The ethics of the carbon economy
The question is not only how can we make an emissions trading scheme fair and yet still work, but also: is now the right time to have one?
The industrial revolution of the late eighteenth and early nineteenth century marked a major turning point in human society, leading over the following centuries to rapid and unprecedented increases in life spans, living standards and general quality of life for those in the western world, culminating in the early 21st century with what economist Ross Garnaut has frequently described as the "Platinum Age".
Little wonder that 180 years later the so-called "developing" countries are also seeking to build their own wealth and social well-being through similar means.
The wealth and growth of the Platinum Age was built on the so-called "carbon economy", powered by two new sources of energy: coal, and then oil.
Coal is plentiful (for example, Victoria’s Latrobe Valley alone has some 1,000 years of coal reserves at current usage rates), it is cheap, and it is easily used to create boundless energy. Oil, while undoubtedly finite, harder to access and process into energy, and much more volatile in price, is an unparalled source of energy (excluding of course nuclear power), providing some 1,700 kWh per barrel.
Unfortunately, the burning of both coal and oil to produce energy results in the release of various noxious and polluting gases, most particularly carbon dioxide, which is generally accepted as being a cause of warming in the Earth’s atmosphere over the last three decades of the twentieth century, and if which continued unabated could result in planet and life-changing negative affects on human well-being.
Which leaves the question: how do we reduce the emission of carbon dioxide into the atmosphere given the current non-existence of commercially viable and less polluting alternative form of energy (given that nuclear energy in Australia has been ruled out by Rudd Labor), and without costing jobs and economic growth? And further, how do we do this without depriving the billions in the developing world of the same benefits that burning fossil fuels accorded to us in the West?
The solution so far, as adopted or proposed to be adopted by the Western world, includes increased investment in alternative non-polluting energies, carbon capture and storage, and, as the principal instrument, emissions trading.
While sound in theory, the problem with emissions trading is that an emissions trading scheme will only work if EVERY country in the world takes part, otherwise western jobs, wealth and pollution will simply be exported to the developing world, where there is no constraint on carbon pollution. But if the developing world does join, the question then is on what basis – morally – can the Western world, which made its wealth out of the carbon economy, deny the developing world the same opportunity?
Add into the mix the current turmoil which is the global financial recession, which is resulting in massive jobs losses in not only the western but also the developing world, and the question is not only how can we make an emissions trading scheme fair and yet still work, but also: is now the right time to have one?
The Treasury’s modelling for Rudd Labor’s so-called Carbon Pollution Reduction Scheme, released in October last year, assumes China’s and the World’s emissions will grow substantially due to strong GDP growth, higher even than the official OECD’s forecasts:
"The GTEM reference scenario [in Treasury’s modelling of the CPRS] projects stronger global GDP growth, particularly in developing economies, than the OECD…"
(Australia’s Low Pollution Future – The Economics of Climate Change Mitigation, Box 3.2)
However, over the six months since this modelling was done, the OECD’s revisions downward for this year’s (2009) growth alone are as follows:
WORLD
August 26 2008: 3.7 percent
November 7 2008: 2.2 percent
January 2009: 0.5 percent
CHINA
July 2008: 9.8 percent
October 2008: 9.3 percent
January 2009: 6.8 percent
Which begs the question: what effect has this downgrading of economic growth had on emissions growth?
Given that the un-stated goal of an emissions trading scheme is to reduce emissions by reducing (polluting) industrial output, the obvious conclusion is that this significant reduction in world economic growth will have a significant reduction in (at least) short term emissions growth.
Indeed, with a world recession, it is logical emissions may actually fall over the next couple of years. We already know from experience that it was the closure of inefficient factories in East Germany after the fall of the Berlin Wall that allowed that country to meet its Kyoto obligations, not the current flawed emissions trading scheme which currently operates across the European Union.
In other words, the global recession is likely to reduce emissions – without an emissions trading scheme!
