Climate policy is a fiendish problem for governments – time for an independent authority with real powers


Peter C. Doherty, The Peter Doherty Institute for Infection and Immunity

From global epidemics to global economic markets to the global climate, understanding complex systems calls for solid data and sophisticated maths. My advice to young scientists contemplating a career in research is: “If you’re good at maths, keep it up!”

I’m no mathematician – my research career has focused largely on the complexities of infection and immunity. But as recently retired Board Chair of the ARC Centre of Excellence for Climate System Science, I’ve been greatly informed by close contact with mathematically trained meteorologists, oceanographers and other researchers, who analyse the massive and growing avalanche of climate data arriving from weather stations, satellites, and remote submersibles such as Argo floats.




Read more:
Why Australians need a national environment protection agency to safeguard their health


My perception, based on a long experience of science and scientists, is that these are outstanding researchers of impeccable integrity.

Among both the climate research community and the medically oriented environmental groups such as the Climate and Health Alliance and Doctors for the Environment Australia with which I have been involved, there is increasing concern, and even fear, about the consequences of ever-climbing greenhouse gas levels in the atmosphere.

The growing climate problem

Following the thinking of the late Tony McMichael, a Canberra-based medical epidemiologist who began studying lead poisoning and then went on to become a primary author on the health section of the Intergovernmental Panel on Climate Change’s five-yearly Assessment Reports, I have come to regard human-induced global warming as similar in nature to the problem of toxic lead poisoning.

Just like heavy metal toxicity, the problems caused by atmospheric greenhouse gases are cumulative, progressive, and ultimately irreversible, at least on a meaningful human timescale.

Regrettably, this consciousness has not yet seeped through to enough members of
the Australian political class. The same lack of engagement characterises current
national politics in Russia and the United States – although some US states, particularly California are moving aggressively to develop alternative energy sources.

The latter is true for much of Western Europe, while China and South Korea are committed both to phasing out coal and to leading the world in wind and solar power technology. In collaboration with the US giant General Electric, South Korean and Japanese companies are working to develop prefabricated (and hopefully foolproof) small nuclear reactors called SMRs.

At this stage, China (currently the world’s biggest greenhouse gas emitter) is humanity’s best hope – if it indeed holds to its stated resolve.

Political paralysis

Politically, with a substantial economic position in fossil fuel extraction and
export, Australia’s federal government seems paralysed when it comes to taking meaningful climate action. We signed on to the Paris Agreement but, even if we meet the agreed reductions in emissions, precious little consideration is given to the fossil fuels that we export for others to burn. And while much of the financial sector now accepts that any new investments in coalmines will ultimately become “stranded assets”, some politicians nevertheless continue to pledge tax dollars to fund such projects.

What can be done? Clearly, because meaningful action is likely to impact both
on jobs and export income, this is an impossible equation for Australia’s elected
representatives. Might it help to give them a “backbone” in the form of a fully
independent, scientifically and economically informed statutory authority, endowed with real powers? Would such an initiative even be possible under Australian law?

Realising that reasoned scientific and moral arguments for meaningful action
on climate change are going nowhere fast, some 41 Australian environmental organisations sought the help of the Australian Panel of Experts on Environmental Law (APEEL) to develop the case for a powerful, independent Commonwealth Environmental Commission (CEC) linked to a National Environmental Protection Agency (NEPA).

This week in Canberra, at the culmination of a two-year process, the environmental groups will present their conclusions, preceded by a more mechanistic analysis from the lawyers.

In very broad terms, the new agencies would do for environmental policy what the Reserve Bank currently does for economic decisions. That is, they would have the power to make calls on crucial issues (whether they be interest rates or air pollution limits) that cannot be vetoed by the government.

Of course, that would require a government that is willing to imbue them with such power in the first place.




Read more:
Australia needs stricter rules to curb air pollution, but there’s a lot we could all do now


While it’s a good bet that developing such a major national initiative will, at best, be a long, slow and arduous process, it is true that (to quote Laozi): “A journey of a thousand miles begins with a single step”.

The ConversationWhat is also clear is that “business as usual” is not a viable option for the future economy, defence and health of Australia.

