The Folly of Investing in Natural Gas

10 July 2011, declared Greens Senator Christine Milne, was the day “Australia turn[ed] its back on the fossil fuel age”. But the reports of the industry’s death were greatly exaggerated. On Monday night ABC’s Lateline Business reported that Santos and BHP Billiton are buying up natural gas assets in expectation of an enormous coming boom. This is empirical evidence of what I have been saying for months: the proposed carbon tax is not enough.

This is not unexpected, of course. Globally the fossil fuel industry has been campaigning hard for a transition to gas. In Australia the incumbent Labor Government have consistently taken the same line (at least, when they haven’t been rhapsodizing about the bright future of coal). The only reason why the policy announced on 10 July contains any support for renewables at all is because Labor had to negotiate with the Greens and independents.

The fashionable view of gas is as a transitional fuel on the world’s journey to a low-carbon or zero-carbon economy. But this is folly: the only realistic way to achieve the required rapid transition to a zero-carbon economy is to phase out fossil fuels as quickly as possible. As a fossil fuel, gas is part of the problem, not the solution. A two-staged transition, from coal to gas then to renewables, would waste precious time. Continue reading

Initial Reactions to the Carbon Tax: A First Step, but Improvement Needed

The carbon price package announced today is Australia’s first step in transitioning away from its current fossil fuel economy toward the renewable energy one we need to get to as soon as possible. There are significant improvements on Labor’s original Carbon Pollution Reduction Scheme (CPRS). But of course it’s far from perfect and it’s far from enough.

Pros

  • Finally Australia will have, from 1 July 2012, a price on carbon.
  • Emissions targets will not be set until 2014, when the independent Climate Change Authority will recommend a five-year emissions budget to come into effect in 2015 when we move to an emissions trading scheme. If the Parliament cannot agree on the target, a default cap will be set for one year only. The Climate Change Authority will review the target annually and make updated recommendations on 28 February. This arrangement provides the promised upward flexibility, in contrast to the legislated lock-in of the old CPRS.
  • In deciding on its recommended emissions reductions, the Climate Change Authority will have regard to global emissions budgets, climate science, existing targets, progress in cutting emissions, economics, social factors, and voluntary action. I’m happy about this because I assumed the authority would be working on Garnaut’s framework, which has a maximum target of 25%. As it is, the Greens say there will be no upper limit on emissions reductions.
  • At least 50% of emissions reductions must happen domestically, and there will be some level of accountability criteria for offsets. (CORRECTION 13 October 2012: The 50% limit does not refer to 50% of emissions reductions. Instead it means merely that companies are allowed to offset 50% of their emissions.)
  • The 2050 target has been raised from 60% to 80% unconditionally.
  • From 2015 to 2018 there will be a $15 price floor in the emissions trading scheme, ensuring some level of investment certainty.
  • An independent Australian Renewable Energy Agency (ARENA) will subsume every existing renewable program except the 20% Renewable Energy Target (RET), and will control a total of $3.2 billion funding. Meanwhile, the RET will be retained and will no longer include biomass.
  • $10 billion over five years will go to a Clean Energy Finance Corporation. $5 billion of that is guaranteed for renewable energy, and the corporation will not fund carbon capture and storage.
  • There’ll be a study on designing an electricity grid for 100% renewable energy by the Australian Energy Market Operator (AEMO). (Beyond Zero Emissions have already done this in their Zero Carbon Australia 2020 Stationary Energy Plan.)
  • The package includes a number of energy efficiency measures.
  • Measurable voluntary actions will automatically be subtracted from the cap. (CORRECTION 13 October 2012: Measurable voluntary actions will be subtracted from the cap five years hence.)
  • There is a strong household compensation package – 90% will be compensated, 70% fully compensated, and 40% overcompensated.
  • The mining fuel tax credit, a nonsensical fossil fuel subsidy, will be reduced. There will also be a Productivity Commission review of fuel excise policy, which may lead to removing many fossil fuel subsidies and covering petrol in the emissions trading scheme.
  • No new coal power plants will be built. (CORRECTION 13 October 2012: There is no explicit ban on new coal power plants, but Treasury modeling predicted the carbon price would be high enough to prevent them.) The Government will buy out 2 GW worth of coal power stations.
  • Coal will get $1.8 billion less compensation than in the CPRS, and in 5 years instead of 10. (CORRECTION 13 October 2012: This refers specifically to coal-fired electricity generators.)
  • Much of the coal mine compensation will be in the form of structural adjustment assistance, better than free permits. (CORRECTION 13 October 2012: This is incorrect. I’m not sure where I got this information from.)
  • Compensation to trade-exposed industries will be reviewed and move towards a principled approach, as recommended by Garnaut.
  • The Australian Chamber of Commerce and Industry, Australian Industry Group, Minerals Council of Australia, and Australian Coal Association oppose the policy, so there must be something to it.

