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Dirty fossil fuel exports will come back to bite Australia

Australian coal and gas is being shipped and burned around Asia at record rates – but at what cost to the climate?
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A coal truck passes a pile of coal at BHP Billiton’s Mt Arthur coal mine in Muswellbrook, Australia. Photograph: Ian Waldie/Getty Images

Australia just loves to share, regardless of whether or not the world might universally benefit from what it’s got to give.

There’s been Kylie Minogue, a certain beer that nobody in Australia actually drinks, unplayable spin bowlers, those mini plastic alopecia-ridden clip-on koalas and pictures of “wish you were here” beaches.

But there’s another, less famous Aussie-born export: fossil fuels. Lots of ’em.

I know, I know. Australia is tackling the world’s greatest market failure with its legislated price on greenhouse gas emissions. One tonne can be yours for AU$23 (£15.50).

Al Gore has said the laws introduced in 2012 by the Labor prime minister, Julia Gillard, had “inspired the world” because “carbon polluters are being held accountable for the global warming pollution they pour into the atmosphere every single day”. Barack Obama has described the policy as “bold”.

Few would argue that it’s a first step to fundamental change but Gore, Obama and Gillard need blinkers when they use the carbon price as evidence of serious action.

That way they can avoid seeing the squizillions of tonnes of Aussie fossil fuels being shipped and burned around Asia like they’re going out of fashion (which surely they should be).

Australia’s domestic emissions of greenhouse gases are relatively modest on a global scale – about 560m tonnes of CO2-equivalent (CO2e) annually. But on a per capita basis, Aussies are one of the worst offenders in the developed world.

A new study in the journal Biogeosciences finds Australia exports twice as much CO2e via coal and gas than it emits at home from burning fossil fuels for energy. But Australia is only getting started.

Already the world’s biggest exporter of coal, a Greenpeace report has dubbed the country’s plans to expand those exports as a “carbon bomb” that will add 900 megatonnes of CO2 to the atmosphere every year when its burned.

On top of that, the state of Victoria is touting, to anyone interested, some 13bn tonnes of its reserves of lignite – low-grade brown coal.

Australia’s most emissions-intensive power plants are fueled by brown coal. In theory the much-lauded carbon price should hit the dirtiest power generators the hardest.

But new analysis this week suggests that, so far, the carbon price hasn’t so much hit them hard as provided billion dollar bonus cheques.

A report commissioned by not-for-profit group Environment Victoria has found, in the first six months of the scheme, the Victorian power firms passed on to customers more than 100% of the carbon price.

Among the laws and schemes to deliver that price was a pot of cash to supposedly stop power plant owners going under and the lights going off.

Thanks to this and the extra cash from price rises the report claims the brown coal generators will pocket between AU$2.3bn (£1.5bn) and AU$5.4bn (£3.64bn).

And where does a fair bit of that filthy lucre go? Clue: it starts with “e” and ends in “xport”. Three of the biggest power plants are owned by two international energy giants: the Europe-based GDF Suez and the Hong Kong-based CLP Group.

But there are other “carbon bombs” being readied for launch.

Queensland has three projects going ahead costing AU$45bn (£30.3bn) to take gas from coal seams (with the help of fracking and about 18,000 wells) and pipe it hundreds of miles to Curtis Island next to the Great Barrier Reef for conversion into liquefied natural gas (LNG).

The Queensland government estimates more than 28m tonnes of LNG will be exported annually, helping Australia compete for the title of world’s top LNG exporter.

In South Australia, Linc Energy has dollar signs flashing in front of its eyes after finding a possible 233bn barrels of shale oil sitting under its exploration areas.

Australia also has globally significant stores of shale gas to exploit, which firms are starting to have a crack at.

But could it be that all that digging, burning and exporting is coming back to bite the Minogue/Fosters/crappy koala souvenir homestead?

Australia had its biggest and longest heatwave on record in January creating perfect conditions for hundreds of bushfires. For seven days straight, the average maximum temperature across the country topped 39C.

Then there were the 2009 Black Saturday bushfires, which killed more than 170 people. The 2011 Queensland floods caused $5bn of damage after an area the size of France and Germany was declared a disaster zone.

Of course these extreme events, like others being shared around the world of late, had absolutely nothing whatsoever, not even in the slightest, how very dare you even contemplate it, to do with man-made climate change.

