Category Archives: Environment

A future economy

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Over the past 120 years ago the have been an average of 114 million sheep grazing on Australia paddocks producing wool and meat for export. In 1970 the numbers peaked at 180 million. Today there are still 72 million sheep but there are also mines making Australia the 2nd biggest global producer of iron ore and 4th biggest producer of coal. Australia the country has done very nicely out of the natural resources of the world’s largest island.

In time the Australian economy will need to make money from something other than natural resources. This is a significant reality for a society that was created on the back of the sheep and now rides high on coal trucks and ships laden with iron ore.

“No worries, mate,” some say. There is plenty of time. There will be generations of demand for those salable mineral resources from the 4 billion people who still don’t have a washing machine but would dearly like one.

Plus we could always go back to sheep. For soon there will be 10 billion humans to be fed and we have all that wet and wonderful land in the north to turn into a food basket.

I joke not. The latter idea is under serious consideration by the right leaning Federal opposition party. Equally there are those who would see remaining forests in the east paved to provide the living space for 100 million.

And maybe that is enough. There could be another 100 years of wealth in natural resources grown on and dug up from the land and immigration to provide local customers who will buy houses, white goods and visit air-conditioned shopping malls.

But I would think we need something else; at least a couple of alternative sources of external income. Not least because there will be a need to find something for everyone to do. Else the nation becomes a handful of miners and hi-tech farmers supported by millions of shopkeepers (or, more likely, couriers for online stores) and civil servants. And not everyone can be those; and already 3 out of 4 Australians in the workforce are paid for delivering a service of one sort or another.

So what would the else be?

Presumably something that the people are good at, have an aptitude for, and makes sense economically. Sport perhaps.

Commentators in the US have asked the same question of their nation. One of their answers is for the US to drive the technology revolution needed to shift our energy supply away from fossil fuels. They have capital, smarts, institutions, and the all-important entrepreneurial spirit. That they are being left behind in this by China and Germany also supplies plenty of motivation.

Australia lacks the scale of entrepreneurial spirit and risk capital to make innovation become a serious earner. Sole trading we can do, but a desire to build empires from small beginnings is rare. Consequently, the risk capital that runs at close to 10% of commercial investment in the US barely makes it to 0.1% in Australia. This lack of support requires that most innovators with a big vision must find what they need overseas.

So what does Australia have? What it has always had; abundant natural resources.

It makes sense to use the vast landmass, the myriad animals and plants, the minerals in the earth and become a regional, even global, breadbasket. Not least because Australia does have smarts, capital, infrastructure and the experience to overcome the significant practicalities that such a mission presents.

Only water, nutrients and labour are in short supply. Land must be managed carefully to avoid soil degradation and salinity. There has to be a careful eye on the changing weather and an ability to drought proof agricultural production.

Australia has a well-developed system of regional natural resource management, generations of farming experience, research and innovation capacity, a world-class tertiary education system and an emerging culture of prudent agriculture epitomized by the Landcare movement. It has what it takes.

This is not a proposal for turning the tropical savannas into laser leveled rice paddies, at least not everywhere, or to continue with meandering livestock left to their own devices and rounded up once in a while for market. This is a call for a radical change to agriculture that will make it into a smart, sustainable production system that accounts all production costs and harmonises output to the capacity of the landscape. In short, to create a totally new way that requires the engagement of everyone.

Why not do it? Create a robust economy on sustainable use of natural resources.

Preparation for change

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Solar panels, BavariaThere were times during the recent debate in the Australian parliament on the clean energy futures legislation when leader of the opposition Tony Abbot was sounding forth his hip pocket rhetoric to an empty lower house. The green leather on the government benches was unmoved.

“This is a toxic tax,” he kept saying, “that on the governments own figures will cost the average Australian a years salary by 2020.”

As the benches were unable to respond, his words echoed round the chamber and into the television cameras.

Why would anyone vote for losing 5% of his or her salary? There has to be a good reason. So what is it? Why should there be a surcharge on a gas that is plant food?

As John Mathews puts it in an online article

“The $25 billion charge on the major carbon polluters is really no more than a signal that they represent the old, brown economy, and will have to start to upgrade their activities if they wish to join the green future. The rest of the world, notably China, Japan, Germany, Spain are all putting huge investments into such a green future. It is long overdue that Australia joins them.”