Peter C. Doherty, Laureate Professor, The Peter Doherty Institute for Infection and Immunity

This article was originally published on The Conversation. Read the original article.

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Native forest protections are deeply flawed, yet may be in place for another 20 years



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Current protections for native forests are hopelessly out of date.
Graeme/Flickr, CC BY-NC

David Lindenmayer, Australian National University

State governments are poised to renew some of the 20-year-old Regional Forest Agreements (RFAs) without reviewing any evidence gathered in the last two decades.

The agreements were first signed between the federal government and the states in the late 1990s in an attempt to balance the needs of the native forest logging industry with conservation and forest biodiversity.

It’s time to renew the agreements for another 20 years. Some, such as Tasmania’s, have just been renewed and others are about to be rolled over without substantial reassessment. Yet much of the data on which the RFAs are based are hopelessly out of date.




Read more:
Money can’t buy me love, but you can put a price on a tree


Concerns about the validity of the science behind the agreements is shared by some state politicians, with The Guardian reporting the NSW Labor opposition environment spokeswoman as saying “the science underpinning the RFAs is out of date and incomplete”.

New, thorough assessments are needed

What is clearly needed are new, thorough and independent regional assessments that quantify the full range of values of native forests.

Much of the information underpinning these agreements comes largely from the mid-1990s. This was before key issues with climate change began to emerge and the value of carbon storage in native forests was identified; before massive wildfires damaged hundreds of thousands of hectares of forest in eastern Australia; and before the recognition that in some forest types logging operations elevate the risks of crown-scorching wildfires.

The agreements predate the massive droughts and changing climate that have affected the rainfall patterns and water supply systems of southwestern and southeastern Australia, including the forested catchments of Melbourne.

It’s also arguable whether the current Regional Forest Agreements accommodate some of the critical values of native forests. This is because their primary objective is pulp and timber production.




Read more:
Why we need environmental accounts alongside national accounts


Yet it is increasingly apparent that other economic and social values of native forests are greater than pulp and wood.

To take Victoria as an example, a hectare of intact mountain ash forests produces 12 million litres more water per year than the same amount of logged forest.

The economic value of that water far outstrips the value of the timber: almost all of Melbourne’s water come from these forests. Recent analysis indicates that already more than 60% of the forest in some of Melbourne’s most important catchments has been logged.

The current water supply problems in Cape Town in South Africa are a stark illustration of what can happen when natural assets and environmental infrastructure are not managed appropriately. In the case of the Victorian ash forests, some pundits would argue that the state’s desalination plant can offset the loss of catchment water. But desalination is hugely expensive to taxpayers and generates large amounts of greenhouse emissions.

A declining resource

Another critical issue with the existing agreements is the availability of loggable forest. Past over-harvesting means that much of the loggable forest has already been cut. Remaining sawlog resources are rapidly declining. It would be absurd to sign a 20-year RFA when the amount of sawlog resource remaining is less than 10 years.

This is partially because estimates of sustained yield in the original agreements did not take into account inevitable wood losses in wildfires – akin to a long-distance trucking company operating without accident insurance.

Some are arguing that the solution now is to cut even more timber in water catchments, but this would further compromise water yields at a major cost to the economy and to human populations.




Read more:
Profits from forests? Leave the trees standing


Comprehensive regional assessments must re-examine wood supplies and make significant reductions in pulp and timber yields accordingly.

The inevitable conclusion is that the Regional Forest Agreements and their underlying Comprehensive Regional Assessments are badly out of date. We should not renew them without taking into consideration decades of new information on the value of native forests and on threats to their preservation.

The ConversationAustralia’s native forests are among the nation’s most important natural assets. The Australian public has a right to expect that the most up-to-date information will be used to manage these irreplaceable assets.

David Lindenmayer, Professor, The Fenner School of Environment and Society, Australian National University

This article was originally published on The Conversation. Read the original article.

By slashing environment spending, the government is slashing opportunities



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At a time of growing human impacts, spending on environmental protection is more important than ever.
Author provided

Don Driscoll, Deakin University

Australia’s native plants and animals are integral to the success of our society. We depend on wildlife to pollinate many of our crops. Most of our cities depend on effective water catchments to provide clean water. And medical scientists are making important breakthroughs in managing disease and health issues based on discoveries in nature.

