A price to pay for climatechange fantasy

From left, China under Xi Jinping and Indonesia under Joko Widodo rely on coal-fired power for industry, the US under Joe Biden produced record crude oil last year, Anthony Albanese refuses to consider nuclear. Artwork: Emilia Tortorella

· 12:00AM JUNE 15, 2024

· 55 COMMENTS

Peter Dutton and Ted O’Brien haven’t reignited the climate wars,as Anthony Albanese and Chris Bowen claim. The climate wars never went away andthey are being waged all over the world. It’s just that almost everything youhear about climate policy in the official and semi-official discussion inAustralia is basically misleading, if not outright wrong.

Let’s take a step back and look at the big picture.

The Kyoto Protocol was adopted, in the serene and beguilingJapanese city of that name, in 1997, 27 years ago. Kyoto itself built on the1992 UN Framework Convention on Climate Change. So for more than three decadesthe world has been decarbonising, right?

We’ve had many solemn moments and announcements, especially the2015 Paris Agreement. Dutton says he would abandon Australia’s 2030 target toreduce greenhouse gas emissions by 43 per cent, but he’s committed tohonouring the Paris pledge to reach net-zero emissions by 2050. He wants to doit in part by building nuclear energy.

In truth Australia, whether led by Albanese or Dutton, is avery, very minor player in all this, being responsible for a tick over 1 percent of global emissions. Every Labor leader since Kyoto, and quite a fewLiberal leaders, has told us the world is decarbonising. Deputy Prime MinisterRichard Marles, early in the life of the Albanese government, caused a rippleof concern by rejoicing in the fact that coal was being phased out globally.

So after three decades of decarbonising, how is the world goingin phasing out fossil fuels, to wit, gas, oil and coal?

Smoke billows from stacks at a coal fired power plant in Shanxi, China. Picture: Getty Images

Let’s start with gas. Everyone except the Greens understandsthat gas is, at the very least, a critical transition technology.

Much of the reduction in the carbon intensity of economies – thatis, the amount of greenhouse gases emitted per unit of production – has comefrom substituting gas for coal and oil.

Nonetheless, after 30 years of relentless decarbonisation, you’dexpect a pretty severe drop in gas use. Actually, according to theInternational Energy Agency, consumption of natural gas is at or just near itsrecord high. The rate of growth of demand has slowed but demand is stillgrowing.

Well, that’s a bit of a surprise. What about oil, that must bewell down, with fuel efficiency standards, the global campaign for electricvehicles, the decline of oil in power generation?

Guess what. Last year, according to the US government’s EnergyInformation Administration, world use of oil was at a record high, higher thanthe peak before the Covid pandemic, at more than 100 million barrels a day. Notonly that, the US under pro-green Joe Biden produced more crude oil, more than13 million barrels a day, than any country has ever done.

Oil production dipped in the global financial crisis of 2008 andagain during Covid. But it’s now roaring ahead, stronger than ever.

But surely the US constantly lectures everyone else aboutclimate change, the dangers of fossil fuels etc. How is that consistent withrecord crude oil production? Bear that thought in mind, for it’s a clue to thewider reality.

OK, so we’ve struck out in looking for global reductions in gasand oil, but obviously coal use must be well down. I have myself causedsomething near pandemonium by suggesting on the ABC’s Q+A and on Insiders thatcoal has a future as well as a past. It was as though a leading atheist hadinfiltrated the Spanish Inquisition. So now I must face the truth about coal.Surely its use has declined?

But what do you know? According to the IEA: “Global coalconsumption reached an all-time high in 2022, and the world is heading towardsa new record in 2023.”

A climate graph which mixes fact with prophesy.

Advanced economies such as the US and the EU are using less coalbut, says the IEA, “the growth in China and India, as well as Indonesia,Vietnam and The Philippines, will more than offset these decreases on a globallevel”. And the price of coal, at $US140 a tonne, is very healthy.

That’s a good thing because our top three export earners arecoal, iron ore and gas. We couldn’t afford any fancy green measures, orMedicare, or the National Disability Insurance Scheme, or anything else,without the minerals industry.

According to the IEA, fossil fuels make up about 80 per cent ofglobal energy, just a tick under their level 10 years ago.