New study reveals Labor will hand $2.3–5.4 billion profit bonanza to Australia’s dirtiest power stations from carbon price compensation

Posted: 19 Feb 2013 01:38 PM PST
by David Spratt

The warnings were clear and now its happened: bending over backwards with carbon tax compensation to appease Australia’s dirtiest electricity generators, the Gillard government has handed big coal billions in windfall profits, whilst consumers are effectively paying twice for the carbon price.

Anybody with any sense — from Professor Ross Garnaut to The Greens — warned two years ago that Labor’s carbon tax package was far too generous in compensating Australia’s dirtiest, brown-coal-fired power stations in Victoria and that, rather than providing reasons for them to be phased out, the package would perversely provides financial incentives to keep generating dirty power even longer.

And now the damning evidence is in.

As reported by The Age, Sydney Morning Herald, Canberra Times, the Financial Review and ABC AM this morning, a new study released today — ‘Transitional assistance or windfall profits?’ — by consultants Carbon and Energy Markets (CME) shows how far overboard the Gillard government has gone in appeasing Australia’s dirtiest coal power station owners. The report is the first analysis based on market outcomes, as opposed to predictions and models.

In an eerie parallel to the mining tax disaster — which has produced revenue of just $126 million in six months as against a giveaway of $1.7 billion in tax credits to the big miners — Transitional assistance or windfall profits? finds that:

In the first six months of the operation of the carbon price, generators have passed on more than 100% of the carbon price to electricity retailers. That is, despite the carbon tax, their profits from the sale of Australia’s dirtiest electricity have increased.
Victorian brown coal generators have already received $1 billion in cash compensation payments from the Energy Security Fund.
They are due to receive billions more in compensation from that Fund, with the next payment due on 1 September this year.
The combination of full carbon price pass-through and compensation will deliver windfall profits for generators estimated at between $2.3 billion to $5.4 billion, depending on the future carbon price.

Report author Bruce Mountain of CME says that in the first six months since the introduction of the emission price, generators in Victoria “seem to have been able to pass on all of the cost of the emission permits, through higher electricity prices in the spot market”.

Assuming the generators are able to pass on a similar proportion of the carbon price in future, he estimates:

the Victorian brown coal generators, which receive over 90% of Energy Security Fund payments, can expect to accrue additional operating profits somewhere in the range of $2.3bn to $5.4bn (Present Value) depending on emission prices in future… Professor Ross Garnaut and others warned against compensation payments for generators stating they were unnecessary. The level of pass-through that has been observed so far has been unexpectedly high, and seems to vindicate their concerns

The report, commissioned by Environment Victoria, leaves the Labor Gillard government little choice but to urgently review and reduce or abandon these compensation payments. The report’s findings are embarrassing and damaging to a government already suffering public odium for its cave-in over the mining tax.

Together, these events paint Labor as a party which has capitulated to the miners and brown coal generators at a cost of many billions of dollars a year in tax revenue. The practical consequence is that Julia Gillard’s newly-described “modern families” will pay the price through a combination of more taxes and lower government services.

It adds to the picture — contrary to rosy claims about “clean energy futures” — of a government beholden to the fossil fuel industry. At the launch of Environment Victoria’s “Paid to pollute” campaign last Sunday, the results of detailed analysis by The Australia Institute of fossil fuel industry subsidies in Australia painted a startling picture. The research found total government subsidies to the fossil fuel industry of around $13.3 billion a year, compared to revenue from the carbon tax of just $7.7 billion a year (on fossil fuel industry pollution).

For all the pain associated with its struggle withe the mining and carbon taxes, Labor has little to show if this compensation bonanza to Australia’s dirtiest generators isn’t quickly remedied. It’s hardly surprising that these generators refused to negotiate seriously (and there is evidence that Martin Ferguson didn’t try) under the proposed “Contracts for Closure” arrangements. If this compensation had been taken off the table as The Greens, Garnaut and many others advised, then we would now likely be watching Australia’s dirtiest generators receiving some compensation to close down, rather than reaping windfall profits of $2.3–5.4 billion to keep pouring greenhouse gases into the atmosphere.

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Fear, optimism and activism: What drives change?

