Australia's carbon tax has been controversial for many reasons and its impact on productivity has been one of them. Craig Milne says the most productive technologies should be chosen in the move to low CO2 emissions, but most renewables fail that test.
The tax on carbon dioxide emissions is a bad idea and a national government acting in the best economic interests of Australia nation would have considered it.
The theory that catastrophic global warming will result from unchanged human economic activity remains controversial, but even if the science is eventually settled in its favour, Australian policy to reduce carbon dioxide emissions should follow others rather than lead. There are two compelling reasons for this. Firstly, Australia’s contribution to global emissions is small, about 1.3%, and is substantially offset by natural sequestration over its large geographic area. Without action by major emitters, a lead taken by Australia will be trivial in climate effect and harmful to its economic interests.
Secondly, the claim that early action will deliver first mover economic advantages through “green innovation” is nonsense. Australian manufacturing is uncompetitive; labour costs are ten or twenty times higher than Asia, scale economies a chronic problem, the skill base thin and taxes and regulations too burdensome. Whatever technologies eventually replace current energy sources, they will be produced elsewhere. Innovative Australian businesses might sprout a green shoot here or there, but better placed industrial nations will grow the whole cabbage, as they have always done.
Any sensible policy for moving to a low carbon dioxide emissions economy would choose the most productive technologies. In all but a few special cases, renewables fail on productivity. Current Australian policy, which sets a mandatory target for a contribution from renewables, should therefore be abandoned. If Australians wanted to replace carbon dioxide emitting energy sources, the last technologies to choose would be expensive, unreliable, disruptive, low intensity sources like solar and wind. These are “gesture” technologies, inadequate for the task being set for them. Unfortunately, the disappointing facts of their low productivity do nothing to deter the dreamers and rent-seekers in government, business and the academies that promote them and the technically illiterate inner city dolts that vote for them. Innovation won’t help either; these technologies don’t need government grants to make them work, they need new laws of physics instead.
If Australians wanted to reduce carbon dioxide emissions without destroying their standard of living, the only practical alternative to chemical energy derived from burning hydrocarbons is nuclear energy.
The application of chemical energy to mechanical work via the invention of the heat engine has served humanity well. It has powered the development of the modern world and is the principal source of the great prosperity we now enjoy. Energy at hand is the fundamental metric of wealth, the base upon which modern technical civilisation rests. Rich nations have a large quantum of energy at hand, poor nations do not. In the face of such global inequity, the idea of closing down perfectly good power stations, like those in the Latrobe Valley, on the basis of a contested theory, is to treat our good fortune with contempt.
The technologies that exploit chemical energy have been developed over three centuries and are all thoroughly understood. Few productivity gains are left to be extracted from heat engines fuelled by compounds of hydrogen and carbon. On the other hand, current nuclear plants, mostly light water reactors (LWRs), are relatively crude designs conceived in a hurry during the 1950s as spin-offs from nuclear weapons and naval reactor programs. They were deployed in the expectation that something better, the fast breeder reactor (FBR), would become available. But for reasons that made sense at the time, the nuclear industry picked the wrong technology and the FBRs were never widely adopted.
Then the left and the environmental movement got organised. From positions in politics, the bureaucracy, the media and the streets, and for various motives, they worked against nuclear power. The effectiveness of green left activism has marooned the nuclear industry in a technological stasis, with old reactor designs that demand stringent management regimes, waste most of the fuel that goes into them, are prohibitively expensive to build and are thermally inefficient. Yet despite these shortcomings, existing nuclear plants, unlike any of the renewables, except for hydro, are almost competitive with coal-fired generators. The explanation is in the physics; fissioning an atom of uranium 235 releases about 200 MeV, the oxidation of a carbon atom just 4 eV. Allowing for the mass differences between uranium and carbon, a nuclear reaction still yields 2.5 million times the energy of the chemical reaction, which is why inefficient reactors can still make cheap electricity.
That inovation aimed at raising energy productivity favours nuclear over renewables is a fact so obvious it is an irritation to have to write it down. Engineers can already approach the theoretical performance limits of airfoils, generators and solar cells. Unlike renewables, however, the potential productivity gains from nuclear technology are truly stupendous. As an example, and there are many, a fourth generation liquid fluoride thorium reactor (LFTR) could improve fuel utilisation over the LWR from 0.5% to close to 100%. The design of the LFTR enables better Carnot efficiency on the generating cycle, up from 35% to 45%, it is much safer to operate, cheaper to build, produces a fraction of the waste and is unsuited to the production of weaponable materials. Reactors like the LFTR would enable a giant leap in nuclear productivity; a step improvement over the LWR much larger than that achieved by the chemical heat engine over its entire history, from the first Newcomen engine of 1712 to the modern turbo-diesel.
If those fretting about carbon dioxide emissions want to be taken seriously, they should be demanding the construction of nuclear power stations and calling for research projects to develop better reactor designs. That mostly they are not, suggests either an inability to follow a train of thought to its logical conclusion or that some other agenda is in play. In due course, anti-nuclear sandbagging will be overcome, innovation will resume and the superior energy productivity inherent in nuclear technology will be realised. When that happens, coal-fired power will enter a period of decline, eventually to go the way of the water wheel and the horse gin. We don’t need to rush this; just enable the replacement of coal plants with nuclear as they are worn out. We don’t need more bureaucrats or carbon taxes or contrived “market” schemes either. We just need to get the green left out of the way and let the natural progress of technological innovation and entrepreneurship take its course.
Craig Milne is the Executive Director of the Australian Productivity Council (APC), a position that he has held since 1987. Prior to joining the APC in 1984, he worked as a Technical Manager with a major trading company engaged in East European trade. Originally qualified in Economics and Politics at Monash University, Craig has undertaken further postgraduate studies in industrial economics and economic history, with a particular interest in Australian industrial development and technology issues. The APC is a private-sector industry assistance organisation originally founded as the Commonwealth funded peak body dedicated to productivity promotion and improvement in 1969. Craig is also Chairman and a director of more than twenty years standing of the Victorian Innovation Centre Ltd (Innovic) and is the President of the Society for Australian Industry and Employment (SAIE).