Government Initiatives and Immediate Options

In addition to its 20% target for renewable electricity, the Rudd Government has announced a $500 million National Clean Coal Initiative to invest in the development and application of advanced coal technologies. The Clean Coal Initiative takes over from the Howard Government’s Low Emissions Technology Fund (LETDF) under which earlier pilot projects were funded.

It is interesting to compare the recent Garnaut Climate Change Review Report with the Commonwealth Government’s 1998 ‘National Green House Strategy’. Where the National Green House Strategy addressed the areas in which a change could be made and means of achieving these goals, Garnaut recommends market manipulation to penalise carbon intensive economic activity and reward alternative behaviour.  The marketplace will provide a price incentive that will change producer and consumer behaviour and everything else (innovation, technological change and social change) will follow.  A great deal of the report is spent arguing the case for this economically distorting market intervention (normally anathema to an economist), justified on the need for urgent and dramatic action against global climate change.

The Garnaut Review had substantial input from the Commonwealth Treasury and spends many pages reviewing various options for this economic intervention.  The recommended solution has since been refined into the Government’s proposed ‘cap and trade’ carbon pollution reduction scheme (CPRS).

While it draws widely on scientific advice, particularly in the area of climate science, the Garnaut Climate Change Review is primarily an economic treatise, not a technically literate one.  It assumes that technology is a ‘black box’ that solutions 'fall out of' in response to market forces.

Although it is a vast report it is ‘thin on the ground’ when it comes to the actual technologies it expects to see implemented, the assumption being that the market will sort this out. For example in the transport sector (which is the largest source of carbon emissions) Garnaut is silent on the technologies that might make a difference such as: lithium ion batteries; very fast trains; a 25KV national rail freight network; Metros in Sydney, Melbourne and Brisbane; planning to increase urban density; alternatives to air conditioning etc. 

Instead the report makes the assumption that the pulling of the appropriate economic leavers will bring these changes via the ‘invisible hand’ for example:

“This transformation will take place through three main processes, which may operate in parallel:

• vehicles becoming more fuel efficient and shifting to low-emissions fuels, such as electricity
• a shift to lower-emissions modes, such as rail and public transport, accompanied by changes in the structure of towns and cities (urban form)
• reduction in travel frequency and distances, facilitated by changes in consumption, production and distribution patterns and changes in urban form, and driven by changing relative prices.”

The report acknowledges elsewhere that a transfer to electric vehicles will only be beneficial if ‘emission free’ electricity generation becomes available.

The Garnaut report predicates many of its assumptions regarding Australia’s (and the World’s) ability to meet ambitious carbon reduction targets on the success of what it calls ‘near-zero emissions coal technologies’

Chapter 20 draws up a long list of the Australian economic dependencies on coal, the importance of coal export markets and other countries’ dependence on coal for energy.

It draws attention to the very substantial employment and skills base invested in coal mining and thermal power generation and the flow on this has to other industries as consumers and suppliers. 

It sets great store by ‘near-zero emissions coal technologies’ and states:

“The priority that should be given to the transition to low emissions in the coal industry is further accentuated by the need to resolve whether a near-zero coal future is even feasible, either partially or in total. If it is not, then Australia needs to know as soon as possible, so that all who depend on the coal industry can begin the process of adjustment, and so that adequate and timely investments are made in other industries.”

The report makes it clear that adjustment in the absence of ‘near-zero emissions coal technologies’ would be extremely economically painful with considerable flow-on effects.

It says that these require sequestration and identifies two potential sequestration technologies:

1.  
   1. Geosequestration: underground, below the seabed, in depleted oil or gas reservoirs, or in deep saline aquifers; or possibly in coal seams to drive out gas[2].
   2. Biosequestration:  to produce biofuels from algae, the growth of which is enhanced by access to a constant stream of carbon dioxide.

The first of these is better known as Carbon Capture and Storage (CCS).  The second is a vast undertaking and would require a change of policy towards the widespread release of bioengineered organisms.

The success of sequestration is therefore central to a vision that embraces the continued exploitation of coal the continuance of a coal industry and the intrinsic value of the nation’s substantial unexploited coal resources, in the new world of substantially reduced carbon emissions.

The remainder of this paper examines the likelihood that this success is achievable and, by implication, the viability of an economist’s vision that embraces both continued and growing coal exploitation and reduced atmospheric carbon dioxide.