2007 was bipartisan policy.

As well, official data shows that national emissions fell 0.6 per cent in the first three months after the carbon price came into force, delivering the lowest quarterly emissions since September 2009. Emissions from electricity generation and industrial processes were down despite an overall rise in industrial production in the quarter. Indeed, as this graph shows, the link between growing industrial production and increasing emissions has been broken. And in the six months that the carbon price had been in effect, as a ‘great bix new tax on electricity” – emissions from the electricity sector had fallen 8.6 per cent.

Screen Shot 2013-03-08 at 9.26.14 AM

Verballing business and Garnaut

But what does business want? Surely they will line up with the Coalition and want to dump the tax. No, that’s not likely, either. The Australian Industry Group, about as conservative a business grouping as you could find, said it wants to keep the carbon price. It just wants it to be not so high. Which is what we suggested way back in July that that is what the Coalition would end up doing, because business would pressure it to do so. But like Treasurer Swan and his budget deficit, it just can’t bring itself to admit it.

Abbott even claimed that Direct Action had the endorsement of climate change advisor Ross Garnaut. Abbott was asked in a radio interview if any economist of any consequence had endorsed the Coalition’s climate change policy.

A: Well I think Professor Garnaut is a pretty good person to start with.

Q: But he didn’t have a look at your whole policy and assess it as fitting the bill though, did he? This is just one idea (carbon sequestration) in your policy that he has backed in principle. That’s a significant difference, isn’t it?

A: Oh, I think Professor Garnaut is a pretty significant supporter.

No he’s not. And here’s why, in Garnaut’s words, a year ago.

“In general there is no dispute amongst economists, so with the idea that you will reduce emissions at lower cost, by a specified amount at lower cost, if you achieve that result with an economy-wide price on emissions rather than through government trying to intervene in particular sectors to reduce emissions.

“One is the operation of the market where businesses respond to incentives and find the lowest cost way of doing things. The other is government second-guessing business and deciding that certain areas are the areas in which we’ll try to reduce emissions in certain ways, other areas will not be.

“It is of the nature of market operations that businesses find ways of doing things at lower costs that no bureaucrat will ever think of. And that’s why, in general, market-based solutions are more efficient than direct interventions and central planning.”

One final delusion

One final delusion is that which assumes that the massive coal mines, and their associated infrastructure, in Queensland would, and should, be belt. By far our most read story this week (in another week of record traffic!!) – Fossil fuels put on notice – the party is about to end – was the analysis by Deutsche Bank of the potential environmental policies that will likely be adopted by China, and its impact on the thermal coal market.

According to Deutsche Bank, China could cease all imports of thermal coal within a few years as it turns its focus to cleaner energy sources. This graph illustrates the change that could take effect within two decades. The impact on Australia? Mining projects like Gina Rinehart’s GVK Alpha mine will struggle to get finance, and big companies like BHP Billiton, Rio and Anglo American could also be hit hard. According to Deutsche, such a scenario could reduce overall earnings by 24 per cent at Anglo, 6 per cent at Rio Tinto and 3 per cent at BHP.

Screen Shot 2013-03-08 at 9.24.33 AM

 

Comments

15 responses to “Five things we learned this week …..”

  1. Beat Odermatt Avatar
    Beat Odermatt

    The carbon tax does not work. CO2 emission according to the graph started well before a carbon tax was implemented. It has far more to do with increased production of electricity by wind and solar energy. Most changes were made by bi-partisan environmental support of moving towards a low carbon economy. Labor and the Coalition know that they have to move towards a low carbon economy, as it is the wishes of the majority of Australians. Some changes were made by businesses to reduce energy waste and to save money with measures as simple as switching off lights at night.
    Julia Gillard is a strong opponent of the carbon tax and has made her opinion clear during the last election campaign. The carbon tax was the “dowry” which the Labor Party was forced to pay for the political marriage to the Greens.

    1. Mr Mauricio Avatar
      Mr Mauricio

      Did you read the article or just launch into an automated rant Beat??

    2. Mr Mauricio Avatar
      Mr Mauricio

      …and further more what is the “dowry” for the coal and oil industries for Tony Abbott but a recipe to be “grilled fried roasted and baked” by 2050

  2. keith williams Avatar
    keith williams

    Hi Giles,

    Re your final graph on China’s energy mix in 2030, what are the actual projected figures for nuclear, wind and solar? My understanding was that by 2030 wind would be making a greater contribution than nuclear and that solar was heading in that direction too. The figures I remember for 2020 are 200GW wind, 90-100 GW solar and nuclear 60-80GW. I thought wind projections for 2050 have been indicated at 1000GW.

    The figures you show indicate that wind and solar combined at around the nuclear contribution. This looks like a significant change?

    1. Giles Parkinson Avatar
      Giles Parkinson

      Well, they are deutsche bank’s graphs, and they do say in their report that it may underestimate solar in particular and wind. They don’t give any further numbers, but just as a broad indication i thought it was interesting – China is moving away from coal, and Gina and Clive’s carbon trinkets

  3. keith williams Avatar
    keith williams

    Hi Giles,

    OK makes more sense as is often the case with groups that have big investment in the status quo, they tend not to look carefully at data that is unsettling to a “conventional” view (ie that solar and wind are in some way energy sources that are “suspect”).