The mental health benefits of a “dose of nature” are becoming more widely recognised, on top of our own experiences of having fun and enjoying the natural wonders of national parks. Our nature inspires us in all kinds of ways, and you can build major industries around that; the Great Barrier Reef is reportedly worth A$56 billion to the Australian economy.

It is therefore surprising, on one hand, to read the Australian Conservation Foundation and WWF Australia budget submission that the Australian government has slashed environmental spending by one third since 2013.

On the other hand, I’m not especially surprised because we ecologists have been living through the ongoing attack on the environment every day. We see how cuts to environmental budgets play out.


Read more: Why a walk in the woods really does help your body and your soul


Our native species and ecosystems are under growing pressure. Australia’s 1.6% annual population growth outstrips many other countries. This is compounded by rises in per-capita consumption and greenhouse emissions.

Escalating consumption translates into growing impacts on biodiversity as more land is released for housing and infrastructure, extractive industries such as mining, recreational and industrial fishing expand and agriculture intensifies.

Climate change further interacts with land clearing associated with producing more for a growing and greedier population. Many species are expected to have to shift their range as the environmental conditions they live in move, and if they can’t move because there is no habitat to move through, extinctions will result.


Read more: Land clearing isn’t just about trees – it’s an animal welfare issue too


State of the Environment reports document the extent of the problem.

For example, between 2011 and 2015, there was a 66% increase in the number of critically endangered animals (from 38 in 2011 to 63 in 2015), and a 28% increase in critically endangered plants (112 in 2011; 143 in 2015). By critically endangered, we mean that extinction is a real possibility in the short term for these species. Immediate action is needed if we are to avoid terminating millions of years of independent evolution, as these biological lineages die out.

Given the extraordinary value of biodiversity and the extreme and growing threats, it would make sense to maximise our spending on biodiversity conservation now, to protect our wildlife through this period of peak human.

Key areas for investment include creating an effective national reserve system, at least meeting the arbitrary international goals of 17% of the land and 10% of the sea area.

Funding is needed to manage the reserve system, containing threats and nurturing already threatened species. Meanwhile, outside of reserves where most of the people live and interact with nature, biodiversity needs to be provided for, and threats need to be managed. Biosecurity is a critical area for funding, particularly to more tightly regulate rogue industries, like horticulture.

Horticulture was recently responsible for introducing myrtle rust, a disease that is devastating many gum-tree relatives, in the family Myrtaceae. Finally, climate change demands a strong response, both in mitigation and adaptation.

Science and environment work needs funding

I’ve never seen so many fantastic, skilled, enthusiastic young ecologists struggling to get a job. At a time when ecologists and conservation scientists are needed more than ever to help solve the problems created by the growth economy, funding for ecology is at a low.


Read more: Vale ‘Gump’, the last known Christmas Island Forest Skink


Of course, beyond the people, we see conservation programs in desperate need of support that just isn’t forthcoming. Christmas Island is a case in point.

The island’s reptiles have been devastated by invasive pests, most likely the wolf snake and perhaps the giant centipede. Two endemic species (species that only lived on Christmas Island) are presumed extinct; the last known forest skink died in 2014.

This Christmas Island Forest Skink was the last known member of her species.
Director of National Parks/Supplied

Two other endemic species are extinct in the wild, but small populations of around 1,000 animals are kept in captivity on the island and at Taronga Zoo.

While ideally a population of at least 5,000 would be maintained to minimise loss of genetic diversity, funding is not available to house that many animals. And it’s rock-bottom budget accommodation; Lister’s geckos are housed in tents because the budget doesn’t stretch to building something permanent.

We’ve also seen important long term research programs defunded. Long-term data provides crucial insights into how our biodiversity responds to decadal changes in weather patterns as well as longer-term changes caused by the greenhouse effect. It is unimaginable that the government have slashed the Terrestrial Ecosystem Research Network’s funding so far that well-established long-term data series are now being compromised.