There it is. The answer is that there will be a green future.

In fact it will not be called green, but normal. Future goods and services will be made possible from what are currently alternative fuels, resource conservation will be the norm, and production efficiency will be an industry mantra because consumers will demand it. The Marks & Spencer Plan A will be copied by everyone.

The chatter about the clean energy futures legislation is about the cost of the tax and the slugging of industry with an emissions obligation but the real guts of the policy is preparation for change that is as inevitable as the weather but not about the weather. It is preparation for an economy  that runs without fossil fuels.

Again quoting Mathews,

“Everyone knows that what goes into the atmosphere over the next 20 years will be the result of investment decisions taken in Beijing and New Delhi, not in Canberra.”

But also the decisions made in the US, Europe, and yes Australia too, on the speed of the transition away from our fossil fuel dependency. Remember folks, this is really what it is all about.

So it was a great shame that those leather benches weren’t warmed by government MPs countering the toxic tax rhetoric with passionate explanation of how this legislation is a historic step on the road to changing the way things are done… to avoid being left behind.

Maybe they just didn’t believe it.

Size of the task

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Opera House, Sydney HarbourIt is desirable to reduce greenhouse gas emissions so that the greenhouse effect doesn’t get out of hand and warm the world by amounts not seen for millions of years.

And should this warming happen too fast for our production systems to adjust, then desire must become an imperative.

Fair enough.

Now let’s consider the size of the task.

If we convert the current global energy use into oil equivalents – that is combine all the coal, oil, gas, hydroelectricity, nuclear and alternative sources and convert the energy we gain from them into the energy we get from a barrel of oil – we use the equivalent of 10 million barrels of oil an hour.

Or, if you prefer, 1,590 million litres an hour.

That’s enough to liquid to fill over 15,000 Olympic sized swimming pools every 24 hours or in less than two weeks fill Sydney Harbour, onE of the largest natural harbours in the world.

Plus this number is, believe it or not, getting larger by the day thanks to more people and rapid growth in demand from emerging economies.

10 million barrels an hour is colossal demand. No wonder superannuation funds invest in fossil fuel energy.

Perhaps the next time you lounge with a G&T by a swimming pool, imagine the pool, and a few thousand more, full of oil, and you may glimpse the size of the task.

Our energy demand is simply vast. And thanks to availability, some legacy issues and economics, most of this demand comes from fossil fuels. Partly because of the volume and locked in infrastructure for generation and delivery energy generation is a tough thing to shift, requiring huge investment in alternative sources, a clunky transition period, and unbridled commitment to change.

And because it will take time, any shift will require great tenacity.

It is a big ask and very unlikely that we will take on this transition voluntarily. It will be both difficult and costly. The engineering task alone is staggering: reworking energy grids, distributed generation, engine conversions and replacement. Even the decision to keep the grid or move to a distributed model is a big one.

Then there is the economics. New monies must be found to develop alternatives at scale and monies found to support uptake of what will initially be more expensive energy sources. Then those who have already invested heavily in fossil fuel power risk lost dividends, losing out to new investors. And more of us have invested than we might realize. Superannuation funds that will pay out for many a retirement, like the low risk of traditional energy investments.

The US and Europe are oil and coal dependent because their entrepreneurs and investors backed fossil fuels. New wealth in China, India and South America can be more flexible. They will invest for the far side of the transition, in the new technologies, not the status quo. In 100 years time it is unlikely that the old west will hold the purse strings, which is actually ok, if a little scary for those who have already invested.

Sydney Harbour

So the size of the task is huge, not just because we gobble 10 million barrels an hour, but also because we are not nimble enough economically to act swiftly.

So when the debate on a carbon price uses hip pocket rhetoric, remember the size of the task and know that change to something this big it is not going to be cheap

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It finally happened

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After back stabbing, vacuous argument and dithering for long enough for us to have been in and out of the next ice age, and despite (or perhaps because of) a hung parliament, yesterday Australian politicians passed a carbon pricing bill through the lower house by a couple of votes.

Champagne all round for the warmers, gnashing of teeth for the deniers and plenty of “why did they do that?” from the majority of the populace more concerned with their own stuff.

And a wry smile from the historians, for this is truly a moment for them to record.

