Michael Pascoe's unshakable faith in the market

Michael Pascoe is one of the best financial journalists in the country, and he writes some great stuff for Crikey which is generally spot on. He gets it mostly right below, but his unshakable faith in the market will be sorely tested by the twin threats of peak oil and climate change:

We can always go back to whale oil

Date: Tuesday, 29 August 2006
Michael Pascoe writes:

Competing doomsday scenarios are making life awfully difficult – I can’t decide whether I should be suicidal about burning too many fossil fuels or not enough. Maybe if Tim Flannery, Richard Heinberg and Andrew McNamara can coordinate their apocalyptic visions we’ll happily drown because we have no means of escaping them rising sea levels.

Pascoe continues...

The “peak oil” worrywarts are having a nice run at present, most recently Queensland National Party state MP McNamara on 60 Minutes and about-to-visit professor and book flogger Heinberg in The SMH, never mind Four Corners last month. At Heinberg's extreme, the peak oil folks are forecasting a return to the 19th century with little and expensive travel and we all have to grow our own food in the backyard as civilisation as we know grinds to a halt.

It is the nature of journalism that catastrophic bad news is goods news. But it is also astounding that that there is such a uniform ignorance or calculated ignoring of the great twin realities of our society: the ability of the market mechanism to efficiently allocate resources and our incredible capacity for inventiveness and problem solving.

We’ve gone through “peak oil” before – only then it was whale oil. The truth is that we’re not running out of oil and never will. At a price, we can make all the oil we need. The oil lubricating my car’s delightful engine already is artificial. As crude oil becomes more expensive, we start to use it more efficiently while the economic stimulus leads to product substitution. Oil remains wonderfully cheap, especially in a handful of low-tax countries like Australia, but in time it will become more expensive and we’ll use less per head of population.

Does it end tourism, global trade, the plastics and pharmaceutical industries? Of course not. The scaremongers themselves have no economic incentive to suggest how our incredibly adaptive species will move forward with less oil, but it’s not hard.

For example, the combination of China’s needs, greenhouse pollution and inventiveness means the next generation of nuclear power plants will effectively be mass-produced – modulised and much cheaper. Once you’ve built your nuke plant, the running costs are low and electricity is cheap. Cheap electricity makes the electric car a goer when oil is expensive, but it also provides the power to make alternative fuels – the hydrogen car just one of the possibilities.

There are bugs being trained to eat coal and excrete plastic. If the polyester shirt dies though, no-one will mind. Filling my Alfa with premium might become a luxury just for a special weekend excursion, but that’s a matter of choice. And we can always start farming whales.

Most of this is true. The market mechanism and human ingenuity will find alternative fuels, China will undoubtedly find a way to produce cheap nukes, but we will never find a fuel so wonderfully packed full of energy and so cheap to extract as crude oil.

Every alternative fuel we move to in the future (such as coal-to-oil, tar sands, shale oil) will cost a lot more energy to produce than crude. For example, in the tar sands of Canada they have to dig up a tonne of oily dirt to fill a tank of petrol. Think of the energy required to dig up that dirt, transport it, and refine it into oil. Compare that with the 'Texas Tea' of last century that just gushed out of the ground.

Of course, this has big implications for climate change. If we have to burn the equivalent of a barrel of oil to make two, even the most efficient vehicle is going to put more CO2 in the air per kilometre driven. Because, unlike conventional crude, the fuel cost a lot of energy to produce in the first place, and for the forseeable future that energy is going to come from fossil fuels. Last time I looked I didn't see any electric trucks at a mine site.

EROEI is everything, both in dollar terms, and in terms of CO2 emitted, and nothing beats the EROEI of light sweet crude.

There are some applications such as jet airliners where no-one can envisage an alternative to oil. There are some early experiments happening with compressed hydrogen and fuel-cells but these are more akin to experiments in human or solar-powered flight than a practical replacement for today's jet plane. Besides, hydrogen has nowhere near the energy density of jet fuel (8MJ/L vs 33MJ/L) and that's a pretty fundamental hurdle to overcome.

Yes we can build nukes and wind farms, and we will inevitably electrify transportation (rail will probably make a big comeback) but I don't know what's gonna keep the planes flying, I really don't. Cheap international tourism may indeed become a thing of the past.

Crude oil is a one-shot deal, and we will use it all in a couple of centuries. A blink of the eye in human history.

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Flannery's doomsday talk may be too scary for some

In today's Crikey climate scientist Ian McHugh writes:

Tim Flannery’s keynote address to the Melbourne Writers' Festival on Friday night at the Melbourne Town Hall must have left more than a few punters feeling decidedly blue. The vision he paints of the coming impacts of climate change is at times little short of apocalyptic.

Yet Flannery’s vision is no exaggeration. And given the stakes, there would be something obscene about soft-pedalling his message just to make our Friday evenings a little cosier, our sleep a little easier. And so, as in his book The Weather Makers, Flannery pulled no punches.

Ian McHugh continues...

But amid all of the talk of melting ice sheets and Arctic pack ice, rising seas, drowning polar bears, fatally confused bird life and monster storms, he seemed to leave scant room for hope. During the Q&A session at the conclusion of his speech, one audience member jokingly remarked that her friends were considering leaping from the balcony.

I’ve followed Tim’s work since the publication of The Future Eaters 12 years ago. A passionate discoverer and documenter of nature and natural history, he’s a great communicator, too. But with such a profoundly disturbing issue as climate change, the difficulty lies in startling people out of their reverie without turning them into despairing balcony jumpers. It is a difficult balance and -- eloquent as he was -- I don’t know that he struck it on Friday night.

This is not to take away his due. Tim Flannery’s is an important voice of warning that has helped greatly in shoehorning climate change onto the mainstream agenda. This was, after all, the ultimate reason for his appearance at the town hall. Perhaps in the end, it is only his job to deliver the bad news, uniquely placed as he is at the, er, coal face of nature’s continuing decline.

