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Australia’s energy policy options: a realist perspective

By Chris Lewis - posted Monday, 1 February 2010


UK consumers are also paying much more because of wind power. With the UK government doing its bit to help the EU meet its target of 20 per cent carbon dioxide cuts by 2020, electricity customers in the 2007-8 fiscal year paid more than $1 billion to the owners of wind turbines, a figure expected to rise to over $6 billion a year by 2020 if the government’s plan to build much greater wind capacity goes ahead (Peter Glover and Michael Economides, "Wind Power Exposed …", November 25, 2008).

And while Denmark’s overall electricity costs are the highest in Europe due to large subsidies for wind in 2008, it is also noted that Denmark’s 6,000 wind turbines were yet to close a single fossil-fuel plant as they require 50 per cent more coal-generated electricity to cover wind power’s unpredictability, while carbon dioxide emissions still rose by 36 per cent in 2006 alone (Glover and Economides 2008).

Solar energy is also very expensive, despite prices for panels falling by 25 per cent in 2008, largely driven down by Chinese manufacturers. While the expansion of Germany’s solar energy industry through subsidies has meant that facilities are paid for in just four years as power generated by solar panels must be purchased at 43 cents per kilowatt hour compared to 9 cents for wind power, the solar facilities already installed will require an additional €27 billion for maintenance. Further, although depending on the type of panel and the amount of sun in each region, it is suggested that it will take between four and nine years before each panel produces as much energy as was used in making it, although the life span of a solar cell is between 30 and 40 years (Jens Lubbadeh and Anselm Waldermann, “How Effective Are Renewables, Really?”, December 16, 2009).

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The production of biofuels is even more problematic. It is argued that if Germany was to meet all of its gasoline and diesel needs with biofuels, it would require cropland greater than the country’s area. This would also be true if Germans decided to heat their homes with wood pellets. A recent US study also suggested that biofuels would do more damage than traditional fossil fuels because lost forests would result in a disappearance of CO2 sinks while the fertilisation of biofuel crops could result in the release of N20 into the atmosphere, a greenhouse gas that is much more damaging than CO2 (Lubbadeh and Waldermann 2009). Another study concluded that ethanol substitution for petrol produces a slight increase in ozone when compared to petrol, especially in colder areas (Randall Parker, “East Asian Pollution Driving Western North America Ozone”, January 20, 2010).

Even if Australia chooses the path of renewable energy, it will make little difference given that Australia’s coal exports alone contribute nearly as much greenhouse gas emissions as the whole of the Australian economy. According to Coal Facts Australia 2008, the use of coal in Australia contributed less than 0.5 per cent to global greenhouse gas emissions (total Australian greenhouse emissions were about 1.2 per cent), yet Australia’s 30 per cent of global coal exports accounted for an additional 1.1 per cent.

There are other reasons why Australia may pursue the development of renewable energy. After all, even coal is not an inexhaustible industry. While there is an estimated supply of coal for several hundreds of years, the US Energy Information Administration and International Energy Outlook 2007 suggest that current estimates may downplay the likely increase in coal use in coming years. Renewable energy may indeed become much more attractive as costs for fossil fuels increase.

But the impact of Australian efforts will be minimal at the global level on present trends. Any domestic concern about greenhouse gas emissions is almost comical given our growing export of raw materials to Asia. The non-OECD Asia region is expected to account for nearly 90 per cent of the total world increase in coal use from 2006 to 2030 with China’s installed coal-fired generating capacity in China projected to nearly triple from 2006 to 2030 (Parker 2010).

With China, already the world’s largest coal producer, it is also worth noting that India’s coal consumption (about a fifth of China’s) will also increase as the Indian economy has been growing at twice the rate of electricity capacity with 68 per cent of India’s CO2 emissions coming from coal.

As I have stated before, what Australia does has little relevance given present economic trends. The world remains largely influenced by the major powers. From a Western perspective, what the US and EU decides will long have the most importance in terms of potential policy ramifications for Australia and the world.

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Our environmental hopes may indeed be folly in such a competitive world. With China becoming an almost uncontested global power, the failed Copenhagen climate summit suggests that its policy direction will not change unless it is forced to.

But Australia has obvious policy options which will not be challenged given the current status quo. First, it will add to its contribution to global greenhouse gas emissions through coal exports because of growing global demand. To offset this reliance, it promotes as yet untested technologies such as carbon capture and storage which involves the separation of CO2 from other gases emitted from coal combustion or gasification with CO2 injected deep underground into geological formations.

And coal will remain the main reason why Australia’s electricity prices will remain relatively cheap by world standards as it provides 84 per cent of our electricity (Coal Facts Australia 2008).

Australians will decide at the next federal election whether a carbon trading scheme is introduced. Although Abbott has ruled out such an option (along with a carbon tax), one editorial in the Economist magazine titled “Wasting Money on Climate Change” argued that the cost to reduce one ton of emissions by subsidising renewable energy such as wind power was somewhere between $69 and $137 compared with less than $15 for a cap-and-trade scheme (Trebilcock 2009). The Pew Center on Global Climate Change has also urged the need for “cap and trade” policies that require greenhouse gas reductions from all sectors, including electric power.

But Australia will achieve little based on recent international economic trends. As long as there is no international agreement for both developed and developing nations to reduce greenhouse emissions, and the ongoing promotion of freer trade continues with such tolerance to an increasingly assertive China, then we can expect more of the same. Australia will talk the talk, but fail to walk the walk as its reliance upon coal exports alone quashes any environmental bid at the domestic level.

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About the Author

Chris Lewis, who completed a First Class Honours degree and PhD (Commonwealth scholarship) at Monash University, has an interest in all economic, social and environmental issues, but believes that the struggle for the ‘right’ policy mix remains an elusive goal in such a complex and competitive world.

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