It is the point at which a conservative country in a remote corner of the western world, bound to a colonial past that created significant wealth by exploiting natural resources, made a tentative, but hugely symbolic step towards accounting for externalities.

A brown economy allowed its politicians to introduce a policy that starts to capture the hidden environmental costs of doing business. Those costs that never make it onto the company accounts, the externalities, or what the policy people prefer to call spillover effects.

On the balance sheets of 500 companies and organisations with the largest greenhouse gas emissions there will now be a line item that will show they have made payments for an environmental impact. Not from a point of pollution into the creek that runs by their factory, or for installing mufflers to counteract machine noise, or the filters and scrubbers to remove particulates from the smoke stack, but for an invisible and diffuse environmental effect.

Truly this is historic.

And what history will record is that on 12th October 2011 Australia made its move down the road of major economic reform. It started the process of converting from a fossil fuel based economy with centralized energy infrastructure built with entrenched investment structures; to a fluid, entrepreneurial, environment friendly era of economic development.

And this happened because it realized that even though a capitalist system fits the human psyche like a glove, capitalism is not sustainable unless profit is real. It cannot be profit declared by hiding costs in the environment. For, in the end, the environment stops absorbing those costs and closes down, cutting off production.

There will, of course, be u-turns and moments of doubt about this historic decision. There will also be kick back from the old ways that claim emissions are just hot air. And those claims may turn out to be true.

Only this path is as inevitable as peak oil, because even if it’s not about emissions, it is about knowing and accounting the true environmental costs of doing business.

Only then we can live well and live within our means.

Peeled potatoes

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In our world of doing it all easy, the latest labour saving option in the kitchen is pre-peeled potatoes.

What an outstanding idea. No need to whip out the peeler and waste time or get mud on your fingers. No more peels to get rid of and litres of water are saved from not having to clean off the grubby bits.

What, you are kidding!

How lazy can we get? It takes no effort at all to peel a potato or two. This has to be consumerism gone mad. ABC radio host Richard Glover thought so and created a funny skit to point out the craziness.

Only there are a couple of things.

First thing. An inevitable consequence of a market mechanism is that new products will emerge. Whatever people will buy, whether they really need it or not, the market will provide. The market will also provide things that they hope people will buy, often well before customers recognize that they might have a need for it. In the end, if a product works for even a few of us then it may be worth manufacturing. Witness, ‘peeled spuds in nitrogen’.

Second thing. There is always an opportunity for more efficiency in they system. If the supplier of the potatoes also recycled the peels into compost, this would be useful second product from the potatoes. Very few of the customers would do this and even if they did there would be no scale benefit.

We are at the stage where every nutrient and kilo of organic material that goes back into our agricultural soils is worth the effort given that fossil fuel based fertilizers are rapidly becoming another of our limited resources.

Our system of resource use is so bloated that there are efficiencies that will help our sustainability just about everywhere. All we have to do is look. One of these efficiencies, conversion of organic waste into fertilizer, will become commonplace. As will novel ways of doing it.

The idea that the recycling happens before the product reaches the kitchen might just be one of the better ones.

Green has moved on – it’s no longer about the environment

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A flowerFed up and frustrated Green has ended her long-term relationship with environment  and moved on.

We have all seen how Green used to jump out of bed and dance along on the promise of great things. There was a spring in her step and a focus on what needed to be done to better her man.

Green could look at Environment with that sense of knowing born of a lover’s pride.

But for some time now it seems that the buzz had gone. The relationship had clearly lost its spark and begun to disintegrate. The rumour is that it is all because Environment has let himself go. He has been binging to excess, giving in to his mining and agricultural mates, and failing miserably to be romantic.

Insiders say the whole relationship has become quite spiteful.

No longer able to tolerate the angry arguments over resource use and pollution, beaten down by endless rhetoric and false promises, tired of the need to put everything on the line, it’s ended. Yesterday, Green walked out.

Not one to linger, Green hit the clubs and was seen with her Mercedes owning nemesis we know as Economics. That slick Rick famed for drive, determination and dirt. Whilst there are numerous paparazzi photos that suggests they were more than chummy in wee hours, it seems that Green’s new beau is actually the trend setting global bachelor Climate.

This reporter has tried to get an interview with the happy couple without success, but sources close to Climate claim that it was his new-found warmth that has made him more attractive. More likely it is his inevitable breakup with live-in partner Change that tipped things in his favour. Whatever the reason, Green is smiling again and we wish her well.