But it’s hard to imagine he would see it that way. And clearly he doesn’t think the situation is hopeless. What would be the point of communicating at all if this were true? Yet despite some welcome discussion of ways forward, it seemed a bit like cursory garnish on the main course of Armageddon. What was lacking was not so much details but a passionate defence of possibility -– the sense that we can choose to unmake at least part of the dark future he described.

It didn’t seem clear that he believed this. And that is probably the scariest thought of all.

More on Flannery's talk here: Braving the cold for a talk on warming

Dr Flannery said Australia was lagging behind the rest of the world in addressing the global warming issue.

"It's important to understand that most governments in the world are acting," he said.

"It's only in Australia and the United States we find there is opposition, still, to addressing the problems.

"These governments say they are waiting for evidence upon which they can act. But it's too late, we need to act now." A quick solution was to impose a hefty tax on those companies that continued to pollute the air.

"If you raised a billion dollars in carbon tax you could give it back to lower and middle-income earners as tax breaks and those polluters would act quickly to fix the problem."

You tell 'em Tim. No-one is suggesting that by imposing a carbon tax the government should or would increase its total tax take. Any pain inflicted by higher electricity or petrol prices could be mitigated by income tax cuts, just as the government did after the GST was imposed in 2000.

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Look what's new at IKEA

The HOVVARD
Small indestructible lump
Does nothing for any home
$29.95

(courtesy of Saturday's SMH)

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Essential reading and viewing

Some essential reading and viewing this weekend. First up is "The Resurrection of Al Gore" in the Good Weekend magazine. The article by John Heilemann (which is not online) talks up the prospect of Gore running for President in 2008 which is hugely encouraging. There is no politician in the world more committed to the issue of climate change than Al Gore, and IMO it is critical for the future of the planet that he runs and wins in 2008.

It was a tragedy of epic proportions that Gore did not become President in 2000. Gore says of that infamous 'victory'...

"The principal source of disappointment was not the dashed expectations for me or my family," he explains, "but the consequences for the country" of Bush's victory. "What the country has subsequently gone through was much worse than I ever thought, but I expected it to be bad."

Indeed. Few of us could have imagined just how bad George W. Bush would be. Iraq, Katrina ... need I say more. On the prospects of Gore running in 2008 Heilemann writes:

What's clear is that Gore would love to be president, but the thought of the whole awful business of getting there makes him nearly nauseous.

Please run Al. One man's nausea is a small price to pay to give the planet some hope. I'm nauseous every time I see Bush on TV, and there millions (billions?) who feel the same.

The article concludes with this:

When Gore ran in 2000, he did so from a position of entitlement: the vice-presidency. But the story he could tell in 2008 would be infinitely more compelling: how he suffered the harshest defeat imaginable and pulled himself back up. As his former vice-presidential chief of staff Ron Klain observes, "Americans love a comeback. We're a comeback-crazed country. And this would be a comeback beyond all comebacks."

Next up is When oil dries up a story by Nick Galvin in the SMH about Richard Heinberg who is in Australia at the moment. Galvin writes...

Heinberg, who is embarking on an Australia-wide speaking tour, is a leading proponent of the "peak oil" theory.

Peak oil is shorthand for the premise that the amount of oil left for us to use has "peaked" (or is just about to peak). Once worldwide production begins to fall and with no corresponding decrease in demand, oil prices will skyrocket, leading to widespread chaos.

How bad will it be? If Heinberg is to be believed, the impending dislocation caused by the end of the oil era will be about as bad as it gets.

From global resource wars as oil-dependent economies battle for control of remaining resources to widespread famine caused by the slowdown in oil-dependent agribusiness, the picture he paints is nothing short of cataclysmic.

Familiar stuff for regular readers of The Oil Drum but it might come as a bit of a shock for the average suburbanite living in a McMansion 40kms from the CBD with two-tonne SUV in the garage. Heinberg continues with this forecast:

Overall population levels will also have to shrink worldwide. On the back of oil's one-time energy dividend the world's population has increased sixfold, creating an unsustainable, self-perpetuating cycle needing more and more oil.

Manufacturing will again become a local business in the post-oil era as the interdependencies of global trade are unwound. International trade will continue but it will be restricted to luxuries and exotic items. People will work and shop close to home and even grow some food in their own backyards - just as many of our parents did.

Is there any hope in Richard Heinberg's post peak world? Well not much, he sounds like a pretty hard-core doomer to me, but he does urge "positive changes" in the face of the inevitable collapse of civilisation...

"If I had a bet on what the state of the world would be in 50 years I think I'd say it's not going to be a very happy place but the more we do the better off we will be," he says. "I think it's more important to be making whatever positive changes we can than just wailing and gnashing our teeth and bemoaning our collective fate."

Continuing the Peak Oil theme 60 Minutes will be giving us their take on the issue tonight. No doubt it will be usual sensationalist tabloid journalism we have come to expect from 60 Minutes, (and not a patch on the recent 4 Corners effort) but the audience will be bigger and broader, and hopefully it will give the aforementioned McMansionites some food for thought.

Running on empty
August 27, 2006
Reporter: Tara Brown

You're about to hear two of the scariest words in the English language — "peak oil".

Effectively, they mean the end of the world as we know it. The point where oil production reaches its absolute peak; the point when supplies start running out. And the doomsayers are convinced we're almost there.

So, if you think paying $100 to fill your tank is painful, I hate to tell you, this is as good as it gets. It'll get worse, much worse.

Two dollars plus per litre by Christmas for a start. Naturally, the oil companies say stay calm. We'll be right for a 100 years at least. But then they would, wouldn't they?

Last but not least 4 Corners is showing yet another story on global warming this Monday. Too much global warming news is barely enough IMO, so kudos to the ABC for continuing to report on this most important of issues. The reporter is Jonathan Holmes who was also responsible for the Peak Oil story in July.

What Price Global Warming?
Reporter: Jonathan Holmes
Broadcast: 28/08/2006

Heat waves and cyclones; droughts ravaging farmland; rising seas swamping beach havens; forests drying up and species dying out; the Barrier Reef and Kakadu, icons of nature, doomed.