Cons

  • If the policy fails to be improved later, Treasury modeling reportedly says, the coal industry will continue to grow exponentially. So its success depends on its upward flexibility.
  • Labor’s minimum 5% target is far too low.
  • Interestingly the Liberals make one of the same criticisms of the new emissions trading scheme that the Greens made of the CPRS: Australia’s domestic emissions will rise while half of the 160 Mt in Labor’s target will be offset overseas. There is a large potential for fraud in international offsets – a rare point on which I agree with Tony Abbott!
  • The 80% 2050 target is a long way off. The world needs to get to zero emissions by 2050 or sooner.
  • Carbon prices of $23 and $15 are far too low to drive a transition to renewables.
  • As well as a price floor there is a price ceiling: $20 over the international price. What if the international price crashes?
  • There have been media reports that the Clean Energy Finance Corporation will fund hybrid gas/solar power plants. Why build hybrid plants when you can build the real thing?
  • The carbon tax excludes petrol, a fossil fuel.
  • It sounds like the coal power plants which are bought out will be replaced with gas, when of course they should be replaced with renewables (I’d make the same criticism of Liberal policy). Also, we should shut more than 2 GW of coal before 2020. And I’m worried that buying them out now sets a precedent – that the Government will have buy them all out eventually.
  • The package retains unnecessary free permits for polluters, albeit temporarily, diluting the price signal and adding to the existing billions of dollars of fossil fuel subsidies. Notably the MPCCC did not agree to some of the compensation, but the Government will try to get it through Parliament.
  • Coal electricity generators will still receive free permits, albeit fewer.
  • Highly emissions intensive trade-exposed industries will receive 94.5% free permits, the same as in the CPRS. The compensation will include $1.3 billion to coal, $300 million to steel, and more. It will be locked in for five years, with an overlapping three-year notification period. This means there will only be a $1-2 price on trade-exposed industries until their compensation is reviewed in 2015.
  • There are $250 million of land sector offsets which I’m not sure whether to include as a pro or a con. While it’s important to manage the land sector side of things, I’m worried it will undermine the even more vital transition in the energy sector.

Summary

Though starting low at $23 per tonne with a minimum 5% target, it looks like the carbon price has unlimited upward flexibility. It still has unnecessary free permits for polluters which are effectively fossil fuel subsidies – but these can hopefully be phased out in a few years, and with luck some might not even get through the Parliament. While petrol is excluded, there will be a review of fuel subsidies hopefully leading to finally getting rid of them. There is a level of support for renewables here which is unprecedented in Australia, and looks like it will provide certainty for the renewable energy industry. It is unclear how well the emissions trading scheme is designed – there are at least some limits on international offsets, but that would still allow domestic emissions to rise.

Roundup of Carbon Tax Leaks

On Monday it was announced that the Multi-Party Climate Change Committee’s negotiations were sufficiently advanced for the full policy to be announced at noon tomorrow, followed by a Prime Ministerial broadcast at 6:30 PM. The MPCCC has reached agreement, and independent Andrew Wilkie (who is not on the committee) has indicated he will support the policy, giving the Government the 76 votes it needs to get it through the House of Representatives and 40 votes in the Senate (where it needs 39). The coal industry is about to launch a multi-million dollar advertising campaign against it.

New details are being leaked out every day and it’s difficult to keep up with them all. So here’s a list of known or rumored decisions. Some of the details are hazy but will no doubt soon become clear. I don’t consider anything certain until the big announcement tomorrow.