Environment did not take our calls.

Buying up the land

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Land has always been an asset. If you control land you can live on it, grow food, exploit other natural resources on or under it, and even charge people for passing through. Land makes money. We didn’t call the old money upper classes ‘the landed gentry’ for nothing.

What we choose to do with land depends on its potential and the owner’s ability to realise that potential. Assuming, of course, the owner recognises the opportunity.  In turn opportunity is about where the land is and what other people want either from it or from what it can produce.

A hectare that overlooks Sydney harbour to the opera house might have been used to raise sheep 200 years ago before there was such an iconic view. Not even the most recalcitrant planning officer could block development of dwellings on such land today. It simply has orders of magnitude more value as a place for dwellings than as a paddock.

Sheep production will not suffer for a few hectares given up to buildings. Grazing properties in Australia cover more than 4 million km2, more land area than India and seven times the size of France.

Nevertheless the Sydney Morning Herald recently printed a story with the following opening line: “FARMERS fear a new rush of environmental plantings for biodiversity and carbon offsets will accelerate the loss of land for food production”.

The story was about mining companies, energy utilities and investment banks buying up land, often through carbon trading companies, to plant trees that will become biodiversity and carbon offsets under the Australian governments Carbon Farming Initiative.

Much of the land purchased is degraded or marginal with limited production potential – a gentle way of saying uneconomic. The new owners have trees planted and account the carbon that these plants pull out of the atmosphere as they grow. This they can register as credits to offset their obligations to purchase emission permits.

Under the carbon accounting rules the new plantings are expected to be “permanent”. That is they must persist long enough to count as emission reductions on the greenhouse gas balance sheet.

An offset planting is not a plantation or production forest. There is no mechanism to allow for later use of the timber resource.  They are carbon sinks, soaking up CO2 from the atmosphere, and providing habitat for any number of creatures that were under pressure as a result of land clearing.

The green end of town is happy indeed. A good thing you would think.

Farmers and their advocates are less enamoured. The prospect of losing large tracts of agricultural land sends a disturbing message to a community already worried by drought, flood, pests, a strong currency and uncertain terms of trade. Then there is also the buy up of productive land by foreign entities, both companies and sovereign states, looking for food security at home.  More land going out of our control.

With this kind of reporting it is a small psychological step to thinking that the land is being appropriated from under our feet creating a threat to a 200 year old way of life.

This will not happen. Even at their maximum extent offsets will be a tiny percentage of the total land area. After all it takes a lot of plantings to cover an area the size of India. However, the reality is that there will be questions asked of land use in the coming decades. We will need more efficient production, regrow vegetation for its carbon value, pay more attention to conservation efforts and be smarter about water use. There will be changes. And this is what the reporters latch onto. Tradition will not be enough to guarantee persistence of the current use everywhere. We will find new ways of making the land productive. Like the plot of land across from the Opera House values will change in ways that make alternate so attractive that change is inevitable.

And in the shakedown, who owns the land may be less important than what is done with it.

Staggering numbers

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It is a tick over 1,900 km from Sydney to Melbourne and back again. Two full days of driving are needed to cover this distance if you keep to the speed limits.

Imagine each side of the road lined with oil tanker trucks parked end to end in one giant parking lot. Each of the 98,000 trucks is roughly 18m in length and is carrying 34,000 litres of crude oil.

This amount of oil, roughly 21 million barrels, is the amount of oil burnt in America in a single day.

Two-thirds of this vast amount goes into the engines of cars, trucks, planes buses and trains whilst the rest goes to heat buildings and manufacture chemicals and plastics.

OMG those Americans!

Well, hold on.

Australia uses around 950,000 barrels a day or a line of trucks 60 km long.

Hah, that’s nothing, won’t even get you across the Sydney basin.

Except that in less than a month there would be enough trucks to park along the road to Melbourne and back.  Just like the Americans.

 

Who’s behaviour are we trying to change?

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The Australian government has just released its clean energy future legislation, a long awaited climate change policy framework.

In line with other jurisdictions the focus is emission reduction by putting a price on carbon to change behaviours away from dirty, fossil fuel based energy and industry to a cleaner, more efficient economic system. Clean energy futures is an elaborate, and in many ways clever, market based system for the commercial exchange of what amount to licenses to pollute, is transitioned in through a tax on the 500 heaviest emitters.