This is Australia’s future if nothing is done to tackle global warming, scientists warn - though exactly what will happen, and how soon, remain uncertain.

Is there still time for the world to avert these dire consequences? How can Australians – per person the biggest greenhouse gas polluters on the globe – do more to curb their own emissions?

The biggest single source of global greenhouse gas emissions is the burning of coal to produce electricity – and Australia is the world’s biggest coal exporter. The best way for Australia to help, the Howard Government believes, is to invest in the search for technologies that will drastically reduce the emissions that come from burning coal.

Meanwhile, says John Howard, it’s pointless for Australia to take expensive steps to curb its own emissions: "If we stopped them tomorrow, it would take all of nine months for China’s additional emissions to equal what we’ve withdrawn by stopping ours," the Prime Minister tells Four Corners.

But a growing cast of business leaders is calling for the Government to engage the power of the market in the fight against global warming. They say Australia needs a "carbon price signal" – either a tax on carbon dioxide, or better still an emissions trading system, which will give business a real economic incentive to save energy, cut emissions and invest in clean technology.

The European Union has an emissions trading regime; Labor state governments are proposing one; but the Federal Government says any such system, unless it’s applied globally, will mean excessive job losses, electricity price hikes and lifestyle sacrifices for Australians.

Which way forward: technology or tax? Four Corners reporter Jonathan Holmes looks at clean coal technologies in the laboratory – and at the efforts of entrepreneurs responding to New South Wales’s trial emissions trading system. And he asks – why not have both?

It will be interesting what conclusions Holmes reaches about 'clean coal' aka CCS or geosequestration. As I've said a few times here, I reckon money spent on 'clean coal' is an expensive folly and is just pandering to the coal lobby, but I'm open to convincing evidence to the contrary.

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Anthony Albanese's vision for the solar industry

Shadow Minister for the Environment Anthony Albanese spoke at the Australian Centre for Science, Innovation and Society (acsis) this week about his vision for Australia's climate change policy.

Most interesting was that Albo's "Period of Real Solutions" talk focussed on solar energy rather than 'clean coal', wind or nuclear. He began with the obvious (well, obvious to anyone except John Howard).

What can Australia do to avoid dangerous climate change? Three things for a start:

1. Dramatically cut Australia’s greenhouse pollution;
2. Ratify the Kyoto Protocol and join the world in a global agreement to cut greenhouse emissions; and
3. Develop a world beating clean energy industry.

And continued...

Our Climate Change Blueprint makes it clear the only environmentally sustainable energy policy for Australia is one which makes the tough decisions to invest in two great transformations:

• transforming the coal industry into a cleaner coal industry; and
• transforming our specialist solar industry into a world beating solar industry as big as coal is today.

I want to particularly focus on the latter transformation today.

Wow! That would be some solar industry given the size of the profits the coal companies are making at the moment. Thankfully Albo skipped any discussion of 'clean coal' (perhaps because it can be summed up in one word: nonsense) and moved onto the solar industry...

Building A World Beating Solar Energy Industry

I strongly believe we can build a world beating solar industry.

In fact, if Australia is to actively engage in a period of solutions, we must establish a world beating solar industry.

The global picture is clear – the sun is shining on solar energy.

Solar photovoltaics have grown by 40% globally over the past five years.

Mark Twidell of BP Solar has stated that sales of solar cells within Asia could grow by 50% within the next decade.

BP expects global solar manufacturing revenue to double by 2008 from almost $500 million in 2005.

According to the International Herald Tribune, Asia is poised to overtake Germany as the solar industry’s main source of growth.

We could, and should, be a part of that massive growth, but the reality in Australia is very different.

Compared to a global growth rate of 40%, solar PV has only grown by 16% in Australia over the past five years.

In June 2007, the sun will set on the popular Photovoltaic Rebate Program (PVRP), which is responsible for more than a quarter of the 25 000 solar panels on rooftops across Australia.

PVRP provides Australians with a direct rebate of up to $4000 for a solar system. The truth is it has always been too popular for its own good, with long waiting lists for people wanting to participate in the scheme.

Instead of a world-beating solar energy industry, we have a beaten solar energy industry.

We could have been the Silicon Valley of solar, but when we needed national leadership we didn’t get it.

Australia once led the world in solar water heater technology but we faltered and failed to commercialise our technologies.

Now we lag behind manufacturers in both China and Europe and account for only a tiny proportion of world production and installations.

Over the last decade, our best technology and our brightest ideas have gone overseas.

Take the solar hot water systems developed at the University of Sydney.

The Chinese saw its commercial potential and grabbed it. It’s now a huge part of China’s solar market. Invented in Australia, made in China. That’s a disgrace.

You see it again with the story of Dr Zhengrong Shi, a dual Chinese-Australian citizen.

Dr Zhengrong Shi debuted at number 4 on this year’s Business Review Weekly, with a wealth estimated at $3 billion.

Zhengrong Shi completed his PhD in solar energy at the University of New South Wales, but his wealth comes from developing solar energy technology in China.

His company, Suntech, is hot property in China but solar power continues to get the cold shoulder in Canberra.

If the last ten years have been a lost opportunity for Australia, what does the next ten years hold?

I think the solar technologies that are currently being developed around the world, and particularly in Australia, have the capacity to drive a period of solutions.

Solar thermal technology being developed by CSIRO and solar sliver technology being developed at the Australian National University are both showing significant potential for addressing base load capacity.

In fact, an unpublished report by the Cooperative Research Centre for Coal in Sustainable Development, obtained by The Canberra Times, suggests solar thermal technology “is poised to play a significant role in baseload generation for Australia” and will be cost competitive with coal within seven years.

The question for John Howard is this – will you build a world beating solar industry or will you allow our solar industry to be beaten by its overseas competitors?

Already, Spain has begun construction of the first large-scale commercial solar thermal plant in Europe. The power plant is designed to generate electricity continuously to the grid when in operation.

We are already falling behind.

Labor will turn this around. We will build a world beating solar industry.

