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

Shell 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).

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.

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.