Ultimately, the environmental funding shortfall needs to be fixed. Our livelihoods and well-being depend on it.


The ConversationThe original version of this article incorrectly reported that the budget submission was made by the Australian Conservation Foundation and The Wilderness Foundation. It was in fact made by the Australian Conservation Foundation and WWF Australia.

Don Driscoll, Professor in Terrestrial Ecology, Deakin University

This article was originally published on The Conversation. Read the original article.

The government is miscounting greenhouse emissions reductions



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Some projects shouldn’t be receiving funding from the government. Yet, lack of proper monitoring has caused huge amounts of wasted money.
www.goodfreephotos.com

Tim Baxter, University of Melbourne

The Emissions Reduction Fund (ERF), established in 2014 with funding of A$2.55 billion, is mostly spent. With just A$200 million left to be allocated, the Climate Change Authority this week released a report on the fund’s progress that can be best described as magnanimous.

The federal government claims that 189 million tonnes of emissions have been diverted or prevented from entering the atmosphere under the scheme. But research I have done with a co-author from Melbourne Law School has found serious issues, from giving unnecessary funds, to counting decade-old projects as new emissions “reductions”.

While the Authority made 26 recommendations for improvement, each is relatively low-impact. Most of the recommendations go towards increasing the fund’s transparency or removing barriers to participation. While these are laudable aims, there are deeper problems.

How should the fund work?

At its most basic, the ERF gives private companies and individuals a cash incentive to avoid or sequester greenhouse gas emissions. These businesses or people compete for funding by putting their projects forward at reverse auctions.


Read more: How does today’s Direct Action reverse auction work?


The fund is unique in Australia’s climate policy, in that the legislation that supports it has strong bipartisan support. Even if a change of federal government leads to a new policy for curbing emissions, it’s very likely that the basic ERF structure will be carried forward.

But despite the fund’s importance, there has been surprisingly little detailed academic analysis of it to date. In an effort to redress this, a colleague and I have a paper forthcoming that examines the underlying logic and effect of the fund. The paper focuses specifically on the path into the ERF for landfill operators, although the conclusions stretch further than just those projects.

Our conclusions are simple. With A$2.55 billion, the fund has considerable potential to crop the low-hanging fruit of Australia’s emissions profile. However, there are serious flaws in how some projects are assessed for funding.

Where support is granted to projects that would proceed without it, there is no benefit to the government’s intervention. Rather than lopping the low-hanging fruit, we are instead throwing money at the fruit that is already sitting in a bowl on the kitchen bench.

How to avoid redundancy

In the language of offsetting schemes, assessing a project to see if it needs extra funding to be commercially viable is known as an “additionality” test. The legislation that underpins the ERF contains three such tests, which are actually very strong:

  • Newness: is a project new? Has work on it already begun? If it has, the project is ineligible, because it is considered already commercially viable.

  • Existing regulations: is a particular project or emissions abatement already required by law? If so, the project is ineligible for ERF funding.

  • Other government funding: does a project have access to other sources of government funding? If it does, the proponent should use those funds instead.


Read more: Australia’s biggest emitters opt to ‘wait and see’ over Emissions Reduction Fund


If these three tests were mandated for all projects submitted to the ERF, it would be filled with projects that truly deliver new environmental benefit. But they’re not – and it isn’t.

There’s a simple reason why these tests aren’t used in all cases: there are 34 different ways of abating emissions recognised by the ERF (technically referred to as “methodologies”), from the destruction of methane from piggeries using engineered biodigesters, to avoiding deforestation.

Because these activities are so diverse, the legislation that underpins the ERF allows the Department of Environment and Energy to create methodology-specific tests instead, in consultation with industry stakeholders. They are then subject to ministerial approval.

In most cases, the replacements merely finesse the tests to make them more appropriate to the specific circumstances. For example, the existence of a conservation covenant (basically a promise to protect land) is not an obstacle to participation under the avoided deforestation methodology, despite these covenants being legally binding on present and future users of the land.

The case of landfill gas

Other instances are much less innocuous. One such area is landfill, where the gas created by decomposing rubbish can be captured and burned to create energy.