In addition to the major policy initiatives announced in our Climate Change Blueprint, we have announced a number of important practical measures that will provide a real boost to the solar industry.

We will ensure all of Australia’s 10 000 schools are solar schools.

With the right policies in place Australia should aim to deliver on our potential to have at least 1.5 million solar powered homes by 2015 and 2.25 million homes by 2020.

In addition, Kim Beazley’s Innovation Blueprint outlined a series of initiative to:

• kick start the next generation of private sector innovation;
• Reform research and development investment arrangements;
• Develop the capacity and diversity of our universities; and
• Rebuild Australia’s great research institutions, including the CSIRO. These initiatives will provide a real boost for the development and commercialisation of solar technology.

I can't wait.

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I used to like Peter Beattie

Until I saw this performance on Lateline last night.

TONY JONES: Do you believe global warming could create more extreme cyclones off the Queensland coast?

PETER BEATTIE: Yes, I do. And in fact, that's one of the reasons why yesterday in Innisfail, I announced a series of programs that over the next 10-20 years, in the area between Cooktown and Bundaberg

Good so far.

I think a lot of people in Australia don't understand what global warming is doing. It's changing our weather patterns dramatically and you look at the drought that we've got in the south-east corner. It is now the worst drought on record. The worst drought on record. And that's because we are getting significant changes in weather patterns. We're getting less rain in the south-east corner, but we're going to get it in a more violent way. There are parts of Western Australia, for example, that are getting rain levels they've never had before. Spinifex, in fact, is dying in some places. So the whole pattern of weather is changing and with that comes all sorts of risks - not just rising sea levels, but clearly, more violent storms and more violent cyclones.

Even better. My God, I think he's got it!

So, what are you gonna do about it Peter?

TONY JONES: At a broader level ... you've recently rejected the proposition for a state-based carbon trading scheme aimed at reducing Australia's carbon emissions to - by 60% by the middle of this century. Isn't that the sort of initiative aimed at targeting the very global warming that's causing the problems that are making Queensland vulnerable?

PETER BEATTIE: Well Tony, let me say that Queensland has contributed more than any other State to reduce greenhouse gas emissions, because we're stopping tree clearing. I mean, the only reason we're anywhere near our Kyoto target thanks to what the Queensland Government did in stopping tree clearing. So let's be clear about that at the front. We've good credentials when it comes to reducing greenhouse gas emissions.

True. But stopping tree clearing is hardly the kind of tough policy that's required to reduce CO2 emissions in any significant way.

Second thing is, I'm not opposed to carbon trading - I'm opposed to doing it in a way that excludes technological evolution in areas like clean coal technology.

Uh oh, Pete's off with the fairies now.

Now I know you had someone on the program last night arguing against this - I don't accept that. I think that clean coal technology can not only reduce our emissions, but what it can do is develop a technology that can be exported to China.

Earth to Pete. Geosequestration, CCS, 'clean coal' (whatever you want to call it) doesn't exist and will never exist. Its a figment of the coal industry's imagination. Whatever way you look at it we are not going to be able to hide a cubic kilometre of CO2 in the earth's crust every day, and that's just Australia. You think nuclear waste is scary? Imagine vast seas of liquefied CO2 under foot that have to be monitored forever, because if it escapes it will suffocate everything in the vicinity. By comparison, the amounts of nuclear waste produced are tiny, it stays put, and does eventually become less toxic.

Anyway, back to Pete:

You see, Tony, the issue for us is our greenhouse gas emissions are about 1.5% of the world - which is chicken feed. If we stopped all our greenhouse gas emissions tomorrow, it would have bugger all effect on greenhouse emissions and global warming.

Ahhh ... the tried and tested "we're small so we don't have to do anything" argument. John Howard couldn't have said it better himself.

Lets extend this to every citizen of the planet shall we? "If I switch off a few lights it won't make any difference so why should I bother?" Apply same logic to six billion people and we're screwed.

But China's got 15.6% of greenhouse gases and rising. You're seeing the same thin g with the development of India. So what we need to do is to develop technology which can be exported to emerging countries like China, with huge energy demands, to reduce the greenhouse gas emissions and out of that we have a cleaner planet.

Pete, the Chinese can't burn the coal if you don't sell it to them.

Now that's what we are doing. We're investing almost a billion dollars in partnership with industry and hopefully the Federal Government in developing clean coal technology which can, in the research we are doing, split off CO2. Yes, it goes into rocks but then you've got hydrogen, which can generate power

Huh? How's that work Pete? You put the CO2 in the rocks and you make hydrogen?! Give this man a Nobel Prize for Chemistry. He's almost as brilliant as Wilson!

TONY JONES: Peter Beattie, there is obviously a complete debate on whether that clean coal technology will work or not, but we don't have time for that, now, we've got to move on.

PETER BEATTIE: Can I just say, Tony, just before we go on this, can I just quickly make this point. The technology will work, the issue is whether it becomes a financial proposition to make it work. That's the test. The technology and we've got the technology being developed now with Shell, we believe the technology works. It's to make it a financial proposition, that's the issue.

Sorry Pete, that's not the issue. The technology is unproven. At best they might get something working by 2020 when it will be too late anyway. Why are you betting our future on this nonsense when we have proven technologies such as wind, solar and (dare I say it) nuclear, all of which are vastly more prudent choices that 'clean coal'.

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You gotta love Mungo

Mungo MacCallum critiques the Howard government's petrol-pricing policy (reproduced in full from the Byron Shire Echo):

Once more John Howard’s opportunism, mendacity and humbuggery have come back to haunt him.

As petrol prices rise inexorably towards the $1.50 a litre mark and the public anger grows, our Dear Leader pleads for understanding: it’s all a matter of supply and demand, it’s because China’s demand for energy is insatiable, it’s because of hurricanes in America and instability in the Middle East (though not, of course, his war in Iraq), it’s an international problem and he’s really, truly, honestly not to blame.

He’d just love to bring the cost to the motorist down, he recognises it as his greatest problem, but there’s absolutely nothing he can do, fair dinkum cross my heart.

