Peak oil and the lost message of the carbon tax

Whether or not one believes in human-induced climate change, with the Carbon Tax's introduction on Sunday, it is worth remembering the fundamental reasons for its conception. The Carbon Tax debate, which has been memorable for its hyperbole, but not its content, has obscured why we contemplated it in the first place.

The concept of an Emissions Trading Scheme (ETS) has two core aims: firstly, the reduction of carbon emissions with the intention of retarding global warming. and secondly, to shift our economy away from reliance on fossil fuels. This second aim, arguably far more compelling, has been neglected in the national discussion.

Global Warming and Opposition Dominance

Despite some conservatives and quarters of the media having cast doubt over the validity of the science of climate change, the scientific community is far less divided in its conclusions. Carbon dioxide (CO2) levels have risen by 36% since 1750 with ice-core data indicating levels are higher now than in the last 800,000 years and geological evidence suggesting as long as 20 million years. This has been attributed to the burning of fossil fuels, which in the last few decades accounts for three-quarters of human emissions (most of the remainder from deforestation).

While the majority of Australians continue to believe in human-induced climate change, their faith that an ETS in Australia will help rectify this has fallen dramatically. When it was the "greatest moral challenge of our time", over half of people felt that "if we didn't act now [on climate change], it would be too late"; but most recent polling suggests only a third now support aggressive climate change action.

Some concern is well founded. It is true that Australia, while having very high per-capita carbon emissions, contributes only a small fraction of global industrial output of the gas and our ETS alone would not make a substantial impact. With the giddy days of Copenhagen behind us, national governments are faced with more pressing financial concerns and the uptake of complementary schemes internationally will be significantly delayed, possibly leading to capital leakage. Moreover, comparisons to other international schemes suggest that Australia will ultimately tax carbon at an unfavourably higher level than its competitors.

However, domestically, the dramatic reduction in support is due to a very successful campaign by the Coalition. The Opposition has deployed a consistent, vehement approach to the Tax, telling voters that it will spell existential crisis for exposed industries, and more importantly, financial pain for average Australians. On a point-by-point basis, much of what Mr. Abbott has argued can be identified as hyperbole, or in some cases simple untruth; but the tactic is aimed at inducing electoral fear and shutting down more substantive debate, and it has worked very well. Voters are fearful of manufacturing job losses and cost of living increases, and will ultimately move with hip-pocket concerns over high-minded environmental aims. The real failing of the Government, and the Greens, is that they have been goaded into tit-for-tat rebuttal of Abbott's sometimes fanciful claims rather than committing to a coherent and sustained argument for the tax.

Even accepting that the Carbon Tax will do little to reduce global carbon emissions, its second aim - a shift from fossil fuels on a whole of economy scale - is worth pursuing.

Peak Oil and the Long Game

The concept of Peak Oil emerged in 1956 when M. King Hubbert used modelling to correctly determine that US oil production would reach its peak by 1970. Peak Oil models identify the point at which maximum oil extraction can be expected to occur, after which it will enter terminal decline.

Such models have been applied to oil on a global scale with disconcerting results. Optimistic estimates suggest Peak Oil by 2020, while in 2010 a report by the US Joint Forces Command suggested surplus oil may stop being produced by this year. A report by the Paris-based International Energy Agency in 2010 found that peak production of crude oil had already passed in 2006 , though it saw a plateau in production until 2035. It is worth considering the demand globally, particularly from China, will begin to outstrip supply in such circumstances. The realisation has seen a shift toward alternative fossil fuels, such as coal-seal and natural gas, though these too are finite resources and will ultimately 'Peak' as well.

The reality is that in the coming century, whole economies will be burdened with a need to find sources of renewable, alternative energy sources as fossil fuel resources dry up. There is a dubious record of government-backed direct interventions in this area with small scale interventions and shifting political imperatives bringing programmes to premature halts (Queensland's solar rebate scheme, for example). Inducements to business to seek clean, renewable energy options have generally failed to have effect, frankly because oil is cheaper than developing and implementing effective renewable options. The uncomfortable reality is, however, that oil will progressively become more expensive as supply evaporates and business will be compelled to act - perhaps not before soaring costs create an economic and energy crisis.

At the heart of the ETS is the aim to pre-empt such a crisis by making carbon (and therefore, fossil fuel use) more expensive and therefore less desirable now, while there is still an energy surplus to buffer the effect; and it is designed to hurt. The hope is that when there is a painful bottom-line effect, a "python-squeeze" if you will, for business and industry, it will drive genuine engagement the problem with more adequate resources.

In Australia, where three-year electoral cycles colour the way we discuss policy, it seems that trying to keep such long-range goals in mind is difficult. It is hard for politicians and the media to look beyond the Carbon Tax to the Emissions Trading Scheme that will replace it in a couple of years. It seems even harder to remember that its true focus is on an inevitable energy crisis still decades away, but that needs our attention now.