No easy substitutes for fossil fuels

To go with Clean Energy Week comes a new report from The Climate Institute telling us that Australians overwhelmingly support renewable energy but don't understand how carbon pricing will work. Not surprisingly, they are also sceptical about the political motivations behind its introduction. I think their scepticism is misdirected. Their target should be the carbon tax itself.

Carbon pricing (of which the tax is a temporary start) is the standard economic remedy for problems like carbon dioxide emissions. As Tim Colebatch, an economist, wrote in The Age recently: "Give us a price incentive, and we find ways to reduce emissions with little damage to profits or our standards of living".

The tax should work in two ways. It should encourage substitution of high-emission fossil fuels by lower-emission alternatives("our clean energy future", as the government puts it); and discourage energy usage in general ("behaviour change") by raising energy costs. Clean energy will cost more. After all, if low-emission technologies were not more expensive there would be no need for a tax.

Fine in principle, but will it work?

I need to assert here that I am not a climate sceptic. And I see the timing of Australia's tax and its explicit contribution to global climate change as important but separate issues.

The carbon price policy is based on two premises: the right technologies will be there when needed; and significantly less energy will be used as its price rises.

Underlying the whole matter is energy's key economic role. Energy is the lever that multiplies the output of human personal effort to give us our unprecedented productivity and prosperity. Energy builds economies. Whatever its shortcomings, the bonanza of fossil fuels we inherited has given us our present living standards.

Both of the above premises have major problems. Firstly, in my opinion (after all, this is a journal of opinion) the expectations regarding renewable energies have been raised to quite unreasonable levels. The proposition as accepted by the public is that feeble, intermittent solar, wind, ocean energy, etc, can effectively replace intensely combustible, high energy fossil fuels as drivers of prosperity. The enormous scale and associated cost of collecting and processing this weak energy is what makes the proposition extraordinary. Extraordinary propositions need extraordinary evidence. That's the sceptics' slogan, and that's why I am sceptical about renewables.

The evidence is in fact very ordinary. We have been hearing about the prospects of renewables for decades. They usually come from promoters and interested parties like environmental and renewable energy advocacy or research groups. The public has been blitzed about renewables and in particular the wonders of solar energy. Not surprising that they support it. There has undoubtedly been some brilliant inventiveness and innovation. The intrinsic weakness of the energy sources remains the big economic stumbling block. And it should never be forgotten that the promoters, the scientists and inventors, the technology developers and vendors, are people who thrive on optimism. I don't blame them. A positive outlook goes with the territory, but all their claims have to be heard in that light.

These are not idle observations. I have been scrutinising alternative energy developments for nearly half a century. It is 35 years since my first letter to The Age attacked the myth that solar, wind and tidal energy are somehow 'free'. I was involved for 20 years in managing R&D related to theresources industry. Taking ideas and innovative technologies to commercial success is tough. The financial discipline of the private investor is an essential ingredient, so I am especially wary when governments get involved in picking winners.

The second premise, regarding energy conservation, does not get the attention it deserves. We hear little other than it's a no-brainer and that energy efficiency is a wonderful 'resource' that will respond to 'behaviour change'. Here we need to remember that about 80% of our primary energy goes to the productive activities of industry and commerce that underlie prosperity. 'Behaviour change' around the home therefore cannot contribute much to national energy savings.

The barrier to conserving energy on a large scale is the strong quantitative connection between GDP and energy. Energy productivity (or its reciprocal energy intensity) is the national economic indicator that links the two. The table shows energy productivities for the OECD countries, which generally have more reliable statistical data than the rest of the world, especially the developing economies. Monetary units are in constant US dollars, year 2000, adjusted to purchasing power parity. Energy is measured in gigajoules (GJ) of total primary energy supply.