Read more: Capturing the true wealth of Australia’s waste


In the most egregious examples of “regulatory slippage” that either myself or my co-author have ever seen, the tests for whether landfill-related schemes should get ERF money have been completely neutered.

One of the largest Australian companies in this area is LMS Energy. Their Rochedale landfill gas project should, under the tests in the Act, be thrice barred from participation.

First, it predates the ERF by a full decade. Second, the capture and disposal of methane from landfill sites is required by Queensland’s air pollution laws. Finally, it receives renewable energy certificates under the Commonwealth Renewable Energy Target, as power is often created by methane burned to drive a steam turbine.

Nevertheless, this project is funded by the ERF. It should be noted clearly that there is no suggestion that the project is engaged in any deception. Its operators are absolutely complying with regulations. The issue is that the regulations themselves have been watered down to a ludicrous degree.

Two of the three tests (no funding from other government programs and not legally required) have been replaced by an unbelievably tautological requirement that landfill gas and combustion projects fulfil the legislative definition of a landfill gas and combustion project. That is, in order to pass the tests, a landfill gas capture and combustion project must merely be a landfill gas capture and combustion project.

The newness requirement permits projects that were previously registered under schemes that predate the ERF, which includes most of the larger sites for the capture and combustion of landfill methane in Australia.


Read more: Explainer: how much landfill does Australia have?


Because this project already existed, its contributions are captured in measurements of Australia’s baseline emissions. While there’s a good argument for rewarding ecologically responsibly companies, that is not actually the point of the ERF. To state the obvious, we should not be paying to maintain the status quo, and then claim to be reducing emissions.

The Climate Change Authority has unfortunately not taken the opportunity to address these underlying problems, or the potential for similar issues in future legislation.

The ConversationMore immediately, we must take the government’s claim to have abated 189 million tonnes of emissions with a hefty grain of salt. The reality is that the scheme’s effect on Australia’s total emissions is considerably smaller.

Tim Baxter, Researcher – Melbourne Law School, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Poor households are locked out of green energy, unless governments help


Alan Pears, RMIT University

A report released this week by the Australian Council of Social Service has pointed out that many vulnerable households cannot access rooftop solar and efficient appliances, describing the issue as a serious problem.

It has provoked controversy. Some have interpreted the report as an attack on emerging energy solutions such as rooftop solar. Others see it as exposing a serious structural crisis for vulnerable households.

The underlying issue is the fundamental change in energy solutions. As I pointed out in my previous column, we are moving away from investment by governments and large businesses in big power stations and centralised supply, and towards a distributed, diversified and more complex energy system. As a result, there is a growing focus on “behind the meter” technologies that save, store or produce energy.

What this means is that anyone who does not have access to capital, or is uninformed, disempowered or passive risks being disadvantaged – unless governments act.

The reality is that energy-efficient appliances and buildings, rooftop solar, and increasingly energy storage, are cost-effective. They save households money through energy savings, improved health, and improved performance in comparison with buying grid electricity or gas. But if you can’t buy them, you can’t benefit.

In the past, financial institutions loaned money to governments or big businesses to build power stations and gas supply systems. Now we need mechanisms to give all households and businesses access to loans to fund the new energy system.

Households that cannot meet commercial borrowing criteria, or are disempowered – such as tenants, those under financial stress, or those who are disengaged for other reasons – need help.

Governments have plenty of options.

  • They can require landlords to upgrade buildings and fixed appliances, or make it attractive for them to do so. Or a bit of both.

  • They can help the supply chain that upgrades buildings and supplies appliances to do this better, and at lower cost.

  • They can facilitate the use of emerging technologies and apps to identify faulty and inefficient appliances, then fund their replacement. Repayments can potentially be made using the resulting savings.

  • They can ban the sale of inefficient appliances by making mandatory performance standards more stringent and widening their coverage.

  • They can help appliance manufacturers make their products more efficient, and ensure that everyone who buys them know how efficient they are.

To expand on the last suggestion, at present only major household white goods, televisions and computer monitors are required to carry energy labels. If you are buying a commercial fridge, pizza oven, cooker, or stereo system, you are flying blind.