Posted: 16 Feb 2013 01:38 AM PST
It’s a fair bet that my Brightsiding series in 2012 was responsible for the topic at this year’s Melbourne Sustainability Festival Great Debate held last Friday: “Fear is stronger than optimism in creating rapid social change”.
So six of us lined up, not in teams, but with clear instructions to take one side or the other and not fence-sit (more of this later). The participants were Bob Brown, Jon Dee, Fiona Sharkie, David Spratt, Guy Pearse and Tanya Ha, and the debate host was ABC TV’s Bernie Hobbs.
Given the brightsiding that still dominates the poor performance of the government and many of the big environment groups on climate action, I felt obliged to bend the stick in the opposite direction, even though the question was poorly framed. Ten minutes is hardly time to canvas the meaning of life, so this was my contribution:

Yesterday, 14 February, was the tenth anniversary of the biggest ever protest rally in Melbourne. Bob Brown will remember it well: he was was one of the speakers.
A quarter of million Victorians stopped the city to say: “Don’t launch war on Iraq, it will be hell.”
As an organiser for that event, I understood that people came because they were defiantly angry, upset, fearful for the tens and hundreds of thousand of people who would die in a war for oil.
And they were right.
We all hope for peace. But anti-war rallies happen when killing is at hand.
At another time of war, one of the world’s great optimists was Neville Chamberlin, the British prime minister in the late 1930s. Faced with a militarised Germany, Chamberlin signed a non-aggression pact with Hitler in 1938 and announced optimistically that he had secured “peace for our time”.
“Madness”, said opposition leader Winston Churchill, who urged the country to prepare for war at all speed, and became the nation’s leader. Churchill was no blind optimist: he assessed the situation bluntly and without false optimism — to call it like it was, and then lead the country to fight and win.
The Churchill lesson is that fear and courage together can make us safer.
As human beings we want to avoid harm. Refusing to drive with a drunk driver is prompted by rational fear.
This is built into our DNA: the fight or flight response. Danger triggers fear, which helps us respond. Without that fear-response, we would not survive.
Fear is the starting point, but it is not enough. All the studies on health and safety promotion — smoking, obesity, drink driving, HIV, workplace safety — show the same thing:

Be honest about the problem, don’t hold back, tell it like it is. (The government’s new graphic cigarette packaging, is a result of decades of careful research on what works.)
Then show there is a better alternative, the benefits of changing behaviour,
Finally show there is an efficacious path: “you can do it” actions that the person or society is empowered to take to move from fear to success.

This process also applies to the threat of climate change, which demands large-scale, fast action to reduce greenhouse gas emissions.
So how did the Labor government and the big climate groups try to convince people of the worth of the planned carbon tax two years ago?
The health promotion lesson was completely forgotten. The impacts of climate change on people lives now and in the future didn’t get a mention.
Instead they ran campaigns about “clean energy futures” and “saying yes”. It was all happy-clappy, win-win. It was all about selling “good news” and not mentioning “bad news”.
This approach, based on “positive psychology” is the stuff of motivational speakers, of many personal development courses, of personality and religious cults, and of most politics today. It is an unrelenting false positiveness disconnected from reality.
And what happened with the happy-clappy “Clean energy futures” campaign? Public support fell, because the government tried sell the answer without elaborating the problem.
This is modern marketing — reality avoidance, glib hope, spin.
On the other hand when people learn what climate change entails — record extreme fires, heat waves, floods and storms — public support for climate action goes up, because people then understand how living on a hotter planet will feel.
And that is a starting point for community organising and engagement.
Over four decades of community activism, I have no doubt that engagement starts with anger, moral outrage, fear, a sense of injustice… combined with a belief that we achieve change.
The biggest community movement in Australia today — against coal seam gas — is motivated by anger and fear of water tables being poisoned, agricultural lands being lost, family lives destroyed. These people are hopping mad.
We do not fight because we are happy. We fight because we have taken off the blinkers of false optimism and we see what is really going on. We fight not knowing whether we will win, but knowing the power of solidarity and collective action.
The scientists tell us that global failure to control greenhouse gas emissions means the world is heading to be 4 to 6 degrees Celsius hotter by century’s end. Much of the planet will be unliveable, and the carrying capacity of the planet will likely be under a billion people, one-seventh of today’s population.
A 4-to-6-degrees-hotter future is incompatible with an organised global community. This is scary stuff.
Fear can immobilise us when the problems seem too big. That’s why it is important to understand what modern psychology teaches us.
We each have a limited capacity for tolerating difficult emotions: fear, grief, pessimism and anxiety. Pushed too far, we are unable to cope and feelings run out of control. That’s why climate change is a difficult subject for many people.
But security, support and understanding can help us better deal with a wider range of such emotions.
Working in groups, community solidarity and identifying with strong courageous leadership can all expand this capacity. In doing so we can feel emotionally safer when the going gets tough.
The bravest thing we can do right now is to be brutally honest in our assessment of the situation, and then find the collective power to change it. That’s the Churchill lesson.
The other choice is bright-siding, the belief that you can control your outlook with relentless positive thinking and a sunny disposition, and by refusing to consider negative outcomes. In requires deliberate self-deception.
As Barbara Ehrenreich observes of the United States, believing the country impervious to a 9/11-style attack, or New Orleans to inundation, and incapable of failure in Iraq or a Wall Street crash, can exist because there was no inclination to imagine the worst, as well as the best.
In the end, bright-siding strips away critical analysis. As Ehrenreich concludes, enforced optimism obstructs the progressive agenda, producing an enforced stupidity.
In other words, optimism is conservative, while realism is progressive.

