The recent ‘Red Book’ briefing by Australian Treasury  to the new Rudd government highlighted the need for a major transformation of the economy if Australia is to effectively deal with climate change.

In the report, obtained by Channel 7 under an FOI application, climate change was described as ‘the single most pressing environmental, economic and social challenge’ facing Australia.

Treasury stated that an effective national response to climate change ‘will entail a major transformation of the economy’ and that ‘If stated emissions reduction objectives are to be achieved, the energy profile of the economy will have to be fundamentally changed, with market-based incentives needing to play a leading role.’

The current 16 year economic boom in Australia is likely to continue for another 2 years according to the Red Book briefing, largely fueled by the rapid growth of China and India and their demand for resources, of which Australia has plenty.

Shift from fossil fuel economy

So what is ‘a major transformation of the economy’ and a ‘fundamental change’ to the nation’s energy profile.

Bottom line is that Australia (and the rest of the world) must substantially reduce its dependence on, and use of, fossil fuel products such as coal, oil and gas, or we will be running enormous, and effectively permanent, risks to the future of  the national economy arising from the impact of climate change.

Fossil fuels have been relatively cheap sources of power for hundreds of years. Our modern way of life, and the global economy, has literally been constructed around the use of fossil fuels. Almost every product and service provided in developed countries is reliant on fossil fuels.  GDP of developed (wealthiest) countries is closely related to their GHG emissions.

Fossil fuels were created by natural processes over hundreds of millions of years, and we are effectively burning it all a million times faster -  over a few hundred years.  That’s like winning the lottery and blowing it all in a few seconds.  We are pumping greenhouse gases (GHGs) into the earth’s biosphere at a rate faster than at any time in the earth’s known history, and certainly in human history. That will almost certainly result in faster and more intense climate change than humans, and probably the planet, have experienced before, and may be beyond our ability to adapt.

Coal fired power

But how does a country such as Australia change its energy paradigm?
One of the obvious areas for change is in the use of coal for generating electricity. Coal fired power represents a significant proportion of Australia’s GHG emissions.
Coal is plentiful and relatively cheap – provided the ‘collateral damage’ to the environment and to the future economy is externalised, i.e. not  taken into account in the financials of the emitter or the end user, and provided the industry is subsidised by the government/taxpayer.

By externalising collateral costs of emissions, emitters (and consumers) avoid paying for the damage caused by their activities. Essentially, we pass the cost on to Mother Nature and to governments. We expect the natural processes of the planet’s systems to absorb and correct any imbalance that we create. Some consequences are paid for by governments, such as health system costs and remediation of ecosystems.
Basically, we are running up a substantial debt to the earth’s biosphere and sooner or later the debt will be called in, by way of perturbation of the climate system which could cause a  substantial impact on our economies and lifestyle, unless we do something soon to stop the current trend.

Subsidies

If the current subsidies to the fossil fuel industry are removed and the coal-sourced energy was saddled with the real cost of carbon, coal-fired power generation would hardly be competitive with renewable energy.

For instance, Government subsidies (read ‘taxpayer support’) have been propping up the fossil fuel industries (oil, coal, gas) in Australia to the tune of between $7 billion and $10 billion a year depending on which source is quoting the figures.  Remove the subsidies and you’ll soon see that the fossil fuel industries are a lot less profitable without the subsidies.  By contrast, the Australian government spent only $232 million for renewables and energy efficiency, and $750 million for alternative fuels during 2005/2006.
Without the subsidies they would have to increase prices or efficiency.  In today’s circumstances that may be useful, as it would lower consumer purchases and reduce the energy used per unit of production.

Add in a carbon tax or emissions trading scheme that has serious teeth and fossil fuels will be far less sustainable economically, making renewable energy sources more economically viable.

Australia is the 4th largest repository of coal deposits and the biggest exporter of coal. Sooner or later, coal exports from Australia and into other countries will be penalised or discouraged as nations reduce their emissions and reliance on fossil fuels in an attempt to avert dangerous climate change.

Moral issue

Knowing what we know now about the impact of GHGs and the risks that we face on a global scale as a result of climate change, there is also a moral question of whether Australia should continue to export coal to China and other countries in the knowledge that the coal will ultimately produce huge amounts of GHGs as China builds a coal-fueled power station each week through to 2020 – another 600 power stations – as it rushes headlong towards a ‘higher’ standard of living.

Australia cannot afford to wait until the coal market collapses. That collapse may take 10 years or 20 years. China won’t need coal forever – it has 200 years of coal buried on it’s own turf.

Australia must act quickly to create the renewable energy capacity that will not only deliver jobs and growth, but will also enable the country to wean itself from fossil fuel energy.

Australia has the innovative capability and the wealth to do that. It could be well on the way to that outcome within 20 years with a smidgen of political will.

How?

Australia is blessed with plentiful supplies of 5 natural sources of renewable energy: wind, solar, waves, currents and geothermal.

If the fossil fuel subsidies are phased out  over the next 12 years and the funds are diverted to building renewable energy capacity,  all major cities in Australia could be obtaining most of their electricity from renewable sources. Base load needs could be accommodated by having some gas fired power stations, which can be brought online quickly when renewable sources are less productive, e.g. a windless, cloudy day. 
If an additional $10Bn per annum (additional to the subsidy diversion) were to be invested by the government into renewables over the next 20 years and private and corporate investment was encouraged by clear policies, Australia would be well on the way to a 60% reduction in GHG emissions.

It seems that the US Congress is thinking the same way. Recently, Speaker of the House, Nancy Pelosi, sent a letter to Vice President Dick Cheney in relation to his pending visit to the Middle East. Part of the letter reads:

“The House of Representatives has again passed legislation to significantly expand our renewable American energy industry in a fiscally responsible way, paid for by ending taxpayer subsidies to the five largest oil companies which are earning record profits. This legislation is pending in the Senate. These subsidies cannot be condoned at today’s historically high oil prices. When oil was just $55 a barrel–half the current price–the President said that such subsidies could no longer be justified. We agree and hope he will actively support this legislation to direct our energy dollars from subsidies for oil companies to development of alternatives to increase our energy independence and improve our national security.”

It was worth a try, but Ms Pelosi may have to wait until the next President is elected to get any movement on that initiative.

By Christo Norden-Powers  ©2008 Spandah