Hit commercial entities with a cost and, on the assumption that the hit hurts, they will do their upmost to avoid it. They are expected to be rational after all. Some will cop the cost and simply pass it on to their customers. But this will benefit their competitors who choose to become more efficient and change to less carbon intensive activities. So the market will sift the options and favour the cleaner ones. Exactly what is wanted.

In this case $25 billion over 5 years is the hit – evened out it is $1 million a year per entity – and that sounds like it should hurt enough to prompt a change. Some entities will become more efficient, trade to get the best price for what they must pay for and, eventually, transition to clean practices.

So we have a system to change the behaviour of… the 500 heaviest emitters.

Only why do these companies emit? For the majority it is because they supply energy or goods to the market at a profit. In other words they have customers, ultimately us.

In the formulation of the clean energy future policy, the $25 billion raised from emitters will go back to consumers through raising the tax threshold at a cost $15 billion and another $10 billion to support exposed jobs. This is so that should the emitters pass the cost of their permits on to the consumer or cut costs in the form of jobs, it is not too painful for those on the receiving end. Us again.

No collective hurt there. And so no change in behaviour.

Propping up the consumer also eases the pain on the emitters and reduces the incentive to change.

At some point it will be necessary to try and change our behaviours too; or even the most intricate of policy formulations will be a waste of effort and opportunity.

The missing link

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Some years ago I wrote an essay entitled ‘What if it’s not emissions’. I was not in denial or even sceptical about climate change, more concerned that we had become fixated with emission reduction as the solution to climate change. So convinced had we become that it was a given that if emissions came down, we would have fixed that awkward problem and all will be well with the world.

My real issue was that we risked putting all our eggs into the emission reduction basket.

Burning landfill site, GaboroneAfter more years of political inaction than seems decent, the Australian government has just released a clean energy future policy on climate change. And, guess what? We still have the same fixation. The proposal is all about emission reduction, initially through a tax on pollution followed by a cap and trade system to make emitting greenhouse gas so expensive that no rational business could afford such behaviour.

It might be about emissions, but the policy formulation sees only a modest reduction target – 5% below 2000 emission levels by 2020. This means in 2020 Australia is pledging to emit 509 million tCO2e in greenhouse gases or 56 million less than it did in 2009.

Only by 2020, even with the proposed intricate emissions reduction policy fully functional, emissions of 679 million tCO2e are predicted.

Actual emissions will increase because the Australian population will grow in numbers at roughly 890 people per day, the economy will grow and so will affluence. Economic growth will require energy to follow the historical trend of a doubling in consumption every 30 years. And although the policy does talk about energy efficiency and alternative sources, the required capacity increase will inevitably be met by traditional means.

Emissions growth will leave a shortfall in the target of 170 million tCO2e or 30% of current emissions. So it would seem that the emissions reduction basket has few eggs.

This again begs the question ‘What if it’s not emissions?’

Let us accept what the science tells us and agree that it is emissions that are a significant driver of the current climate warming. What the policy shows is that, rather like American debt ceiling, we cannot quite admit the severity of the problem. And, more importantly, we lack the courage to tackle the problem head on. It is just too hard and too scary.

And this would actually be ok if we hadn’t missed the critical issue in all this.

We have stopped talking about how 7 billion people are going to sustain growth in affluence on a warming planet. We have forgotten about adaptation. Forgotten that we will need to use water wisely, deliver sustainable production on farms, and manage our landscapes when the temperatures change, rains forget to fall, seasonality shifts, severe weather events become more frequent and the sea levels rise.

Less than $1 billion of the $25 billion revenue generated from the carbon tax will go incentive land management through carbon offset projects. They will mostly be Kyoto compliant activities such as permanent tree plantings and flaring methane – just as the international agreement to proceed with a second commitment period of the Kyoto protocol teeters.

There will be money for biodiversity initiatives. Good stuff, but just more of what we have already been doing.

What happened to incentives to revegetate the landscape and put carbon back into the soil? The critical activities that will help us manage that scarce water, produce reliable quantities of food and help save what is left of nature. Missing, presumed dead.

Seems like we should ask again, ‘What if it’s not emissions?’