    Unfortunately the outcome is that data gets promulgated that does not reflect what is actually happening, and so when China makes very clear for example that they plan to cap coal use by 2015, many conventional groups can’t get their heads around it (even thought this has been talked about in China since the middle of last year).

    I’ll be very surprised if the Deutsch Bank data isn’t used by the nuclear lobby to reinforce that China is going nuclear at the expense of solar and wind.

    Not very professional of Deutsch to admit their solar and wind stats might be wrong, as there is a lot of accessible data on these (and nuclear).

    A quick look at current data is as follows:

    Nuclear : 58GW (before Fukushima this was projected to be 100GW) 2020, 200GW 2030, 400 GW 2050 source World Nuclear association (updated Feb 19, 2013)
    http://www.world-nuclear.org/info/Country-Profiles/Countries-A-F/China–Nuclear-Power/#.UTlJtNEpbY0

    Wind : 200GW 2020, 400GW 2030, 1000GW 2050 : source IEA Oct 2011
    http://www.iea.org/publications/freepublications/publication/name,27325,en.html

    Solar : 90-100GW 2020. Because solar has come out of nowhere it is harder to find predictions for 2030 & 2050, but a recent McKinsey report suggested a similar level for coal (34%) but solar contributes 8% and wind 12% … very different from the Deutsche figures.

    I won’t say that Deutsche Bank is telling lies, but the way they present the solar and wind projections is very misleading.

  4. James Wight Avatar

    The AIG proposal is a very bad idea.

    Under current policies we are starting to see Australia’s emissions decrease. Rushing to an ETS would bypass the Climate Change Authority and lock in weak targets, unlimited offsets, and a low carbon price for years, stopping this emissions reduction in its tracks.

    Instead of trying to bring forward this potential disaster, true advocates of climate action must persuade the CCA and/or the government of the need for deep emissions targets without international offsets.

    See my blog post: http://precariousclimate.com/2013/03/08/politicians-right-aig-business-lobby-scheming/

  5. David Rossiter Avatar
    David Rossiter

    So carbon emissions are reducing due to more use of solar and wind generation AND carbon pricing.

    That view of a reduction in emissions, which I think is correct, still runs counter to the view carbon pricing does not work which the Coalition is still perpetrating as an election mantra. The facts seem to run counter to their statements.

    1. concerned Avatar
      concerned

      David the emissions are falling mainly from a decrease in economic activity.

      1. Giles Parkinson Avatar
        Giles Parkinson

        Can’t you read the graph? Industrial activity is up, emissions are down.

          1. Gillian Avatar

            ‘Concerned’ … The graphs you linked covered a timespan ending in 2011. The current discussion is about the period AFTER the carbon tax was introduced in July 2012.

            Perhaps you want this ABS page (http://www.abs.gov.au/AUSSTATS/[email protected]/allprimarymainfeatures/52AFA5FD696482CACA25768D0021E2C7?opendocument) – showing that GDP rose 0.6% in the December 2012 quarter.

            Or this page (http://www.abs.gov.au/AUSSTATS/[email protected]/allprimarymainfeatures/EE4EB2DC50B2FC61CA257B2500115B6F?opendocument), showing that GDP rose 0.6% in the September 2012 quarter. In July-December 2012, GDP rose 1.2%.

            You claim emissions fell because of a decrease in economic activity, but ABS data shows that GDP has increased since the carbon tax was introduced. That shoots a big hole in your theory. Can you bring your theory in line with reality?

          2. concerned Avatar
            concerned

            Gillian, read and understand them.
            GDP is down and the rate of growth has been trending down for the last years.

  6. Martin Nicholson Avatar

    Keith, Deutsche Bank are referring to energy not capacity.

    In 2030 on your numbers wind will be at 400 GW capacity and nuclear will be at 200 GW. At capacity factors of 35% for wind and 90% for nuclear then nuclear will deliver 1.3 times as much energy as wind. DB number are 1.6 times. More yes, but hardly “very different” given the margins of error in such calculations.

    1. keith williams Avatar
      keith williams

      Thanks for the clarification Martin.

      The McKinsey report had dramatically different figures for wind and solar energy generation (12% wind vs DB 5.1%; 8% solar vs 3.1% DB). The McKinsey report quoted energy generation so these are real and major differences.

      Hence I’m still not sure that the Deutsche figures give an accurate view of where China is going.

      Of course it’s all crystal balling, but a few things are worth considering:

      i) The Chinese have consistently outperformed on solar and wind builds (ie continually increased their build). Solar is the wild card. Their 2020 estimates are now around 100x what they were a few years ago. If this trajectory continues, then solar could end up powering the whole show.
      iii) Nuclear is slow to build and the costs keep rising. Much of the projected new builds involves untested technology. The figures I used for nuclear were from the World Nuclear Association which projects an optimistic view.
      iv) Both wind and solar are fast to build and the costs are falling dramatically.
      v) If China does get onto the trajectory indicated by the DB figures for nuclear, it will be going against the trend as even France is looking to wind down the role of nuclear power.
      vi) Not sure I agree about nuclear having 90% capacity. Even in France nuclear doesn’t get that level of utilisation.

Get up to 3 quotes from pre-vetted solar (and battery) installers.