  • 1 July: The MPCCC have discussed buying out some coal power plants and replacing them, though it sounds like they will be replaced by gas, not renewables. Notably, this is similar to one of the Liberal Party’s policies.
  • 3 July: The Government announced the carbon price will not include petrol, although it may be covered in the future. Oil is one of the three main fossil fuels, and excluding it halves the number of companies covered from 1,000 to 500. Liberal leader Tony Abbott complained the exclusion of petrol made it a “great disappearing carbon tax”, despite having campaigned daily for months against taxing petrol and credited himself with its exclusion.
  • 5 July: 90% of households will be compensated, 70% will be fully compensated, and three million will be overcompensated.
  • 5 July: Even Greens leader Bob Brown says Australia will not phase out coal in the next decade (though Greens Senator Lee Rhiannon rightly says it is possible).
  • 6 July: The Government announced free permits for coal – the worst of the conventional fossil fuels. The amount is said to be smaller than the $7.3 billion over ten years for coal in the old CPRS, but instead granted over five years. Labor freely admits the industry’s size would double by 2050 under its policy.
  • 6 July: CSIRO modeling says under a $26 per tonne carbon tax, fossil fuels will still supply half of Australia’s energy by 2035, and possibly even by 2050 with carbon capture and storage.
  • 7 July: Though one of the MPCCC’s original principles was revenue neutrality, reports say the policy will cost $4 billion over four years, or $1 billion per year. Some of the funds will come from cutting fuel tax rebates (worth $5 billion in 2010-2011 but it will only be cut for some industries).
  • 8 July: The Greens announced a new independent body called the Australian Renewable Energy Agency (ARENA). ARENA will subsume $1.5 billion of existing renewable energy projects – the argument is management by an independent body will stop renewable energy money being constantly shuffled around. ARENA will also receive at least another $1.7 billion (apparently over ten years). It’s not clear where the money will come from – perhaps from the Clean Energy Finance Corporation will be funded by carbon tax revenue ($10 billion over five years). Thankfully, carbon capture and storage will not be counted as clean energy.
  • 9 July: The starting price is reported to be $23 per tonne.
  • 9 July: The Government will be able to buy $1 billion of carbon offsets in the land sector, but they won’t count towards Australia’s international target. Companies can also buy carbon offsets, but they will be capped.

More tomorrow…

Overview of My Opinions on the Carbon Tax

The topic of the Australian carbon tax is so big it’s hard to know where to begin covering it. Every aspect is inter-related to every other aspect. So here is a quick overview of my opinions and a list of possible topics I may cover in the near future.

The atmospheric level of CO2 must be returned to 350 ppm to prevent dangerous anthropogenic interference with the climate system. Because of the long lifetime of CO2 in the atmosphere, to reduce its concentration humanity must stop emitting so carbon sinks can start absorbing. Every year the world delays, CO2 rises by another 2 ppm and the 350 goal slips further from our grasp.

The only realistic way to achieve the required transition to a zero-carbon economy is to phase out fossil fuels as quickly as possible. This seriously calls into question the fashionable view of gas as a transitional fuel. While renewables are a zero-carbon energy source, gas is merely a lower-carbon one. A two-staged transition, from coal to gas then to renewables, would waste precious time. And it makes little sense for energy companies to invest in gas power plants, when they will eventually have to be shut down anyway.

Australia should be a leader in climate change mitigation, not a follower. Australia must rapidly transition to a zero-carbon economy as part of a 350 ppm global mitigation effort. The Zero Carbon Australia 2020 Stationary Energy Plan made a convincing case that Australia can create a 100% renewable energy economy in just ten years, by rapidly scaling up concentrated solar power technology (which has the storage capacity to provide power 24/7).

A carbon price should help to drive the transition to renewables. A badly-designed carbon price may be even worse than no price at all, if it locks in unlimited fossil fuel burning for another decade. Continue reading

What We Know About the Carbon Tax

This is just a quick post recapping the background of the carbon tax debate I will be commenting on.

2011 is probably our best hope of getting meaningful action from the Australian Government on climate change. Four months ago it announced its new carbon price policy framework. It’s a framework because the policy is in the process of being designed by the Multi-Party Climate Change Committee (MPCCC), set up by the Labor minority government to secure the support of the Greens.

Only two things are definitely decided:

  • The introduction of a carbon price before the next election. The legislation is intended to be introduced to the House of Representatives in August, the Senate in October or November, and come into effect on 1 July 2012. The Government says the start date is not negotiable.
  • The mechanism: a hybrid tax/cap-and-trade scheme. It will begin as a simple carbon tax that rises over time, and is intended to transition to a cap-and-trade scheme in three to five years.

The interim carbon tax was advocated by the Greens at last year’s election, to break the deadlock while emissions targets are negotiated. As a Greens voter, it is part of the platform that I voted for, and I hope it will be an effective deadlock-breaker. However, the devil is in the details which are still being negotiated. Continue reading

A Change of Direction

With two days to the middle of the year, I’ve decided it’s time to reassess what I want to do with this blog.

I started out, about eighteen months ago, writing posts debunking the arguments of global warming contrarians (you can find all those old posts here). However, in the past year I have transferred this effort to the Skeptical Science blog started by John Cook (you can find links to my Skeptical Science posts here), and Planet James was petering out. So now I have decided on a new role for Planet James from now on.

