Carbon pricing: it’s a proven way to reduce emissions but everyone’s too scared to mention it


Tony Wood, Grattan Institute

Opposition leader Anthony Albanese sought to claim the climate policy high ground last week with his commitment to a net-zero emissions target by 2050.

But figures on Australia’s emissions from the Department of the Environment and Energy help frame the political debate, and put the policies of both Labor and the Coalition in context.




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Australia’s emissions fell from 611 million tonnes of CO₂-equivalent in 2005 to 532 million tonnes in 2019 – an average annual reduction of 5.6 million tonnes.

But the government’s projections show this will slow to an average of only 2.4 million tonnes per year over the next 10 years.

Achieving Labor’s target of net-zero by 2050 would require much faster emissions reduction: about 25 million tonnes a year.

Business groups and economists agree putting a price on carbon is the best way to meet this objective in a low-cost way. But amid this climate policy hodge-podge, no one is talking about it anymore.

Scott Morrison: building technologies, not policies

The summer bushfire crisis prompted demands from business and community for climate action, triggering a repositioning by the Morrison government

There are two arms to the government’s strategy.

The first uses the falling emissions of the past 15 years to support the argument that its target of reducing greenhouse gas emissions to 26-28% below 2005 levels by 2030, is achievable. And, by implication, so will be any future targets.




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The problem with this claim is that the past success has been driven by not-to-be-repeated land use changes, the now-finished Renewable Energy Target, and coal plant closures. It has not been achieved with current policies. And even if the current target is met, it leaves a tough post-2030 challenge.

The second arm builds the case for future emissions reduction on technology and not policy, thereby avoiding the firm targets that are poison within the Coalition.

Morrison feels he must focus his narrative on a positive technology action story without quantifying the costs of these actions or of inaction. This is a high-wire act, but he has little political choice in the short-term. It may yet buy him the space he needs in the medium-term.

Anthony Albanese: needs credibility

Albanese has almost certainly made the right political call to embrace the target of net-zero emissions by 2050. He is on the right side of the broad Australian debate.

Yet, this call brings its challenges. Labor has a year or so to develop a clear and compelling narrative that uses the target as the long-term objective, builds an economy-wide pathway to its achievement, and is supported by a policy framework to follow that pathway.




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Labor has considerable experience, much of it painful, from which to learn. It must provide enough substance to be credible but avoid getting bogged down using economic modelling as a precise forecasting tool. It must also directly address the role of government in supporting structural adjustment as the new economy emerges.

The big difference this time around is Labor can harness the widespread support across many areas of industry and the community.

Albanese has already begun to build his narrative around these themes. His challenge is to sustain the momentum.

Resurrecting the carbon price

In all the strategies and tactics of this round of the climate wars, the most disturbing development must be that carbon pricing became roadkill on the way.

Emissions must be reduced across the economy at lowest cost. Business groups, including the Business Council of Australia, as well as economists, recognise a carbon price is the best way to meet this objective. And there are several models to choose from, including cap-and-trade, baseline-and-credit and emissions intensity schemes.




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The key advantage of an economy-wide carbon price is that it provides an overall emissions constraint and leaves it to the widest possible range of businesses and economic activities to find lowest-cost solutions.

Sector-based approaches or having governments pick winners – such as the Commonwealth’s Underwriting New Generation Investment scheme – can reduce emissions. But this will always come at a higher cost than a carbon price – a cost borne by consumers and taxpayers.

The government seems captured by its own past success in killing carbon pricing mechanisms, such as Labor’s carbon price regime which ran from 2012 to 2014. This is despite the fact that two existing policies it has overseen – the Climate Solutions Fund and the Renewable Energy Target – incorporate explicit and implicit carbon prices respectively.

Labor seems captured by its past failure with carbon pricing, such that Albanese now argues it’s unnecessary. At the same time, he refers positively to the abandoned National Energy Guarantee as the sort of policy he could support, without apparently recognising it would have included a form of carbon pricing and trading.




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As we settle into the third decade of the 21st century, it seems our best hope for the near-term is a combination of sector-based, technology-driven, third-best policies that will deliver progress for a while.

Long-term environmental and economic success will depend on returning to first-best policies when we learn from the consequences.The Conversation

Tony Wood, Program Director, Energy, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

It might sound ‘batshit insane’ but Australia could soon export sunshine to Asia via a 3,800km cable



SHUTTERSTOCK

John Mathews, Macquarie University; Elizabeth Thurbon, UNSW; Hao Tan, University of Newcastle, and Sung-Young Kim, Macquarie University

Australia is the world’s third largest fossil fuels exporter – a fact that generates intense debate as climate change intensifies. While the economy is heavily reliant on coal and gas export revenues, these fuels create substantial greenhouse gas emissions when burned overseas.

Australia doesn’t currently export renewable energy. But an ambitious new solar project is poised to change that.