So why Rudd Labor’s rush to an emissions trade scheme? Surely in this circumstance, a delay of a couple years, giving time for the emissions trading scheme to be properly designed, and fully accounting for world agreements more likely to be reached during that time-frame, won’t cost us anything? Indeed, it’s likely to be positive all around.
Yet despite all this, Minister Wong tells us that the Government is pushing ahead with its plan to put in place their emissions trading scheme by 2010, no matter whether the rest of the world is involved, and no matter the global recession and recession-like conditions in Australia.
It’s time for the Government to take a deep breath, take a close look at what effect the global recession is having on not only jobs but on emissions (remodel it) , and slow down their rush into their proposed job-destroying emissions trading scheme.
Senator The Hon. Eric Abetz is the Shadow Minister for Innovation, Industry, Science and Research and Deputy Leader of the Opposition in the Senate
Senator Eric Abetz is the Shadow Minister for Employment and Workplace Relations, Liberal Senator for Tasmania and Leader of the Opposition in the Senate.
patrickgarson
February 26, 2009 at 2:04 am
The cost of doing nothing
Senator Abetz, your op-ed makes a disingenuous assumption that because emissions are falling somewhat due to the Global Financial Crisis, we have now 'caught up' with carbon emissions and that this will enable us to take our foot off the pedal so to speak.
But you couldn't be more wrong. A year or two temporary reduction in emissions is nothing compared to the credit we have rung up at the carbon till over the last fifty years. Many scientists fear that we have already delayed things for so long that there will be tremendous environmental, economical, and social costs we will not be able to mitigate, despite our best efforts.
I understand your stated concern with "getting it right", but your party hasn't actually proposed an alternative model, and there's been plenty of time to do this. Given the number of climate change skeptics and outright denialists in the coalition, and the lack of an alternative proposal, I find it hard to believe that this is anything but an attempt to pander to said denialists and drag heels.
Just because this is a slow motion car crash, doesn't mean the urgency to act is any less. I fear thinking like this will lead Australia into becoming one of the countries you seem so concerned about that doesn't do anything.
JEQP
February 26, 2009 at 6:48 am
We’re in the “Platinum Age”-why not settle for the “Golden Age”?
You're right — the past 100 years or so have seen unprecedented improvements in our lifestyle, largely at the cost of our environment and other countries. But considering how fabulously well-off we compared to any other time in history (and quite possibly any other time in the future) is it too much to ask that we accept a reduction in our standard of living? That we own fewer cars? That we don't upgrade our electronic equipment after just a few months?
Several studies have shown that a carbon trading scheme will not cost jobs, but if done correctly will create them. I understand that other studies have shown the opposite, so I guess they kind of cancel each other out.
The main point was already made by the first commenter: We don't have time. Maybe if we'd started at the end of the last recession we could relax a bit … but we didn't, and we can't relax.
I'm glad you understand the moral problem with requiring developing nations to pay the costs that we have run up. While reductions won't work unless every country is involved, it's only fair that those of us who have caused the most damage are the first to try and fix the problem: When we show that we're serious and we've found the best way to do it, the developing countries will follow. Do you know what that's called? Leading. If you want to be a leader (especially of the "free world") you have to do things first. By requiring China to take the same measures at the same time we do, you're asking them to be the leaders.
The way to do it morally is to recognise that just as we have benefited the most from rampant pollution, so we should bear more of the burden of fixing it. When we develop technologies to counter pollution and to reduce pollution in power production and manufacturing (for example) we should just give it to developing countries to help them in their own fight against pollution. It's fair because they're already paying a lot of the costs of our development, and more importantly it's in our own best interests.
It's like there's a heavy anvil hanging above our head, with a rope through a pulley held only by a skinny man. The skinny man says "can you give me a hand holding this?" and we reply "what's in it for me?"
MikeM
February 26, 2009 at 9:57 am
It’s time to get on with it
Who decreed that that is the requirement? What if the damage from not addressing the problem is so severe that it merits incurring some present pain for future gain? The time to act of course was five years ago when the economy was going gangbusters. However the OECD downward revisions are insignificant given the size of the problem and do not justify further delay.