And people just don’t believe him. They don’t believe him because they know if they carry on loudly enough and for long enough that Howard will make the price come down, and the reason they know this is because it has all happened before. When the price rose at the beginning of 2001 there was a huge outcry, and the government, already somewhat spooked by unfavourable opinion polls, went into a flat panic. Not only did the bush receive a veritable cornucopia of fuel subsidies ranging from the easily rortable through the utterly inequitable to the frankly unworkable, but Howard knocked a sizeable chunk off federal government excise and abandoned the indexation of excise altogether.

This sent a firm signal to the industry that petrol was king and would continue to be king until it ran out altogether: there was to be no serious attempt to ration an increasingly scarce resource through the use of the market, and the search for alternatives was to be seen as an unnecessary frippery.

And if the message didn’t get through in 2001 it was heavily reinforced three years later when Howard offered a pre-election bribe of another $1.5 billion in subsidies both to off-road farm vehicles and to long-haul transport, a policy which became abbreviated as Cheap Diesel for Big Trucks. Just fill up at the nearest pump and don’t worry about the cost; the government will look after it.

But although the main beneficiaries of this squandermania were the farmers and the truckies, the message was clear to all motorists – indeed, to all consumers: if you just make enough fuss, if you hold your breath till you turn blue in the face and then scream and scream and scream till you’re sick, Johnny will buy you an ice cream. He’ll keep telling you no, but he doesn’t really mean it.

The problem is that this time he does mean it; he really has to. He simply can’t afford to lose any more of the excise; as he himself has pointed out, to cut the excise by even ten cents a litre would cost the budget around $4 billion a year and with the price of petrol likely to keep rising it would do very little political good. There are more profitable ways of spending $4 billion in the lead up to an election year (extra funds for political junk mail, for instance) and there have to be cheaper ways to divert the public’s attention.

It is probably too late to try and educate them to the fact that Australia has cheaper petrol than almost anywhere outside the United States and the middle east itself, or to tell them that they were silly to buy that huge four wheel drive gas guzzler just to drive the kids half a kilometre from the McMansion to the local private school: Howard has pandered to the greed of the electorate for far too long to start preaching restraint now.

The tokenism of a touch of ethanol in every tank appeals, once again, to the farmers but does almost nothing to reduce costs to the motorist and absolutely nothing to promote fuel conservation, which is the real problem. The subsidy for those who already overuse their vehicles to convert to gas is another piece of panic-driven economic nonsense: it will simply push up the price of gas (supply and demand again, Prime Minister) and in any case, the gas is to become subject to excise in a few years so the price will rise anyway. It is, after all, a by-product of the same crude oil from whichwe refine our petrol, and will run out at the same time.

This is not a policy – it is pure political adhockery.

But since political adhockery has driven this government’s approach to fuel for the whole of the last decade, we have no reason to be surprised. And deep down we are still convinced that if we throw a big enough tantrum, that same adhockery will give us back petrol at a dollar a litre.

But then, we believed that he’d keep interest rates low, too. Some voters will never learn.

This is slightly off-topic for this blog, but its freakin' hilarious. Mungo continues...

Another example of Howard’s adhockery (he himself would, of course, describe it as realistic and pragmatic government that pays due attention to public concern) is the decision to allow a free vote on bringing embryonic stem cell research up to the level that operates in most other countries.

The very idea has further unhinged Tony Abbott, who has warned that such legislation would turn Australia into some kind of Island of Dr Moreau in which mad scientists would create halfhuman monsters and release them to terrorise the populace. Such statements might suggest that Abbott is unfit to occupy the office of health minister, or indeed any room that lacks well padded walls and a secure lock on the door.

But then, what else would you expect from the Mad Monk, whose own idea of medical research consists of an annual pilgrimage to Lourdes?

Mungo is a national treasure. May he pontificate from his enlightened enclave for many years to come. Although one wonders how long can it be until Howard excises the Shire of Byron from the Commonwealth of Australia?

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Howard attacks Labor's 'hidden' plan for a carbon tax

John Howard was out attacking sane and reasonable policy again last week with this press release:

LABOR’S CARBON TAX PLAN

Australians would pay more for electricity while jobs and investment would be exported offshore under Labor’s plan for carbon taxes in Australia.

The emissions trading plan released by the Labor states and territories would impose significant costs on the Australian economy and have zero impact on global emissions and climate change. It also exposes Mr Beazley’s weasel words about the impact on Australian families of his commitment to cut Australia’s greenhouse gas emissions by 60 per cent compared with year 2000 levels by 2050.

He prattles on about jobs in his beloved coal industry for a while, then baits Beattie with this:

...he must unconditionally repudiate this emissions trading plan and Mr Beazley’s hidden plan for a carbon tax.

He then makes this startling claim:

The notion that a $12-$14 carbon tax would have only a ‘small’ impact on the Australian economy is simply wrong.

Ok, lets look at what the ABARE report actually says. As discussed here the ABARE report describes six scenarios. The most likely scenario (were a sane government to be elected) is 2b where early action is taken to reduce GHG emissions, no Carbon Capture and Storage is available (because, lets face it, its nonsense) and no nuclear power is available.

Below is a chart showing the carbon tax imposed and the resulting reduction in GDP from ABARE's business-as-usual reference case:
You will note that a carbon tax of $22/tonne is imposed in 2020 which results in GDP that is 0.71% lower than the reference case. In other words, GDP will be 0.71% less than it otherwise would have been in 2020, a reduction of just 0.05% per year spread over 14 years. If John Howard does not think 0.05% is 'small' then what exactly is his definition of small?

Extending this to 2050, ABARE predicts a reduction of GDP of 3.17% over 44 years (or 0.07% per year). This is despite the carbon tax being ramped up from $22/tonne in 2020 to $157/tonne in 2050.

Howard continues...

One of its scenarios would see coal-fired power generation reduced by 37 per cent over the period 2010-30.

Mr Howard, that is the whole point of a carbon tax, to reduce power generation from CO2 intensive sources such as coal.