The Finkel Review made it clear that the energy industry will not lead on this. It clearly recommends that energy efficiency is a job for governments, and that they need to accelerate action.

The ConversationIt’s time for governments to get serious about helping everyone to join the energy transition, not just the most affluent.

Alan Pears, Senior Industry Fellow, RMIT University

This article was originally published on The Conversation. Read the original article.

Critical backbenchers push back on Finkel clean energy target plan



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Josh Frydenberg’s task of garnering broad support for the Finkel scheme is proving to be more difficult than expected.
Lukas Coch/AAP

Michelle Grattan, University of Canberra

A sizeable slice of his backbench has sent Malcolm Turnbull a forceful message that his road to implementing the clean energy target (CET) proposed by the Finkel inquiry will be rocky even within his own ranks.

After Energy Minister Josh Frydenberg gave an extensive briefing on the Finkel plan to the Coalition partyroom on Tuesday morning, MPs later reconvened for nearly three hours of questions and debate.

About one-third of the 30-32 who spoke expressed misgivings, according to Coalition sources. There was broad support from another third. The rest didn’t express a firm view, asking questions and seeking more information.

The report from the panel led by Chief Scientist Alan Finkel says a CET “will encourage new low emissions generation [below a threshold level of carbon dioxide per megawatt hour] into the market in a technology neutral fashion”.

A key issue will be where the government, which is disposed to adopt the Finkel plan, sets the threshold. It is clear that to accommodate the Nationals and a section of the Liberal Party it will have to be at a level that allows for the inclusion of “clean” coal.

The meeting was to gauge backbench views ahead of cabinet considering the report. Ministers, apart from the minister with carriage of the issue, don’t speak on these occasions.

Tony Abbott, who had publicly flagged his belief that the Finkel scheme represents a tax on coal, spoke strongly at the meeting.

The degree of pushback against a CET was stronger than had been anticipated, given the intense lobbying of the backbench that Frydenberg had done ahead of the meeting.

Frydenberg said afterwards: “I want to emphasise that this meeting was not making any decisions about Dr Finkel’s proposal. Rather, it was an information-gathering session.”

A common theme from backbenchers was that it was vital to be able to be confident the Finkel plan would make energy more affordable. A number of MPs, especially from outer suburban and regional areas, said affordability was what mattered most to their electorates.

Some questioned the Finkel modelling showing that prices would fall. The chairman of the backbench environment committee, Craig Kelly, said: “If you believe that you can lower prices by replacing existing coal-fired generation with higher-cost renewables, then I have a harbour bridge to sell you.”

Concern was expressed about the place of coal, and there was criticism of Finkel’s projection of an effective renewable energy target of 42% by 2030. Some backbenchers believed it would take the Coalition too close to Labor, which has a 50% target. There were also queries about the status of the Paris targets.

But Frydenberg told the ABC: “There was an overwhelming feeling among those in the party room tonight that business-as-usual is not an option.”

Asked on 7.30 “are you going to be able to get your colleagues to agree to support a clean energy target?,” Frydenberg replied: “It is too early to say.”

Finkel met with the government’s backbench environment committee on Tuesday to explain his plan and answer questions.

Frydenberg conceded that backbenchers “are concerned about the future of coal”. But he flatly rejected the Abbott suggestion that the Finkel plan amounted to a tax on coal, saying it was “absolutely not”.

“Dr Finkel has made it very clear he is not putting in place any prohibitions on coal or any form of generation capacity. He is putting in place incentives for lower emission generation. It is not a price on carbon or a tax on coal.”

The CET had “similarities to what John Howard put forward back in 2007”, Frydenberg said – a point he made in his briefing to the party meeting.

Deputy Prime Minister Barnaby Joyce also slapped down Abbott’s proposition that the CET amounted to a tax on coal, telling Sky that “Mr Abbott’s entitled to his opinion” but “there is no penalty placed on coal.