So how has the world been reducing its greenhouse gas emissionsfor so long, with these fossil fuels all reaching record production andconsumption levels? Well, actually, the world hasn’t been reducing itsgreenhouse gas emissions.

Oops again. Another surprise. According to the US NationalOceanic and Atmospheric Administration, greenhouse gas levels are rising again,and reached record levels last year. The IEA’s own figures, and studies fromStanford and other universities, confirm this.

None of the foregoing bears on the question of what should behappening. But our debates ought to start with reality. What is happening inthe world is more or less the opposite of what the government and the climatechange propaganda agencies tell us is happening.

How often have you heard any of the facts above in theAustralian climate debate? The debate is overwhelmingly dominated by people whoare so committed to the idea of Australia taking radical action that theyinsist on pretending radical action is being taken globally.

The developed countries are reducing greenhouse gas emissions,but the developed countries are no longer the big story. China is the biggestgreenhouse gas emitter by far. It accounts for more than 29 per cent ofglobal emissions, more than the US and EU put together. The top 10 emittersare: China, the US, India, Russia, Brazil, Indonesia, Japan, Iran, Mexico andSaudi Arabia. Of those only two, the US and Japan, are rich, developedcountries. Almost none of the others has binding targets or any commitment towhen their emissions will even peak.

Indonesia is a fascinating case. Like China, it has a goal ofnet zero by 2060. It has nearly 280 million people and is still a poor country.It has more than 250 operational coal-fired power plants. It has aninternational deal to retire some of them early. Well, that seems to beprogress, you might argue.

Except that it also has an out clause that says plants that havealready been approved, or “captive” plants that don’t feed directly into thegrid but only power an industrial park or a specific project, or are concernedwith National Strategic Projects, can go ahead. There are 40 plants underconstruction and more in pre-approval.

Recently, Indonesia has had huge success expanding its nickelproduction. In 2020, Jakarta banned the export of unrefined nickel. LikeAustralia, it has a lot of nickel. It didn’t want to dig it up and ship itoverseas. It wanted refining and processing to take place within Indonesia.

This move defied every tenet of orthodox economics and wasalmost universally criticised by international commentators (including me). Yetas so often, reality doesn’t conform to the textbook.

Indonesia’s move worked. It attracted Chinese partners who alsobought the product. Low-grade nickel is used to make steel. High-class nickelis used for very sexy products like lithium-ion batteries. A bit like ElizaDoolittle in My Fair Lady, low-class nickel can be transformed into high-classnickel with enough money. There are industrial processes that will do the trickbut they require enormous amounts of power. So Indonesia’s Chinesecollaborators built a swag of coal-fired power stations to provide the power towork the magic on the nickel.

In 2017, Indonesia produced 385,000 tonnes of nickel. Last yearit produced 1.8 million tonnes. It’s murdering the Australian competition. TheAlbanese government talks a lot about Australia’s position with rare earths, ofwhich we have a lot in the ground, and how we’re going to become a renewableenergy superpower.

By the way, almost every country in the world plans to be arenewable energy superpower (surely now one of the iconic cliches of our time),suggesting many, many of them will be sorely disappointed.

The Indonesian policy has succeeded magnificently from its pointof view. Indonesia’s President, Joko Widodo, has genuine environmentalambitions. But he’s also determined to develop his nation. Similarly, anyonewith even the vaguest familiarity with Indonesian politics will know just howentrenched and powerful are coalmining and energy interests. Indonesia pays itspopulation fuel subsidies – the exact opposite of a carbon tax – and hastypically subsidised coal energy.

But the deeper pattern and perversity of the industrial politicsof renewable energy revealed in the Indonesian nickel example occurs morebroadly across Asia, especially in China. The production and sale of windturbines is dominated by China. To make them so cheaply, China typically usescheap coal-fired power. Coal power is still mostly the cheapest power in theworld despite what the Albanese government tells you (more on that below).

So the true carbon cost of even renewable energy ought to takeinto account the role of coal-fired power in making the renewable energyproducts. In any event, here’s the paradox of energy politics: to become arenewable energy superpower, you need lots and lots of cheap coal-fired power.

China, India, Indonesia, Vietnam, The Philippines and in duecourse the poorer nations of Asia, and beyond that lots of African nations, areextremely unlikely to compromise their national development by embracing vastlymore expensive and unreliable renewable energy over coal, gas and the like.