From the Garnaut Report:
Australia's per capita emission in 2000 was 25.6 tonnes, China's 3.9 tonnes and India's 1.9 tonnes. Australia has a whole lot of work to do to get onto the same emission reduction trajectory as Europe (10.5 tonnes per capita), much less down to 4 tonnes.
Senator Abetz is right insofar as there is no technology magic silver bullet that can slay our greenhouse giant stone dead. While solar steam plants might or might not replace coal generation plants one-to-one (although the Latrobe Valley is an unpromising place to build one), most of the solution lies in an arsenal of technologies and techniques, ranging from better home insulation to solar water heating to more efficient transport to… Throw in some more speculative technology such as carbon capture from coal power stations and underground thermal heat. There is scope for new industries and many new jobs to replace jobs that are lost.
With minor exceptions, Australian industry is crying out for certainty. If industry knows what the framework is, it can take into account negative as well as positive effects and plan accordingly:
Even though Australia's economy is suffering a downturn, we are not in the same dire straits as Japan, the United States or the UK. Our banking system to date has proved sound, there is no huge overhang of unsold homes nor epidemic of defaulting mortgagees.
Senator Abetz, it's time to get on with it.
MikeM is delaying making an investment decision until this is sorted out. His choice is whether to buy a new pair of shoes, or to keep catching the bus.
Annabel
March 2, 2009 at 4:45 am
are you serious?
"In other words, the global recession is likely to reduce emissions – without an emissions trading scheme! "
Are you serious?
The economic recession we are currently in is hardly catastrophic enough to reduce carbon emmisions dramatically enough to make the problem obsolete. The fact that I'll keep sriving my old car for another year rather than buying a hybrid, or even just a newer unleaded model with lower emmisions is hardly going to help.
Perhaps a total collapse of all governments and financial systems in the western world would curtail our dirty energy consumption enough that we'd start reversing pollution, however it's hardly the best solution to the problem.
Senator Eric Abetz
March 3, 2009 at 11:44 pm
Thank you for your comments
Dear All
Thankyou for your comments. This is a vexed and important issue and I've been encouraged by the fact that we are now having a genuine debate about the carbon economy and an emissions trading scheme.
Since I posted my blog, the Australian Industry Group, who previously supported a 2010 commencement of the CPRS, have now changed their position to arguing for a two-year delay, citing as one reason the fall in emissions growth as a result of the global recession.
Today I note that Professor Garnaut is reported as saying that for similiar reasons – as a result of the global recession – we now have at least two years "breathing space" in the fight against climate change (The Australian, 4th March 2009, "Financial gloom buys time for a climate fight: Garnaut").
We should act, but we need to make sure that we actually reduce global emissions, don't export jobs to other countries, and don't unfairly impinge on the right of developing countries to raise their living standards.
The global recessions has brought us additional time – we would be foolish if we didn't use it to make sure we get our response right.
Eric.
mgmbuilt
March 24, 2009 at 11:28 pm
Carbon Economy
Hi Eric.,
Australia has a huge moral duty to act on climate change given we are responsible for some 30% of worldwide co2 emissions because of Australian coal. Despite our huge reserves of coal it is clear that the coal industry will go the way of "buggy whip" manufacturing. CCS has little hope of being developed in time to make a difference and economically the cost will probably rule out its use compared to alternatives.
The so called "breathing room" should be seen as an opportunity to get more bang for our buck rather than a reason to delay action (as promoted by the hydrocarbon industry)
We should use every minute available to re-engineer our (and influence the world) economy to de-carbonise. Our ultimate response must be to stop using and selling coal. Coal exports are less than 3% of GDP with most profits flowing offshore anyway, employs only 30,000 people (less than 1/2 the number at Mc Donalds). The task is not that hard! We have less than 30 Coal fired plants so lets start phasing them out! (radical? yes, necessary? absolutely)
We can either grab this opportunity and be a world leader in renewable energy expertise (this alone will create many more times the number (if any) lost due to the implementation of emissions trading) or we can be a follower and see our expertise move offshore.
Best Regards
Mark Ruseler (Geelong)