So how did this go down? Fiona Sharkie (CEO of Quit Victoria) said that fear-based campaigns had been very effective in her organisation’s work. Likewise academic and author Guy Pearse was sober and forthright in describing the failure of political parties and many environment and climate groups to get to grips with the real size and urgency of the climate challenge.
John Dee said neither was a particular driver and Tanya Ha, in the end, was close to sitting on the fence. Bob Brown acknowledged the role of legitimate fear as a driver of social activism and said it was more than justified given what is happening to the planet, and concuded that fear then needed to drive “intelligent optimism”.
Of course activism requires both, but it would have hardly have been a debate if we had all said that! After the six speakers, the audience was invited to vote, and were given three choices (plus “other” which produced many personal takes on proceedings!). Of the three tick-a-box options, “optimism” scored 10 votes, “fear” scored 45 and “both fear and optimism” won with 145. That “both” won was to be expected.
What was good was that, in contradistinction to the brightsiding that pervades so much of climate advocacy and public policy discussion, the healthy role of legimate fear as a reasonable response to global warming got a healthy airing, and most of the audience was able to acknowledge than emotion.
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Insulation dud scheme bills roll in

Jessica Marszalek
The Daily Telegraph
February 12, 201312:00AM

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THE bungled home insulation program is still costing the taxpayer, with the federal government deciding not to recoup $24 million in suspect claims.

Nearly $14 million owed by companies believed to have wrongly claimed subsidies under the failed scheme has been written off, a senate estimates hearing was told yesterday.

The government has also decided to reverse $10.2 million in “potential debt”, ruling it would have difficulty proving and collecting it.

The botched scheme was plagued by dodgy practices and led to the deaths of four installers and 224 house fires.

Department of Climate Change and Energy Efficiency deputy secretary Subho Banerjee told the hearing 671 debts from 516 installers totalling $6.69 million was still owed, but even that might not be recovered.

“The experience in these debt recovery operations across the Commonwealth is that the expected recovery rates are very low,” he said. “That’s our advice in this case as well.”

He said $1.89 million had been recovered.

The hearing was told $13.77 million of debts were written off – seven because companies were declared bankrupt, one because of death, 445 because the companies ceased operating and 35 were deemed “uneconomical to pursue”.Liberal Senator Simon Birmingham asked what lengths the government had gone to to chase down the 445 cases.

“Or was it just the case that people managed to set up companies, fleece the taxpayer of $13.7 million and then close down their companies and get away with it?” he said.

Dr Banerjee said civil action was still being considered.

“But our advice is that on the basis of the information that we have from the ASIC records that the proper course of action was that that debt was unlikely to be recovered and therefore it should be written off.”

Dr Banerjee said $1.9 million paid to insulation installers to try to stop them going under through the Insulation Industry Assistance Package had also been written off, although $310,000 had been recouped.

Do we need a Plan B for the fossil fuel industry?

Posted: 09 Feb 2013 02:15 PM PST
by Graeme Taylor

Is their any future for the oil and coal industries without doing what they do now: burning the stuff? In Global Warming’s Terrifying New Math, Bill McKibben argues that:

We have five times as much oil and coal and gas on the books as climate scientists think is safe to burn. We’d have to keep 80 percent of those reserves locked away underground to avoid that fate. Before we knew those numbers, our fate had been likely. Now, barring some massive intervention, it seems certain.