Two factors allow some modern, wealthy, industrial nations torun low emissions levels. One is a natural topography that lends itself tohydro-electric power. Hydro power is the only genuinely cost-competitiverenewable energy and still the most important renewable energy. The other isalready having a lot nuclear power.

None of this, as I say, is to argue what Australian policyshould be. But the realities sketched here almost never figure in theAustralian debate. How come?

Let me nominate one international factor and one specificallyAustralian factor.

Accompanying this article is a graph from the IEA showing therise of the use of gas, oil and coal, measured in exajoules (one joule, ameasure of energy, to the power of 18; that is to say, lots of joules, onejoule being the equivalent of 107 ergs). The left side of the graph’s curve, upto the peak in 2022, which has been maintained in 2023, describes things thathave already happened. That part of the graph is indisputable fact.

The right side of the graph shows a steep decline in the use ofcoal, oil and gas. But that’s purely speculative. That’s more or less taking anend point of declared policy, the Paris targets, and plotting a line that getsthere. But that’s the future, and government predictions of the future havenever been reliable. Indeed the Climate Tracker website describes Argentina,South Korea, Russia, Turkey, Canada, Mexico and Indonesia as “criticallyinsufficient” in meeting their greenhouse gas reduction targets, and Australia,China, Brazil, the EU and Britain as “highly insufficient”.

The point about the graph is that huge amounts of climateliterature are presented this way. The average reporter, the average citizen,tends to see such graphs as one entity and unconsciously gives the authority ofthe left-hand side of the graph, which represents factual history, to theright-hand side of the graph, which represents Nostradamus-like prophecy.

Within Australia, governments do this kind of thing very deliberatelyand with shockingly good effect. I’ve been following the national defencebudget pretty closely for some decades. I’ve never seen a defence budgetprojection, or capability projection, actually come true if it concerns anyperiod of the future longer than about six months. And defence is an area wherethe Australian government entirely controls what it spends. Australiangovernments can’t even predict what they themselves are going to do more thanfive minutes hence.

Yet somehow we are supposed to believe government agencies canforecast exactly what’s going to happen in energy and climate years and years,even decades, ahead. Gimme a break.

Thus the Albanese government has got great mileage from aClimate Change and Energy Department projection that Australia will reach a 42per cent reduction in greenhouse emissions by 2030, just 1 per cent shy of ourtarget of 43 per cent. Apparently the government now can predict thecourse of the Ukraine war, the effects of a possible Donald Trump victory inAmerica, greenhouse gas emissions caused perhaps by a sudden spike in migrationto Australia, and all the other manifold variables. You think?

Predicting we’ll be just 1 per cent short is a sweet touch.Just try a little harder, Australia! Yet a UN committee examining the issuedoesn’t think even one G20 country will meet its target. The government ismiles behind in the rollout of renewables. Electric vehicle sales are a smallfraction of the forecast sales. But still we are, according to the magicforecast, just 1 per cent off target.

This is the problem, though. Almost every piece of informationin this area is designed to produce a political effect. Disinterestedinformation is at a premium.

When like is genuinely compared with like, coal is cheaper thanrenewables. Because with renewables you have to take account of the fact thatmost of the time they don’t operate so you need vast extra capacity, sometimesthere are wind droughts and long cloudy periods so you need vast back-upsystems of gas or coal or something else, the transmission infrastructure isenormous and the costs huge, and after 25 years or so you’ve got to throw awayall the renewable stuff and replace it.

Almost everywhere that introduces vast renewable energy, apartfrom hydro, sees big electricity price rises. It might be that we still want tomake the change because of our commitment to lowering our greenhouse gasemissions. But we need to recognise the cost, otherwise there will certainly bea backlash and the policy may well be reversed in time.

On the other hand, perhaps we should have some otherconversations as well. Almost everyone wants to make some contribution toreducing our greenhouse gas emissions. But given that whatever we do will haveno discernible impact on the global environment, we should think prettycarefully about the cost. Especially given that it’s not happening globally.

Switching to renewables will make us poorer. They say the keypolicy dilemma for China is: will it grow rich before it grows poor?

For us the question is: do we want to grow richer before we growpoorer? And how poor do we really want to be?