The Conversation“There is an advantage that is placed on those that are below the line. An advantage, because they get a section of a permit, which is like a payment. Those above the lines don’t … I suppose ipso facto it could be seen as not having the same advantage.”

https://www.podbean.com/media/player/icjdu-6b9a25?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

The government is swimming against the tide on Westpac’s Adani decision


David Peetz, Griffith University and Georgina Murray, Griffith University

The Australian government’s strident criticism of Westpac for not financing the Adani Carmichael coal mine is out of step with the economics. As the cost of renewable energy falls and its adoption increases, fossil fuels are becoming a riskier investment. The Conversation

It’s not just Westpac. This shift is reflected right across the finance industry. The big four Australian banks have all declined to finance this mine, as have many large international financial institutions.

The Commonwealth Bank quit as the project’s financial adviser in August 2015. NAB ruled out financing the mine in September 2015. ANZ effectively ruled out financing in October 2015 and again, more firmly, in December 2016.

Big overseas financiers Standard Chartered, Barclays, Royal Bank of Scotland, Citi, HSBC, Morgan Stanley, Société Générale, Crédit Agricole, JP Morgan Chase, Deutche Bank and BNP Baripas have also already abandoned or made clear their lack of support for the mine.

Adani’s coal was to be used to generate electricity in India, recently seen as the future for the product given China’s shift away from coal. But Indian demand for coal is slipping. Its new National Electricity Plan has renewables rising from the current 15% to 56% of installed power capacity by 2027.

The Indian government itself now thinks it may not need any new coal power plants for at least a decade.

As mines require a huge initial investment that pays itself off over many years, this increases the risk that the Carmichael mine will become a “stranded asset”.

Shifting economics of coal

Sure, financial institutions are under pressure from customers and activists to avoid investments that damage the climate. But for these institutions, such pressures only make a difference at the margin. For them it is the poor economics of coal that is fundamental.

The long-term prospects of coal are weakened by the rapid changes in technology and the deterioration of the climate outlook.

Solar energy prices have fallen more rapidly than most expected, and battery technology and use is rapidly improving.

A recent study found that solar energy is on a trajectory to supply at least 3 terawatts (TW) of power globally by 2030, and potentially up to 10TW if certain barriers to installation can be overcome. For comparison, the world’s total electricity capacity from all sources as of 2014 was just 6TW.

Financiers’ minds may be focused still further by the fact that, if anything, scientists appear to have underestimated the effects of climate change on sea levels, polar ice caps, and methane emissions from thawing permafrost and lakes.

From short- to long-term thinking

The fact that the financial industry is reluctant to fund the Carmichael mine is just one example of the phenomenon described in a report by the Asset Owners Disclosure Project (AODP) as “a fundamental power shift … from short-termers to long-termers”.

There are several reasons for this, besides the changing economics of renewable technology, the worsening climate outlook, and the shifting policies in countries like China and India.

New tools are being developed to enable investors to quantify the impact of climate on their investments. In financial circles, the more things can be counted, the more they count.

Superannuation funds and overseas pension funds need to invest over long periods of time, and so are now forced to invest with climate change in mind. They can’t afford to have a stranded asset on their books.

Reinsurers – essentially large firms that provide insurance for insurance companies – face the same issue. They need to minimise exposure to extreme weather events, which are increasingly influenced by climate change.

Fund managers are creating financial products to enable investment in climate change adaptation. And some investors are taking more control over their investments, rather than leaving them in the hands of fund managers, so they can give appropriate priority to climate issues.

This is not to say that financiers around the world are uniformly reacting to climate issues. The AODP report shows that, on average, European and Australian asset owners and fund managers have done well in acting on climate risk, whereas American, Middle Eastern and (until now) Chinese ones have done poorly.

It’s also not true that finance has uniformly abandoned short-termism. “Climate-interested investors” currently account for just a third of the ownership of the world’s very large corporations.

But no one is going to make even short-term profits out of the Adani coal mine, with its huge upfront capital investment, unless they get a substantial subsidy from the taxpayer. And the long-term prospects look grim.

Those who argue that Westpac’s decision was “illogical” are swimming against both the financial and technological tides.

David Peetz, Professor of Employment Relations, Griffith University and Georgina Murray, Associate Professor in Humanities, Griffith University

This article was originally published on The Conversation. Read the original article.