Yes, this coal and gas and oil is still technically in the soil. But it’s already economically aboveground – it’s figured into share prices, companies are borrowing money against it, nations are basing their budgets on the presumed returns from their patrimony. It explains why the big fossil-fuel companies have fought so hard to prevent the regulation of carbon dioxide – those reserves are their primary asset, the holding that gives their companies their value. It’s why they’ve worked so hard these past years to figure out how to unlock the oil in Canada’s tar sands, or how to drill miles beneath the sea, or how to frack the Appalachians.
If you told Exxon or Lukoil that, in order to avoid wrecking the climate, they couldn’t pump out their reserves, the value of their companies would plummet. John Fullerton, a former managing director at JP Morgan who now runs the Capital Institute, calculates that at today’s market value, those 2,795 gigatons of carbon emissions are worth about $27 trillion. Which is to say, if you paid attention to the scientists and kept 80 percent of it underground, you’d be writing off $20 trillion in assets. The numbers aren’t exact, of course, but that carbon bubble makes the housing bubble look small by comparison. It won’t necessarily burst – we might well burn all that carbon, in which case investors will do fine. But if we do, the planet will crater. You can have a healthy fossil-fuel balance sheet, or a relatively healthy planet – but now that we know the numbers, it looks like you can’t have both. Do the math: 2,795 is five times 565. That’s how the story ends.

I agree with his logic. Because corporations, governments, investors and pension funds will do everything possible to avoid bankruptcy, efforts by environmentalists to simply shut down fossil fuel production will inevitably meet enormous resistance. For this reason it is hard to imagine any scenario in which preventative action will be taken in time to prevent catastrophic climate change.
McKibben then concludes that because the pollution caused by the oil, gas and coal companies will destroy most life on Earth, they are our enemies. While I understand his frustration, I believe that his analysis is incomplete, with the result that he is making serious theoretical and strategic mistakes.

His theoretical error is to analyse the fossil fuel industry in isolation from the rest of the global industrial political economy: in reality ending the use of fossil fuels will stop most existing industrial processes. We cannot create an environmentally sustainable economic system without completely transforming our wasteful, polluting pyrotechnical system to one based on renewable, recyclable, non-polluting processes. This will require a whole-systems paradigm shift — of not only the energy sector but also transportation, manufacturing and consumption. The political and economic power of the fossil fuel industry comes from its essential role in maintaining the industrial economy: because poverty is not an acceptable option, almost everyone on the planet wants the global industrial system to continue growing and will oppose policies that threaten economic collapse.
His strategic error is to position the environmental movement in opposition to the fossil fuel industry. This win/lose approach fails to give the industry and its investors any alternative other than to directly or indirectly oppose environmental initiatives. This is a particularly inappropriate strategy given the relative strength of the two groups and the (ultimately common) need for a rapid resolution to the problem.

We are likely to be more successful if, instead of trying to force the energy industry to write off $20 trillion, we provide constructive alternative uses for their assets — ones that support the development of an environmentally, economically and socially viable global system.
We need to put “Plan B” — a strategy for creating a sustainable fossil fuel industry — on the global agenda. It will work if:

Technologies are developed to utilise hydrocarbons as feedstocks to manufacture fully recyclable products in non-polluting (e.g. non-aerobic) processes. Carbon based products (e.g. plastics, fibres, carbon nanotubes) could then be used to create much of our built environment and transportation infrastructure.
While these technologies already exist (e.g. steam-methane reforming), they need to be refined and scaled up to commercially competitive levels.
Using fossil fuels to produce manufactured products should add value in three ways:
instead of burning coal, oil and gas, it will be more profitable to use them to produce finished products;
through creating recyclable products, the life of finite resources will be greatly extended; and
the (ultimately catastrophic) environmental, health and social costs of pollution will be avoided.
An emergency approach is taken to developing and scaling up the new technologies (similar to that of war mobilisation).
An international regime of sanctions and rewards is used to encourage industries and consumers to make the transition from polluting to non-polluting products.

Dr Graeme Taylor is the coordinator of BEST Futures (www.bestfutures.org) and the author of Evolution’s Edge: The Coming Collapse and Transformation of Our World, which won the 2009 IPPY Gold Medal for the book “most likely to save the planet”.
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