Then Howard goes on to quote the impacts of ABARE's scenario 2d, again implying this is the most likely scenario when in fact it is very unlikely that "Australia unilaterally undertakes deep emissions cuts" described.

It found that a 50 per cent cut in Australia’s 1990 emissions level by 2050 would lead to a 10.7 per cent fall in GDP, a 20.8 per cent fall in real wages and a carbon price equivalent to a doubling of petrol prices.

Under this scenario, the cost of carbon would translate into a staggering rise in electricity and gas prices

Interestingly the "600 per cent rise in electricity and gas prices" claim has disappeared, probably because a Howard staffer made it up, or got horribly confused between percentages and dollar values.

Howard then quotes this from the summary of the ABARE report:

Unilateral action to achieve deep cuts in Australia’s emissions is estimated to cost the Australian economy signifi cantly more than not undertaking that action and offers no perceptible additional benefits to the rest of the world — neither in economic terms nor in terms of global environmental benefits...

but neglects to include the rest of the paragraph, that reads:

...(scenario 2d vs scenario 2a, table C). Even under a high carbon tax regime as modeled under the smaller international coalition (scenario 3), Australia is projected to be less worse off when compared with the ‘deep cut’ abatement regime analysed in the report (scenario 2d). Output from key energy intensive industries, nonferrous metals and noncoal energy (oil and gas), is projected to fall by 75 per cent and 60 per cent respectively in scenario 2d, relative to the reference case at 2050. Activity in the agriculture sector would also decline significantly, with output falling by 44 per cent relative to the reference case at 2050.

So again, the nasty economic impacts he quotes in the first part of the paragraph actually refer to the high carbon tax regimes 2d and 3 with carbon taxes in 2050 of $623/t and $525/t respectively (which is a tad more than the $12-$14/t Labor is apparently proposing)

The reality is, Howard has decided (based on ABARE's modelling) that it is better to act late than act early (see ABARE's scenario 1). In other words, let the rest of the world do the hard work of conserving energy and investing in renewables while Australia profits from climate change by exporting millions of tonnes of coal. Makes you proud to be an Australian, doesn't it?

Howard concludes with:

Through initiatives such as our Low Emissions Technology Fund, the Australian Government is pursuing a technology-driven strategy to combat growth in greenhouse emissions. This approach does not sacrifice Australian jobs, investment and export income in advance of an effective global response to climate change. In contrast, Labor simply does not understand the basic realities of Australia’s national interest.

Which in effect says, we are spending taxpayers money to 'pick winners' while those crazy socialists (such as Anthony Albanese) are proposing a market based approach of carbon taxes, cap and trade, and Mandatory Renewable Energy Targets.

What a strange old world we live in.

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Triple Crunch 2020

The three big issues that society will have to deal with in the next 10-15 years (in order of probability):

1. The Demographic Crunch
By 2020 the boomers will be no longer be able to delay retirement. Medical costs will skyrocket. The pool of taxpayers will shrink. No-one is denying this will happen, its the least controversial of these issues.

2. The Oil Crunch
Even the oil companies admit oil production will peak around 2020. Once oil production plateaus it will put a cap on global economic growth that we cannot escape. The only alternative to to move our entire transportation infrastructure from oil to something else. What chance of that happening in the next 14 years?

Could the Peak Oilers be wrong? Well yes, they've been wrong before and they will be wrong again. Someone will predict Peak Oil every year from now until it actually happens. The optimists say there's a lot of oil in tar sands in Canada and Venezuela but these reserves are only economically viable when crude prices are very high, and the EROEI is crap. For every three barrels of oil you produce you have to burn two (EROEI = 1.5:1) unlike Saudi crude where the EROEI is something like 10:1.

3. The Climate Crunch
If the scientists are right (and they're not just making this stuff up to protect their funding) climate change should be hitting us big time by 2020. A few things that might shock the punters out of their complacency; A major Australian city or town runs out of water (Poowoomba perhaps?), a major coral bleaching event on the Barrier Reef destroys the economy of FNQ (oh, and we lose one of the natural wonders of the world in the process), the snow stops falling at Perisher and Thredbo. Funnily enough, I reckon the last one would have the most impact. James Packer might notice.

Could the scientists be wrong? Of course. I have to admit its the least probable of these scenarios. Unfortunately for the skeptics, the climate scientists are become more alarmed (not less) in recent years as the evidence mounts that climate change is happening faster than anticipated.

So, what odds would you give on these happening by 2020?
My guess: 1. 100%, 2. 80%, 3. 60%

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Ian Macfarlane denys connection between emissions and climate change

Crikey readers, read original story here:
Triple Crunch 2020

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Scientific American: Energy's Future Beyond Carbon

Scientific American has a special issue this month: Energy's Future Beyond Carbon. The introduction 'A Climate Repair Manual' is available online in full and you can read the first two paragraphs of each article below...

• STRATEGY: A Plan to Keep Carbon in Check
• ENERGY EFFICIENCY: An Efficient Solution
• FUEL CELLS AND MORE: High Hopes for Hydrogen
• CLEAN POWER: The Rise of Renewable Energy
• CARBON CAPTURE AND STORAGE: What to Do about Coal
• SPECULATIVE TECHNOLOGY: Plan B for Energy
• AUTOMOTIVE ANSWERS: Fueling Our Transportation Future

You can buy a PDF version of the issue for $5 USD.

Looks like a great read.

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Whither Cellulosic Ethanol?

Ethanol is often held up us a panacea to the world's transportation fuel woes. In theory its greenhouse neutral and renewable, and it has some heavyweight supporters in Richard Branson, Bill Gates, Paul Allen, Steve Case, John Doerr, and most vocal of all Vinod Khosla:

...he's obsessed by a crusade as grandiose as any he's ever pursued: ending America's dependence on foreign oil. "I think we have a replacement for oil today," he says. "It's cheaper, cleaner, it doesn't require a change of infrastructure, and it appeals to most of the lobbies. What is this platform? It's ethanol."