The proposed Sun Cable project envisions a ten gigawatt capacity solar farm (with about 22 gigawatt-hours of battery storage) laid out across 15,000 hectares near Tennant Creek, in the Northern Territory. Power generated will supply Darwin and be exported to Singapore via a 3,800km cable slung across the seafloor.

Sun Cable, and similar projects in the pipeline, would tap into the country’s vast renewable energy resources. They promise to provide an alternative to the export business of coal, iron ore and gas.




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As experts of east-Asian energy developments, we welcome Sun Cable. It could pioneer a renewable energy export industry for Australia, creating new manufacturing industries and construction jobs. Importantly, it could set our economy on a post-fossil fuel trajectory.

Long-term cost benefits

Sun Cable was announced last year by a group of Australian developers. The project’s proponents say it would provide one-fifth of Singapore’s power supply by 2030, and replace a large share of fossil fuel-generated electricity used in Darwin.

Submarine cables are laid using deep-sea vessels specifically designed for the job.
Alan Jamieson/Flickr, CC BY

To export renewable energy overseas, a high-voltage (HV) direct current (DC) cable would link the Northern Territory to Singapore. Around the world, some HVDC cables already carry power across long distances. One ultra-high-voltage direct current cable connects central China to eastern seaboard cities such as Shanghai. Shorter HVDC grid interconnectors operate in Europe.

The fact that long distance HVDC cable transmission has already proven feasible is a point working in Sun Cable’s favour.

The cost of generating solar power is also falling dramatically. And the low marginal cost (cost of producing one unit) of generating and transporting renewable power offers further advantage.

The A$20 billion-plus proposal’s biggest financial hurdle was covering initial capital costs. In November last year, billionaire Australian investors Mike Cannon-Brookes and Andrew “Twiggy” Forrest provided initial funding to the tune of up to A$50 million. Cannon-Brookes said while Sun Cable seemed like a “completely batshit insane project”, it appeared achievable from an engineering perspective.

Sun Cable is expected to be completed in 2027.

Bringing in business

The proposal would also bring business to local high-technology companies. Sun Cable has contracted with Sydney firm 5B, to use its “solar array” prefabrication technology to accelerate the building of its solar farm. The firm will pre-assemble solar panels and deliver them to the site in containers, ready for quick assembly.

The Northern Territory government has also shown support, granting Sun Cable “major project” status. This helps clear potential investment and approval barriers.




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Across Australia, similar renewable energy export plans are emerging. The Murchison Renewable Hydrogen Project in Western Australia will use energy produced by solar and wind farms to create renewable hydrogen, transported to east Asia as liquid hydrogen.

Similarly, the planned Asian Renewable Energy Hub could have renewable hydrogen generated in Western Australia’s Pilbara region at 15 gigawatts. This would also be exported, and supplied to local industries.

These projects align with the Western Australian government’s ambitious Renewable Hydrogen Strategy. It’s pushing to make clean hydrogen a driver for the state’s export future.

Reliable solutions

Generating and transmitting power from renewable resources avoids the energy security risks plaguing fossil fuel projects. Renewable projects use manufactured devices such as solar cells, wind turbines and batteries. These all generate energy security (a nation’s access to a sufficient, affordable and consistent energy supply).

Australia controls its own manufacturing activities, and while the sun may not shine brightly every day, its incidence is predictable over time. In contrast, oil, coal and gas supply is limited and heavily subject to geopolitical tensions. Just months ago in the Middle East, attacks on two major Saudi Arabian oil facilities impacted 5% of global oil supply.




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Renewing international links

Apart from exporting electricity produced on its own solar farm, Sun Cable could profit from letting other projects export electricity to Asia through shared-cost use of its infrastructure.

This would encourage future renewable energy exports, especially to the energy-hungry ASEAN nations (Association of Southeast Asian Nations) – Indonesia, Malaysia, the Philippines, Singapore and Thailand.

This would strengthen Australia’s economic relationships with its ASEAN neighbours – an importantc geo-economic goal. In particular, it could help reduce Australia’s growing export dependence on China.

However, as with any large scale project, Sun Cable does face challenges.

Other than raising the remaining capital, it must meet interconnection standards and safety requirements to implement the required infrastructure. These will need to be managed as the project evolves.

Also, since the power cable is likely to run along the seabed under Indonesian waters, its installation will call for strategic international negotiations. There has also been speculation from mining interests the connection could present national security risks, as it may be able to send and receive “performance and customer data”. But these concerns cannot be validated currently, as we lack the relevant details.

Fortunately, none of these challenges are insurmountable. And within the decade, Sun Cable could make the export of Australian renewable energy a reality.The Conversation

John Mathews, Professor of Strategic Management, Macquarie Graduate School of Management, Macquarie University; Elizabeth Thurbon, Scientia Fellow and Associate Professor in International Relations / International Political Economy, UNSW; Hao Tan, Associate professor, University of Newcastle, and Sung-Young Kim, Senior Lecturer in the Department of Modern History, Politics & International Relations, Macquarie University

This article is republished from The Conversation under a Creative Commons license. Read the original article.