While I will continue to write about climate science on Skeptical Science in a politically neutral way, on Planet James I’ll be mainly blogging about climate politics in Australia. Now is a critical time, perhaps our best hope of getting meaningful government action, and I want to have my say.

In the past I wrote long and detailed posts that were few and far between. Now I intend to write posts that are shorter, sharper, more frequent, and to the point.

Christy Crock: Do the observations match the models?

I wrote this post for Skeptical Science.

At the recent US House of Representatives Committee on Science Space and Technology climate hearing, the Republicans called Dr. John Christy as an expert witness testifying against the global warming consensus. Unfortunately, Christy spent his time repeating a long list of climate myths, including the common contrarian refrain that “climate model output does not match up to the real world”. Let’s examine this claim.

A tale of three climate indicators

Surface temperature observations are well within the range of model projections:

Observed global temperatures since 1980 compared to IPCC AR4 model projections Continue reading

Zero Carbon Australia: We can do it

I wrote this post for Skeptical Science.

My recent post about long-term CO2 targets was rather doom-and-gloom: I concluded that we must phase out fossil fuels to keep the climate in the range that humans have experienced. The good news is that action on this scale is not only possible but surprisingly feasible.

Last year, the University of Melbourne Energy Research Institute in conjunction with Beyond Zero Emissions produced the Zero Carbon Australia 2020 Stationary Energy Plan. The ZCA2020 Plan outlines an ambitious and inspiring vision: to power Australia with 100% renewable energy in ten years.

The report that has been released only covers emissions from Stationary Energy (though it does refer to electrifying transport). Five future reports are planned on how to eliminate emissions from other sectors (Transport, Buildings, Land Use and Agriculture, Industrial Processes, and Replacing Fossil Fuel Export Revenue).

Why do it, and why now?

As I’ve explained here, to prevent “dangerous anthropogenic interference with the climate system” we must reduce CO2 to below 350 ppm. That necessitates a rapid transition to a zero-carbon economy.

A common approach is to define a quota of allowable future global emissions to limit warming to less than 2°C above predindustrial levels, and divide them up by nation per capita. At Australia’s current rate of emissions, we will use up our share of the global budget in just five years (the same goes for the US and Canada). This gives Australia about a decade to make the transition. Continue reading

Climate Emergency: Time to Slam on the Brakes

I wrote this post for Skeptical Science as a basic rebuttal of the argument “It’s not urgent”.

Global warming is an increasingly urgent problem. The urgency isn’t obvious because a large amount of warming is being delayed. But some of the latest research says if we want to keep the Earth’s climate within the range humans have experienced, we must leave nearly all the remaining fossil fuels in the ground. If we do not act now we could push the climate beyond tipping points, where the situation spirals out of our control. How do we know this? And what should we do about it? Read on.

James Hansen, NASA’s top climatologist and one of the first to warn greenhouse warming had been detected, set out to define dangerous human interference with climate. In 2008, his team came to the startling conclusion that the current level of atmospheric carbon dioxide (CO2) is already in the danger zone.

Since the Industrial Revolution, atmospheric CO2 has increased from 280 to 390 parts per million (ppm). Don’t be fooled by the small number – 390 ppm is higher than CO2 has been in millions of years. CO2 is rising by 2 ppm per year as we continue to burn fossil fuels. To stabilise the Earth’s climate, we must reduce CO2 to the relatively safe level of 350 ppm. And we must hurry, because the task will soon be an impossible one.

The 350 target is based not on climate modeling, but on past climate change (“paleoclimate”). Hansen looked at the highly accurate ice core record of the last few hundred thousand years, sediment core data going back 65 million years, and the changes currently unfolding. He discovered that, in the long term, climate is twice as sensitive in the real world as it is in the models used by the IPCC. Continue reading

A basic overview of melting ice around the globe

I wrote this post for Skeptical Science as a basic rebuttal of the argument “Ice isn’t melting”.

Contrary to contrarian claims, ice is melting at accelerating rates in the Arctic, Antarctica, Greenland, and glaciers all over the world. Arctic sea ice has shrunk by an area equal to Western Australia, and could be all gone in a decade.

Ice sheets are beginning to shrink

An ice sheet is a huge layer of land ice. The only ice sheets are in Antarctica and Greenland.

The Greenland ice sheet is losing mass at an accelerating rate. In recent years the ice loss has spread from the south coast around to the northwest.

Continue reading