The current hype (largely stirred up by Khosla) is about cellulosic ethanol. This is the kind of ethanol that's produced from any part of a plant that you don't eat - straw, stalks, corn husks. All of that waste is rich in cellulose, which, in theory, can be converted into sugar, and then ethanol.

Kholsa talks about his vision for ethanol (cellulosic and otherwise) here: Biofuels: Think Outside The Barrel

Unfortunately it seems biochemists such as John Benemann are not so convinced as he explains at The Oil Drum:

I read the presentation of Vinod Khosla and most of the responses. I have some experience in this field, about 30 years of being in the ring of biofuels technology development, with first-row seats, so to speak, on the fights I was not in myself.

Re. lignocellulosic ethanol, I am, bluntly, a skeptic. See our abstract, copied below. This is R&D, not something ready for commercial ventures, at least not in any time, or with any risk ratio, a typical venture capitalist would accept. Perhaps Vinod Khosla is not a typical VC, though I have no basis for assuming that.

Much more important, this technology is not ready for policy decisions. It compares with, for one example only, the near-late-lamented Hydrogen Program of the Bush-Cheney Administration. Coming from the same source, talk about curing our addiction to Middle East oil by substituting for it an addiction to Middle America ethanol, has just as much credibility. I note that all long-term R&D (is there any other?) for hydrogen is being terminated next month by the Dept. of Energy.

Benemann continues ...

Bluntly, we should not put our trust and future in ethanol from biomass saving the day. No more than in to that prior canard that H2 would save the day after tomorrow (remember those GM ads so long ago, was it last year, saying that todays' toddlers would get their H2 cars for high school graduation?). And remember all the venture capital that went into those hydrogen companies?

And concludes:

Yes, biofuels are and will be very important, we are already doing some things, and need to do much more. Much work is required, in many areas, from anaerobic digestion to crop production, and including R&D on lignocellulosics to ethanol. Maybe we will get the proverbial breakthroughs. But multiple barriers must be overcome, and betting the farm on just this one ticket, on only ethanol from switchgrass and such, is foolish in the extreme. And that is, what I am afraid, the Bush-Cheneys are now attempting and the Gates-Khoslas accomplishing. This single rathole could easily consume most biofuels funding and, most likely, nothing real will be accomplished.

Oh well, I guess we won't be growing our own fuel in 2050 :(

Further reading:
Vinod Khosla Debunked: Ethanol is NOT the Answer
A Conversation with Vinod Khosla

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Are these the words of an environment minister?

Ian Campbell shares his thoughts on a carbon tax:

SENATOR IAN CAMPBELL, FEDERAL ENVIRONMENT MINISTER: You don't want to wipe out the jobs of thousands of Australians. What we want to do is invest in the technologies that reduce greenhouse gas emissions and this is just a tax.
...

SENATOR IAN CAMPBELL: This is simply a new tax and there can be no getting away from it. It is a massive impost on Australian industry. It will drive jobs offshore, put up prices for energy in Australian households and not fix the greenhouse gas challenge that's so serious that governments should be investing in it.

Citizens of the civilised world may be excused for thinking these cannot possibly be the words of an environment minister. An industry minister perhaps, but surely not an environment minister.

Campbell is repeat offender on this issue. In June he described carbon taxes as 'stupid' prompting this hilarious response from Big Gav at Peak Energy:

The Minister for blocking wind farm development, Ian Campbell, has announced that "carbon taxes are stupid". As he is a master of the dark art of stupidity, perhaps he could be considered an expert on stupid things, but I still think he's several beers short of a sixpack, as usual.

Personally I'd say a well implemented global carbon tax would solve (1) global warming (2) peak oil and (3) resource wars over oil and the terrorism that results from these - so perhaps they wouldn't be such a bad thing.

Its amazing to think that more than a decade ago Australia had an environment minister who actually proposed a carbon tax. His name was John Faulkner.

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Some scary global warming graphs

This graph shows the correlation between atmospheric concentration of CO2 and temperature over Antarctica for the past 400,000 years:
This graph shows atmospheric concentration of CO2 as recorded by Mauna Loa Observatory in Hawaii since 1958:
Putting these two graphs together, along with forecasts for atmospheric concentration of CO2 in 2100, you get this (very tall) graph...
Which is clearly nothing to worry about.

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UK to ban standby devices and incandescent light bulbs

More encouraging news from the civilised world: TV standby buttons will be outlawed

THE Government is to outlaw standby switches on televisions and video and DVD players to cut the amount of electricity wasted in the home.

Refrigerators, washing machines and dishwashers will have to become energy-efficient, and lightbulbs that burn too much energy will be phased out.

We can only dream of such forward-thinking policies in Australia

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Ian Macfarlane is dangerous fool, and must be stopped

Ian MacFarlane is the Howard Government minister that represents the forward-thinking town of Toowoomba, that has just voted itself out of water.

He's also the one that told the fossil fuel companies that renewable energy was "too successful" and had to be stopped...

KERRY BREWSTER: No-one denies the success of the Mandatory Target for Renewable Energy target. It was virtually met last year, five years ahead of schedule. In fact, it was too successful. According to the leaked notes of a senior executive of Rio Tinto, Industry Minister Ian Macfarlane told a secret gathering of the CEOs of major fossil fuel companies in 2004 that the scheme "worked too well", that "investment in renewables was running ahead of the original planning", and that the "very vocal" renewables industry had taken the agenda from them. Ian Macfarlane declined to be interviewed for this story.

Transcript | Video

This week the states have announced they're going to go it alone on a carbon trading scheme: States band together on pollution plan

KAREN BARLOW: The states and territories say they want to follow Europe and individual states in America in setting up a greenhouse gas emissions trading scheme.

The South Australian Premier Mike Rann says manmade climate change is the world's greatest menace.

MIKE RANN: I mean, it's a bigger threat ultimately to our planet, to our way of life to our economy than even terrorism.

KAREN BARLOW: Under the scheme there would be a set national target of emissions of the three main greenhouse polluting gases - carbon dioxide, methane and nitrous oxide.

Greenhouse gas-emitting companies, such as electricity generators, would receive a limited number of permits each year to cover their emissions.

Companies that emit too much would face stiff fines, while the New South Wales Premier Morris Iemma says companies that achieve their targets can make money by selling their excess permits on the open market.

MORRIS IEMMA: It's capping the emissions and establishing a trading mechanism whereby certificates or credits can be traded in the marketplace with the overall objective to reduce greenhouse gas emissions from electricity generators, who are the biggest contributors to greenhouse gas emissions, some 35 per cent.

A positive move you might think, but not according to Mr MacFarlane....
Fed Govt dismisses states' carbon trading plan

It is a carbon tax, it will increase the cost of electricity to consumers, it will increase the cost of petrol to motorists, and the reality is, the way to solve the greenhouse gas problem is through introducing new technology, getting involved and collaborating with other countries, and that's what Australia is doing, bearing in mind that Australia is one of only three or four countries who will reach it's Kyoto target.

Easy if you negotiate a Kyoto target that is 8% higher than 1990 levels and is largely met by reduced land clearing. Not that you'd actually ratify Kyoto anyway...

The way to reduce greenhouse gas, particularly from stationary generators like power stations, is to find ways to capture the carbon dioxide and store it underground in geosequestration.

Ummm ... yeah, geosequestration sounds like a really good idea not!

Well, there are all sorts of figures being bandied around by the states, but can I just say one thing, that one of the models that they're proposing is a reduction of greenhouse gases by 50 per cent.

That was actually costed by ABARE, the Agricultural and Resource Bureau of Agricultural Economics. That bureau costed that at an increase in electricity prices of almost six-fold and a doubling of petrol prices.

Well we know how the Howard government spins ABARE's modelling. AFAICT there is no ABARE document that says electricity prices will rise six-fold or petrol prices will double. Chances are a staffer just made it up.

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Howard spins ABARE's report on carbon taxes

This is what Howard said in the House of Reps on Wednesday, August 16th, 2006:

According to ABARE, a 50 per cent cut in Australian emissions by 2050 would lead to a 10 per cent fall in GDP, a 20 per cent fall in real wages, a carbon price equivalent to a doubling of petrol prices, and a staggering 600 per cent rise in electricity and gas prices. These are not the calculations of my office. They are not the calculations of the federal secretariat of the Liberal Party. They are the calculations of the Bureau of Agricultural and Resource Economics, a very respected federal government body.

ref: page 44 here

In reality the ABARE report found that the impact of reducing emissions of greenhouse gases (GHGs) would be minimal. A 40 per cent reduction in GHGs would result in a 3.2 per cent fall in GDP spread over 40 years, or just 0.07% of GDP per year.

The key inaccuracies and distortions in Howard's statement are as follows:

• The ABARE report describes six scenarios. Howard only quotes the impacts of most extreme scenario (2d) where Australia takes unilateral action to reduce its CO2 emissions to 50% below 1990 levels, and imposes a carbon tax 4-8 times greater than the other scenarios ($623/t vs $77/t). This is like assuming Bob Brown becomes PM next year.


• Scenario 2d will result in a 68% reduction in greenhouse gases from ABARE's business-as-usual reference case, not a 50% reduction. I suspect Howard is confusing a 50% cut from 1990 levels with the percentage reduction from the reference case.


• The "10 per cent fall in GDP" (actually 10.7%) refers to the difference between GDP in 2050 for the reference case, and GDP in 2050 for scenario 2d. This equates to a reduction in GDP of less than 0.25% per year spread over 40-odd years.


• The "20 per cent fall in real wages" (actually 20.8%) refers to the difference between real wages in 2050 for the reference case, and real wages in 2050 for scenario 2d. This equates to a reduction in real wages of less than 0.5% per year spread over 40-odd years.


• I can find no reference in this ABARE report (or any other ABARE report) to a 600 per cent rise in electricity and gas prices. I suspect Howard confused the "overall costs per unit of abatement" for scenario 2d ($499) with a percentage value. (500+100=600???)


• Similarly, I can find no reference in any ABARE report to a doubling of petrol prices due to carbon taxes.

Rather than quote the economic impacts of the least likely scenario, Howard could have quoted the impacts of the most likely scenario, which in my opinion is 2b.

• Scenario 2b calls for a 40% reduction in GHGs consistent with reductions in other developed countries (i.e. no unilateral action)


• Scenario 2b assumes no Carbon Capture and Storage (CCS aka geosequestration) in Australia.


• Scenario 2b assumes no nuclear power in Australia


• Scenario 2b results in a 3.2% reduction in GDP by 2050 relative to the reference case. This equates to a reduction in GDP of 0.07% per year


• Scenario 2b results in a 7.5% reduction in real wages by 2050 relative to the reference case. This equates to a reduction in real wages of 0.17% per year

This is the scenario (2d) Howard has quoted. It is the most extreme example where Australia takes drastic unilateral action to reduce its CO2 emissions to 50% below 1990 levels. No-one is seriously proposing this (in the short term at least) yet Howard only quotes the impacts of this scenario.

scenario 2d – Australia is assumed to reduce its own carbon dioxide equivalent emissions to 50 per cent below its 1990 levels by 2050, while the 2050 global carbon dioxide emissions target remains at 39.4 Gt CO2. Relative to the projected reference case emissions presented in chapter 3, this implies a 71 per cent cut in Australia’s carbon dioxide emissions in 2050, while the global target is a 40 per cent cut in total carbon dioxide emissions in 2050. As for the technology options, the assumption of the global access to carbon capture and storage is maintained under scenario 2d. Also, Australia is assumed to have access to nuclear energy. As in scenario 2c, one small nuclear plant is assumed to start operating in Australia around 2020, with potential expansion taking place between 2020 and 2050. Scenario 2d is designed to examine the economic impacts of Australia unilaterally undertaking deep emissions cuts [ABARE's emphasis] while the global abatement task remains unchanged at the scenario 2 group level.

Here's a table showing assumptions for each scenario:

Here's a table showing projections of economic impacts for each scenario:

Here's a table showing detailed projections of economic impacts for scenario 2d:

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